BoT says lending rates falling at sluggish rate

06Jan 2022
The Guardian Reporter
The Guardian
BoT says lending rates falling at sluggish rate

LENDING rates by financial institutions continue to fall albeit at a sluggish rate from an average of 16.65 percent in October to 16.40 percent in November last year.

Bank of Tanzania governor, Professor Florence Luoga.

Bank of Tanzania said in its December 2021 monthly report that the overall lending rates averaged at 16.40 percent, decreasing from 16.65 percent and 16.61percent recorded in the preceding month and November 2020, respectively.

“However, the negotiated lending rates charged to prime customers remained unchanged at around 14 percent,” the report said while noting that banks’ interest rates on deposits increased slightly during the period under review, with an overall deposit interest rate averaging at 6.80 percent compared with 6.64percent and 6.74 percent recorded in October 2021 and November 2020, respectively.

“Meanwhile, the negotiated deposits rate for prime customers remained unchanged, averaging 9.78 percent in November 2021,” the report stated adding that due to accommodative monetary policy driven by the need to continue boosting credit flows to the private sector to support recovery of the economy from the adverse effects of the coronavirus, extended broad money supply (M3) grew by 14.9 percent compared with 5.2 percent in November 2020.

“Similarly, broad money supply (M2) registered an annual growth of 17.2 percent, up from 8.7 percent. Domestic credit by the banking system, extended to the private sector and central government, grew at an annual rate of 13.5 percent in November 2021, compared with 12.5 percent in November 2020,” the central bank’s report for December 2021 noted.

Credit extended to the private sector continued to recover, growing by 7.8 percent compared to a growth of 5.6 percent in the preceding month and 5.2 percent in the corresponding period of 2020, the BoT report said.

The central bank further stated that sustained recovery of growth of credit to the private sector was also largely attributed to accommodative monetary conditions as well as ongoing initiatives by the government to improve the business environment.

“Growth of credit to the private sector is expected to continue to maintain an upward trend towards the target of 10.6 percent set for 2021/22, supported by the implementation of policy measures recently rolled out by the Bank of Tanzania to foster credit growth and lower of lending rates,” the report added.

“The growth of credit to the private sector was more prominent in personal activities, largely small and medium enterprises, followed by trade andmanufacturing,” the December 2021 monthly economic review report explained while noting that personal activities continued to hold the largest share of the outstanding credit followed by trade, manufacturing and agriculture.

Money market sustained adequate liquidity levels in November 2021, supported by accommodative monetary policy condition. Consequently, money market interest rates and yields on government securities remained low and stable, the central bank pointed out in its report.