Tanzania: Credit to private sector likely to swell

CREDIT to the private sector is expected to swell up in the coming months because of increased confidence of commercial banks on the sector.

Chairman of Tanzania Banking Association (TBA) Laurence Mafuru said in Dar es Salaam yesterday that, “There is increased demand and more appetite by commercial banks to lend to the private sector than investing on government securities.” Mr Mafuru was commenting on the declining investment packages on the government securities by commercial banks.


It is estimated that over 60 per cent of the investments on longterm government securities to be by commercial banks, with retail investors taking five per cent. Other investors are pension funds, insurance companies and few microfinance institutions.

According to experts, the increased lending to private sector, an engine of the economy was a positive sign of attaining the designated development goals. Mr Mafuru said also that the months between June and August this year experienced high demand for paper securities as most of the government expenditures were halted giving way for budget estimate debates in parliament.

During the period, he said some service providers to the government were not paid thus reducing their investment portion on the treasury bills and bonds.

According to the Bank of Tanzania (BoT) monthly economic review for June, credit to the private sector grew by 24.6 percent in the year ending May 2011, compared with 20.4 percent and 13.7 percent recorded in the year ending April 2011 and May 2010, respectively.

Banks’ credit to major economic activities continued to grow, driven by higher growth in trade activities, building and construction, as well as hotels and restaurants. As a proportion of total outstanding credit, personal loans continued to account for the largest share, followed by trade, manufacturing, agriculture, and transport and communication activities.

The government on the other hand borrowed on net basis 1,106.7bn/- compared with 930.3bn/-recorded in the year ending April 2011 and 647.5bn/- in the year ending May 2010.

These developments partly translated into increase in growth of net domestic assets of the banking system to about 40 percent, from 25.3 percent in the year to May 2010, and accounted for Billions of shillings.