Home Business Agriculture’s lending appetite soars-Bank of Tanzania

Agriculture’s lending appetite soars-Bank of Tanzania

by Grace Kisembo

The Bank of Tanzania’s monthly economic review for January reveals that the lender’s appetite to the agriculture sector is higher than in other sectors.

According to the report, the annual banks’ credit to agriculture sector grew by 90.1 per cent in the year ended December 2019 compared to negative 16.0 per cent in the corresponding year on account of government measures to improve the business environment.

The credit flow to the agriculture sector is set to increase as long as most commercial lenders make efforts to de-risk agricultural finance by addressing both individual and systematic risks.

Most commercial lenders have for years regarded the agriculture sector as a high-risk business to lend, leaving it financially underserved.

Their positive attitude towards agriculture sector is welcomed and according to analysts would yield huge impacts on the country’s economy.

Analysts believe that increased lending will bring about the huge impact on the agriculture sector that employs about 70 per cent of the country’s workforce and contributes at least 30 per cent of the Gross Domestic Product.

“The central bank’s accommodative monetary policy and measures to improve the business environment have played a key role in increasing commercial lenders appetite to the agriculture sector,” stated the report.

During the period under review, the composition of credit outstanding to agriculture expanded by 9.5 per cent from 9.4 per cent in the corresponding period of 2018.

Other sectors that registered a strong annual growth rate of banks credit apart from agriculture are building and construction 72.6 per cent compared to negative 23.2 per cent of the corresponding period 2018.

Banks’ credit to mining and quarrying grew by 13.2 per cent in the period under review compared to 28.2 per cent in the corresponding period.

Also, banks’ credit extended to personal grew by 9.3 per cent compared to 54.0 per cent of the corresponding period of 2018. The banks’ credit to the manufacturing sector grew by negative 0.8 per cent compared to 17.5 per cent in 2018.

Credit to the private sector recorded an annual growth of 11.1 per cent in December last year compared with 4.9 per cent in the corresponding period of 2018.

The sustained growth of credit to the private sector is supported by the accommodative monetary policy and ongoing measures implemented by the government to improve the business environment.

During the reference period, domestic credit by the banking system grew by 6.2 per cent in 2019 compared with 10.1 per cent a year earlier.

The slow growth was attributed to the decline in credit extended to the Government, largely due to buildup of government deposits at the BoT following an increase in revenue collection and streamlined expenditure.

Related Posts