THE agriculture sector has become attractive to the country's commercial lenders, thanks to monetary policy measures aimed at supporting cost effective credit intermediation to the agriculture and agribusiness activities.
The implementation of the monetary policy measures by the government has helped smallholder farmers become reliable and bankable to access credit from commercial lenders.
Formerly, banks viewed farmers as unreliable borrowers because of unstable income, lack of savings and volatile productivity that is dependent on rainfall.
The Bank of Tanzania (BoT) monthly economic review for November shows that the credit extended to the agriculture sector has increased by 57.7 per cent compared to a negative 14.0 per cent registered in the corresponding period last year.
Agriculture in Tanzania represents almost 30 per cent of the country's Gross Domestic Product (GDP) with three-quarters of the country's workforce involved in this sector.
Agriculture is undoubtedly the largest and most important sector of the Tanzanian economy, with the country benefitting from a diverse production base that includes livestock, staple food crops and a variety of cash crops.
According to World Bank, agriculture finance empowers poor farmers to increase their wealth and facilitates the development of food value chains for feeding 9 billion people by 2050.
Agriculture finance helps clients provide market-based financial services and fund long-term and green investments to support sustainable agriculture and agri-food value chains.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
Demand for food will increase by 70 per cent by 2050 at least 80 billion US dollars in annual investments will be needed to meet this demand.
Growth of credit extended by the banking system to the private sector and the central government remained high on account of sustained high growth of credit to the private sector.
Annual growth of 34.2 per cent was recorded in October this year, higher than nine per cent in the corresponding period in 2021.
Private sector credit recorded a year-on-year growth of 23.7 per cent, compared with 5.6 per cent in October last year and the target of 10.7 per cent for 2022/23.
The private sector credit performance is attributed to the normalisation of economic activities from the Covid-19 pandemic, coupled with supportive monetary policy conditions.
During the year ending October, all major economic activities recorded positive growth of credit, except hotels and restaurants.
The outstanding credit to hotels and restaurants shrunk by 4.5 per cent following the writing-off of non-performing loans to comply with regulatory requirements.
Meanwhile, personal activities mainly small and medium-sized undertakings, continued to account for the largest share of the total outstanding credit to the private sector, at 38.4 per cent, followed by trade, manufacturing and agriculture activities.
