Dar es Salaam — Personal loans have started diminishing as commercial banks slow issuing credit to finance economic activities.
The individual credits which have been recording the fastest growth rate in the past years have now joined the line of economic activities like agriculture, transport and communication, and building and construction which have recently been recording negative growth in terms of receiving credit following a tight liquidity stance the lenders face.
In the year ending March 2017, the annual growth of banks' credit issued as personal loans was -4.9 per cent meaning that it experienced contraction compared with a growth of 37.2 per cent recorded in the same period in 2016, according to the Bank of Tanzania.
Agriculture recorded -9.2 per cent compared with 11.2 per cent in the previous year while transport and communications was the most hit at -21.6 per cent from 27.4 per cent last year.
Credit to building and construction contracted by 3 per cent compared to a growth of 9.7 per cent.
Credit to all major economic activities recorded slower growth relative to the year ending April 2016, except for trade activity.
Credit to the private sector grew at an annual rate of 3.4 per cent to Sh16.716 trillion in the year to April 2017 compared with 19.3 per cent growth in the corresponding period in 2016, the central bank said in the Monthly Economic Review for May.
Extended broad money supply (M3) increased by 3.8 per cent, lower compared with 12.9 per cent in April 2016 and 4.6 per cent in the preceding month.
East African Business Council vice chairman Mr Felix Mosha said that the economic cycle, especially lending, goes down and picks up at some points.
However he said concern is on the agriculture sector which accounts for substantial share of the economy.
"Investment in agriculture has four times impact on the economy," he said.