THE total loans extended by banking sector went down by almost one percent in May owing to coronavirus pandemic lockdown.
The Bank of Tanzania (BoT), said in its latest monthly economic review (MER) that on monthly basis, total credit slowed down to 3.5 percent from 4.4 percent in the preceding month.
The central bank attributed the slowdown to repayment failure by some sectors, especially hospitality and education due to the ongoing pandemic economic effects.
“The slow growth was on account of repayment of loans by some borrowers, coupled by subdued demand for loans by hospitality industry and schools owing to coronavirus,” the BoT report said. The report showed that credit to the private sector slowed down by 5.1 percent from 5.8 percent.
On other hand, sectoral decomposition of credit indicates fast growth of loans extended to building, construction, transport, communication and personal-related economic activities—mostly SMEs.
“The profile of loans outstanding indicates much of the credit was extended to personal-related activities, trade and manufacturing,” the report said.
The personal-related activities, trade and manufacturing shares to loans outstanding were 31.7 percent, 17.3 percent and 11.5 percent, respectively.
Extended broad money supply (M3) grew at an annual rate of 11.9 percent in May, compared with 12.2 percent in the preceding month and 5.8 percent last May.
Despite the drop, BoT said: “money supply growth remained strong, reflecting the impact of accommodative monetary policy to limit the impact of coronavirus on the economy, combined with moderate growth of credit to the private sector”.
Also broad money supply (M2), went down by 12.9 percent compared to 13.9 percent and 7.2 percent.
This, BoT’s Monetary Policy Committee (MPC), had approved measures to limit impact of coronavirus on the economy.
The MPC lowered statutory minimum reserves (SMR), requirement ratio from 7.0 per cent to 6.0 percent, reduce discount rate from 7.0 percent to 5.0 percent, and lower haircuts on government securities pledged by banks for borrowing from 10 percent to 5.0 percent for securities maturing within one year, and from 40 percent to 20 percent for securities with maturities exceeding one year.
In addition, the measures included providing regulatory flexibility to banks in restructuring loans and overdraft facilities for businesses affected by coronavirus and increasing mobile wallet daily transaction limit from 3.0m/-to 5.0m/-, and mobile wallet daily balance from 5.0m/-to 10m/-.