Credit shift leaves manufacturing sector trailing behind trade and personal loans

This comes at a time when overall private sector credit is growing strongly, rising by 22.8 percent in the quarter ending March 2026, up from 19.2 percent in the preceding quarter, according to the report.

Personal loans continue to dominate lending, accounting for 35.4 percent of total credit in February 2026, down slightly from 37 percent a year earlier.

Trade has emerged as the second-largest recipient, with its share increasing from 12.3 percent to 14.7 percent, reflecting expanding activity in wholesale and retail markets as well as regional commerce.

Agriculture recorded modest but stable growth, with its share rising from 12.9 percent to 13.7 percent, supported by targeted government interventions, including a Sh1 trillion special loan facility and other measures aimed at improving access to affordable financing.

Mining and quarrying, though still accounting for a relatively small share of total credit, posted the fastest growth rate, driven by government efforts to modernise the sector and improve access to flexible collateral arrangements for artisanal and small-scale miners.

Commenting on the trend, the Tanzania National Chamber of Commerce (TNCC) Manager for Industry, Mr Ezekiel Kahatano, said commercial banks remain guided by risk and profitability considerations in their lending decisions.

“Many small and medium enterprises, particularly in manufacturing, continue to face challenges accessing credit due to their inability to meet lending requirements, especially the lack of adequate collateral,” he said.

In response, the government, through the Bank of Tanzania, has introduced credit guarantee schemes to ease financing constraints.

These include the Export Credit Guarantee Scheme (ECGS) and the Small and Medium Enterprises Credit Guarantee Scheme (SME-CGS), launched in September 2005 to support viable projects that lack sufficient collateral.

Despite these interventions, structural challenges persist.

“A significant number of SMEs remain informal, fragmented and unregistered, making it difficult for them to meet the requirements set by financial institutions,” Mr Kahatano said.

He noted that the TNCC has initiated programmes to support SME formalisation, with pilot projects already underway in Kibaha, Coast Region, although scaling them nationwide remains capital-intensive and dependent on multi-stakeholder collaboration.

Beyond formalisation, the chamber is also focusing on capacity-building initiatives to improve business management, financial literacy and operational efficiency among SMEs.

Mr Kahatano further underscored the need for reforms to simplify tax procedures, noting that complex and costly requirements often discourage entrepreneurship, forcing some businesses to close while others remain informal.

To address issues of scale and competitiveness, the TNCC is promoting the consolidation of small producers into cooperatives and larger corporate structures.

Under this approach, producers across value chains are integrated to enhance coordination and market competitiveness. In agricultural value chains such as sunflower, efforts are underway to link farmers, processors and distributors into a unified system spanning production to final processing.

According to Mr Kahatano, the model is expected to boost value addition, improve access to financing and strengthen the competitiveness of Tanzanian industrial products in both domestic and export markets.

Exports defy credit squeeze

Despite the contraction in credit to manufacturing, the sector’s export performance has strengthened.

Exports of manufactured goods rose from $366.3 million in the first quarter of 2025 to $514.3 million in the corresponding period of 2026, indicating improved production efficiency and stronger external demand.

The divergence suggests that manufacturing growth is increasingly being driven by factors beyond traditional bank financing, including operational efficiency, expanded export markets and alternative funding sources.