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Com banks in dramatic credit shift to private sector
2008-08-14 10:42:19
By Beatrice Philemon
Commercial banks credit to the private sector has maintained high annual growth rate above 40 percent mark over the past seven months, according to latest data released by the Bank of Tanzania (BoT).
The trend is attributed to narrowed lending options for commercial banks since the government distanced itself from fiscal reliance on banks` financing through debt securities such as Treasury Bills and Bonds from last financial year.
The aim was to force commercial banks to devise more innovative lending products to the budding private sector and at more competitive lending rates, even as the government improves its revenue collection and expenditure management.
At the same time, inflows from development partners have equally improved government`s revenue gap, especially development financing component.
In addition, the BoT report says the on-going structural reforms have provided catalyst for expansion in economic activities as well as increasing accessibility to banking services by the majority of private investors.
In practice, the government has reduced securities auctions, and only been a some of the matured debt instruments, but not new floats, a strategy which has contributed to increased supply of credit to private sector.
For instance, in May alone this year, growth of commercial banks` credit to the private sector reached 42.1 percent, compared with 43.4 percent recorded in the preceding month and 40.6 percent registered in May 2007.
The figures translated to 46bn/- in loans going to various private sector players in May, as compared with 37bn/- provided in the preceding month.
Gauged on year-to-year basis, outstanding stock of commercial banks’ credit to the private sector was 3,191.9bn/- compared with 2,246.3bn/- registered in May 2007.
The economic sectors which benefited mostly from the commercial banks` credit remained broadly unchanged, namely trade, manufacturing, transportation and communication, including agricultural marketing activities.
Moreover in May, share of private sector credit to total deposit liabilities of banks which gauge the level of intermediation stood at 60 percent up from 51 percent registered in May 2007 and 58 percent in April 2008.
More positive, even share of private sector credit to total money supply increased dramatically to 51 percent in May 2008 from 44 percent in May 2007.
In line with country`s monetary policy, the annual growth rate of money supply was restricted as monetary aggregates for the year ending May 2008 continued to slow down ``largely due to continued tight monetary policy pursued by the Bank in an effort to reduce inflationary pressure experienced in the country``.
The slowdown in monetary expansion during May 2008 was largely explained by a decline in the rate of expansion of net domestic assets (NDA) of the banking system.
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