CREDIT extended to Tanzania’s private sector by financial institutions grew to 17.2 percent in June, this year compared to the 16.5 percent registered in the preceding month, indicating steady improvement according to Bank of Tanzania (BoT).

The BoT’s monthly economic review for June however shows that the rate was lower than the 21.3 percent documented in the corresponding period in the previous year.

“The steady credit growth underscores the private sector’s continued demand for financing to sustain economic activities and support investments,” the BoT report says.

Money supply continued to grow, albeit at a slower pace, aligning with the current monetary policy stance.

The deceleration reflects measures taken by the bank to moderate liquidity to maintain inflation at the targeted levels.

Credit extended to agricultural activities continued to register the highest growth, trailed by manufacturing, mining and quarrying.

During the period under review, credit growth in Tanzania’s agriculture sector year on year remained strong at 53.1 percent compared to 40.6 percent in the corresponding period last year.

However, on month to month, the BoT report shows that for three consecutive months, credit growth slowed down, signalling a weakening demand for loans within the industry.

For example, last April credit growth to agriculture was strong at 60.6 percent the highest since December 2019, in May it was 55.7 percent and in June it was 53.1 percent.

The BoT attributes this credit growth to government measures aimed at improving the sector’s environment and creating favourable conditions for investment.

Personal loans, largely utilised by micro, small and medium-sized enterprises (MSMEs), remained a major driver of private sector credit growth and accounted for the largest share of total credit extended to the private sector at 37.2 percent.

In general, interest rates charged by banks on loans decreased compared to the rates recorded in the preceding month while those offered on deposits recorded a marginal increase. As a result, the spread between one-year lending and deposit interest rates continued to narrow, reaching 6.31 percentage points from 6.83 percentage points recorded in May 2024. 

This performance reflects improved efficiency in the banking sector’s intermediation process and an easing of credit risk in the market.