The Central Zone dominates agricultural loans, securing 45% of national loans in agriculture, forestry, fishing, and hunting. Recent reports indicate a robust increase in bank loans, reflecting a shift in confidence in agriculture as a growth sector, driven by strong credit accessibility, reduced interest rates, and an emphasis on the sector’s investment potential.
The Central Zone has established itself as a dominant region for bank loans in agriculture, forestry, fishing, and hunting, commanding a significant 45 percent share of all loans in these sectors—nearly threefold the national average of 16.9 percent. According to the most recent Consolidated Zonal Economic Performance Report for the quarter ending September 2024, the total value of agricultural loans in the Central Zone, composed of Dodoma, Morogoro, Singida, and Tabora regions, reached Sh5.57 trillion. This figure represents 17.1 percent of Tanzania’s overall bank loans, which total Sh32.66 trillion.
With a remarkable year-on-year growth rate of 59.4 percent, loans in the Central Zone have risen by 35 percent compared with June 2024. This trend reflects a burgeoning demand for credit, particularly within the agricultural sector, underscoring the region’s reliance on farming and agribusiness. The Central Zone excels in the production of cash crops including tobacco, sunflower, grapes, and cotton, alongside staple food crops such as maize, millet, and sorghum.
In addition to crop production, sectors such as livestock, forestry, and beekeeping have further fueled the demand for bank loans as financial institutions broaden their credit offerings tailored to agribusiness. Economists attribute this rapid growth of agricultural loans to various economic policies, enhanced credit accessibility, and a growing acknowledgment of agriculture as a key investment sector.
Dr. Tobias Swai, an economist at the University of Dar es Salaam and director at Sava Tech Financial Solutions, noted that the increase in loans signifies the rising confidence among financial institutions in agriculture’s potential for expansion. He stated, “With improved access to credit, farmers can invest in better inputs, modern equipment, and processing facilities, leading to higher yields and greater market competitiveness.”
Conversely, he also pointed out the inherent risks linked to agricultural lending, such as unpredictable weather and market instability, recommending stronger collaborations between banks and insurance firms to shield farmers against potential losses. Dr. Mwinuka Lutengano from the University of Dodoma remarked that the rising agricultural loan trends are also attributed to reduced interest rates that enhance credit accessibility.
Both experts believe that increased financial support for agriculture positively impacts farmers and contributes to overall economic stability in Tanzania. Dr. Donald Mmari, Executive Director of the Research on Poverty Alleviation (Repoa), highlighted that agricultural financing could modernize farming methods and elevate rural incomes, driving value addition and infrastructure development.
Dr. Daudi Ndaki from Mzumbe University emphasized that the uptick in agricultural lending indicates a shift in perspective, recognizing agriculture as a lucrative venture rather than mere subsistence. Banks’ investment in agriculture signals perceived potential for high returns and may attract further investment into the sector, facilitating its commercial growth.
In summary, the Central Zone’s significant share of agricultural loans exemplifies a shift in financial confidence towards the agricultural sector in Tanzania. This trend is driven by various factors, including favorable economic policies, improved access to credit, and reduced interest rates, which together foster growth in this vital industry. The increased focus on agricultural financing presents opportunities for modernization, increased productivity, and rural transformation, with the potential to significantly bolster the Tanzanian economy as a whole.
Original Source: www.thecitizen.co.tz
