THE Covid-19 pandemic has devastated local bank lending to the private sector, but lenders are still optimistic about a bright future, as the global economy normalizes and the government takes action to boost debt intermediation. credit.
Bankers expressed optimism at the 20th Conference of Financial Institutions (COFI) on Friday and pledged to increase lending as a measure to boost productive activities and support the resumption of post-pandemic growth in the national economy.
Banks have said they are fiscally fit to increase the credit extension game as the latest industry financial data shows and ready to lend at relatively lower interest rates.
However, the Managing Director of NMB Bank Plc, Ms Ruth Zaipuna, said this effort will bear fruit through the concerted efforts and collaborations required to achieve the desired results.
“The Covid-19 pandemic has had a negative impact on private sector credit granted by banks,” noted Ms. Zaipuna in a presentation titled: Increasing Private Sector Credit Beyond the Covid-19 Pandemic: role of government, financial institutions and the private sector.
“To stimulate the growth of credit to the private sector after the Covid-19 pandemic, a number of actions must be taken by all key stakeholders. These actions require a collaborative approach to ensure a lasting impact on the economy, ”she explained.
The NMB leader said conditions already exist to support increased lending to the private sector and the sector resilience required to support the resumption of credit growth.
Ms. Zaipuna told the COFI 2021 rally that almost two years after the start of the pandemic; the global economy experienced its strongest post-recession recovery in 80 years.
In 2020, the world economy decelerated by 3.1%, but the IMF now expects world production (GDP) to increase by 5.9% in 2021. Nationally, GDP is expected to reach 5% this year, compared to 4.8% in 2020 as the impact of Covid-19 on economic activities continues to decrease.
Bank of Tanzania (BoT) Governor Professor Florens Luoga told conference attendees on Thursday that the national economy will grow 5.2% in 2022. The two-day conference focused primarily on examining the national economy after Covid- 19.
Ms. Zaipuna said the other reason for the positive optimism in the credit recovery stems from the supportive policy measures taken by the authorities to stimulate lending.
She said timely national policy responses to prevent the economy from being devastated by the effects of Covid -19 have also enabled the local banking sector to remain resilient during tough times.
While banking sector assets increased by 4.16% in 2020 to 34.68tri / -, deposit mobilization increased by almost 4% to 24.77tri / -.
At 17.19% in 2020 compared to the 17.04% ratio of the previous year, the banking sector’s core capital was well above the legal minimum requirement of 10%.
Ms. Zaipuna said the positive capitalization outlook meant banks had the sustained capacity to meet their maturing obligations. Most banks also continued to make profits, with NMB Bank posting a historic income of 206 billion / – in 2020.
“With the stability and resilience of the sector, banks have continued to provide services during the pandemic period while ensuring the health and safety of staff and customers,” Ms. Zaipuna said, noting that lenders have also contributed for more than $ 1 billion to national Covid-19 relief efforts.
Banks have encouraged increased use of alternative payment channels and expanded access to digital services by increasing transaction limits and waiving some fees.
As a result, the number and value of electronic transactions has increased from 99tri / -in 2019 to 126tri / -in 2020.
“The growth is in part due to the BoT’s policy measures to encourage the use of digital financial services, including increasing mobile money transactions and balance limits,” Ms. Zaipuna said.
Other policy measures adopted in 2020 to address and cushion the economic impacts of Covid-19 have been reducing haircuts on government securities and reducing the minimum legal requirement (SMR) to six percent.
The BoT also reduced the bank rate to five percent in order to ease the borrowing costs of commercial banks and improve their liquidity. It also allowed banks to discuss loan restructuring with borrowers hit hard by the pandemic.
In order to give a big boost to a rapid increase in credit to the private sector and lower interest rates, thereby accelerating the recovery of the economy, the BoT implemented further measures in July 2021.
These included a further reduction in the AB on loans to farmers and lower interest rates on agricultural credit. The BoT has also relaxed the requirements of bank branches to increase funds loanable to banks.
Ms. Zaipuna said that the recent introduction of a special loan facility for banks worth 1 tri / -for on-lending to the private sector will increase bank liquidity and lower the price of credit.
“These measures deployed by the Bank of Tanzania in July 2021 and the recovery of global activity after the pandemic have positively led to the increase in credit to the private sector,” she noted.
Pre-pandemic figures show credit to the private sector increased 11.1% in the year ending December 2019. However, the trend was dramatically reversed after economies in most lockdowns. of Tanzania’s major trading partners.
By the middle of last year, private sector lending had fallen to 5.5 percent due to subdued demand for new loans, especially in business activities. The situation worsened to unprecedented levels over the following months.
Ms Zaipuna said the situation now looks much better as the global economy continues to recover as the government and banks redouble their efforts to increase the availability of credit.