What Tanzania’s credit mix reveals about national economic growth

 Personal loans accounted for 35.8 percent of total lending, significantly surpassing trade at 13.6 percent and agriculture at 13 percent. Meanwhile, manufacturing—often regarded as a key sector for job creation and industrialization—absorbed just 7.8 percent.

The building and construction sector received 4.7 percent, and transport and communication accounted for 4.5 percent.

In its January 2026 Monetary Policy Report, the BoT noted that personal loans, primarily extended to small and medium-sized enterprises through individual facilities, remained the main driver of overall private sector credit growth.

Trade and agriculture followed in significance, with mining and quarrying experiencing the fastest growth at 30.1 percent.

Credit to agriculture expanded by 29.8 percent, partly due to the central bank’s Sh1 trillion special loan facility and the Small and Medium Enterprises (SME) relief window.

Experienced banker Kelvin Mkwawa stated that strong growth in personal lending boosts household purchasing power, stimulates market demand, and affects price dynamics across the economy.

“In the short term, personal loans foster economic growth and enhance financial inclusion by bringing more individuals into the formal financial system,” he explained.

However, Mr Mkwawa warned that this trend also highlights limited access to credit for productive sectors, which are essential for generating employment, expanding the tax base, and promoting long-term growth.

He pointed out that a significant portion of personal borrowing is directed toward consumption items, such as vehicles and household goods, rather than income-generating activities.

Financial analyst Christopher Makombe noted that a credit structure dominated by personal loans presents a clear trade-off.

Although it allows households to finance housing, education, and durable goods, it does not necessarily create new income streams or jobs.

“If individuals borrow large sums solely for consumption, they may struggle to make repayments, particularly if salaries do not increase, leading to the risk of individual over-indebtedness,” he said.

Mr Makombe also mentioned that this trend could impede structural transformation. With banks operating under limited lending capacity, a larger allocation to personal loans reduces the funds available for businesses to invest, expand operations, and enhance productivity.

“This can slow the transition towards a more diversified and industrialized economy,” he said. From a financial sector perspective, the predominance of personal lending indicates a risk-averse attitude among banks.

Lending to salaried individuals provides predictable cash flows and lower default risks compared to financing enterprises, especially small and medium-sized firms. While this cautious strategy helps protect bank balance sheets, analysts argue that it may limit the contribution of the sector to broader economic development.

The BoT’s recent intervention facilities, particularly for agriculture, have accelerated credit growth in selected productive sectors. Nevertheless, the overall credit mix suggests that consumption-driven lending remains the primary engine of expansion.

In terms of interest rates, both lending and deposit rates remained largely unchanged in 2025.

The BoT reported that overall lending rates ranged between 15 and 16 percent, while deposit rates hovered around 8 percent.

 The negotiated lending rate for loans to prime customers stood at approximately 12 percent, with a negotiated deposit rate averaging 11 percent.

Despite this, these interest rate levels remained relatively lower than those in most East African Community (EAC) countries.

Recent reform measures aimed at broadening the scope of eligible collateral and introducing a price comparator system, which enhances transparency in the pricing of financial services, are expected to promote competition in credit pricing.

These efforts align with ongoing initiatives to increase financial literacy.