BANKS credit to the private sector grew by 8.6 per cent in the year ended March compared to 9.6 per cent registered in the corresponding period 2019, with much of the share observed in building and construction, agriculture and personal loans.
The Central Bank’s latest monthly report shows that the credit growth partly reflects adequate supply of loanable funds following intensified liquidity easing monetary policy measures.
Banks credit to the central government and private sector grew by 6.5 per cent in March 2020, compared with 5.8 per cent recorded in the preceding month and 6.9 per cent in the corresponding month in 2019.
Early this week, the BoT announced various measures, including reducing the discount rate to historical low, to boost financial activities and to offset Covid-19 effects on the economy.
The central bank lowered the discount rate from 7.0 per cent to 5.0 per cent from yesterday, in a bid to increase liquidity space in the financial sector. The last time BoT lowered the rate was almost two years ago.
“This measure will provide additional space for bankers to borrow from Bank of Tanzania to lower costs, thus signalling lower lending rates by banks,” BoT said in a statement.
Furthermore, the central bank’s Monetary Policy Committee that met recently cut statutory minimum reserve requirement from 7.0 per cent to 6.0 per cent.
“The measure expected to provide additional liquidity to banks,” the statement said. However, the implementation starts early next month.
The haircut for treasury bills is from 10 per cent to 5.0 per cent and for treasury bonds by half from 40 per cent to 20 per cent from yesterday.
This is expected to increase banks’ borrowing from the central bank with less collateral than before. In another move to contain the economy from contracting, BoT is asking banks and other financial institutions to thoroughly assess borrowers’ financial difficulties due to Covid-19 towards restructuring loan repayments.
High growth of credit was observed in building and construction, agriculture and personal loans. Personal loans and trade accounted for the largest share of credit outstanding, at 30.2 per cent and 17.7 per cent, respectively.
The Bank of Tanzania has continued to intensify accommodative monetary policy measures in order to cushion the economy from the impact of Covid-19.