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Wed Jun 14, 2017

Agriculture sector lending declines

According to the Bank of Tanzania (BoT) economic bulletin for the quarter ending March this year the annual growth of banks lending to agriculture sector registered negative growth of 9.2 per cent compared to 11.2 per cent of the same period last year.


The fall of banks credit to agriculture that employs over 70 per cent of workforce hold up efforts of enhancing the sector’s contributions to the economy. For example, last year agriculture sector contribution to GDP was 29.1 per cent.


The BoT year on year total domestic credit declined by 1.2 per cent for the first three months to March this year compared with a growth of 21.1 per cent in the corresponding period a year before.


The credit to the private sector by banks grew by 3.7 per cent, representing an annual increase of 603bn/- compared with a growth of 23.6 per cent or an increase of 3.06tri/- in the period ending March last year.


Similarly, the government borrowing from the banking system decreased by 17.5 per cent.


Noteworthy, trade and personal activities continued to hold the largest share of banks’ credit outstanding, accounting for nearly 40 per cent of total credit.


During the period under review, the extended broad money supply increased by 880.9bn/- to a stock of 22.52tri/-, representing an annual growth of 4.1 percent. This compares with an increase of 2.91tri/- that translated to annual growth of 15.5 per cent in the corresponding period in 2016.


The slow growth of broad money supply was driven by a slowdown in lending to private sector by banks and government borrowing from the banking system, as well as a decrease in net foreign assets (NFA) of the banking system.


However, the growth of broad money supply was relatively higher than 2.9 percent recorded in the year ending December last year. This follows a pick-up in NFA of the banking system, which more than offset the impact of slowdown in the growth of domestic credit on money supply.


NFA of the banking system grew by 13.1 percent in the year ending March, compared with 17.9 percent in the period ending March a year before.


The slow growth of NFA was mainly on account of shrinkage in the net foreign assets of banks following reduction in placement abroad and sustained increase in foreign borrowing. However, the growth of NFA was higher than a contraction of around 0.4 per cent in the period ending December last year.


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Posted by Arwa


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