LENDER's appetite on agriculture sector has increased after the annual growth rate of banks credit expanded by 85.2 per cent in the year ended November last year compared to negative 17.3 per cent of the preceding year, thanks to measures aimed at improving business environment.
The Bank of Tanzania (BoT) monthly economic review December shows that lending to agriculture sector continued to expand at a faster rate than other sectors namely building and construction as well as mining and quarrying.
Commercial lenders positive attitude towards agriculture sector is welcomed and according to analysts would yield huge impacts to the country's economy.
The continued efforts put by commercial lenders to de-risk agricultural finance by addressing both individual and systematic risks would increase credit flow to the sector.
Most commercial lenders have for years regarded agriculture sector as a high risk business to lend, leaving it financially underserved.
"The BoT accommodative monetary policy and measures to improve business environment have played key role in increasing investors lending appetite to agriculture sector," stated the report.
The increased lending will bring about huge impact to the agriculture sector that employs about 70 per cent of the country's workforce and contributes at least 30 per cent of the Gross Domestic Product.
During the period under review, the composition of credit outstanding to agriculture expanded by 9.4 per cent the same as in the corresponding period 2018.
Other sectors that registered strong annual growth rate of banks credit apart from agriculture are building and construction 71.5 per cent compared to negative 18.1 per cent of the corresponding period 2018.
Banks' credit to mining and quarrying grew by 22.2 per cent in the period under review compared to 15.8 per cent in the corresponding period.
Also banks' credit extended to personal declined by 11.8 per cent compared to 54.1 per cent of the corresponding period 2018.
The banks' credit to manufacturing sector contracted to 1 per cent compared to 6.9 per cent in 2018.
Credit to the private sector continued to grow, recording an annual increase of 8.9 per cent in November 2019 compared with 5.0 per cent in November 2018.
The sustained growth of credit to the private sector is supported by the accommodative monetary policy and ongoing measures implemented by the government to improve business environment.
Domestic credit by banking system that includes credit to private sector and net credit to Central government grew by 4.2 per cent in the year ending November 2019 compared with 8.7 per cent and 9.5 per cent in the year ending October 2019 and corresponding period in 2018, respectively.
This outturn was due to a decline in banking system's net claims to the Central government owing to build-up of government deposits at the Bank of Tanzania