Banks increased savings rates to boost deposits

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By Mnaku Mbani
Depositors in banking sector have a reason to smile following an increase of deposits yields, the August Monthly economic review published by the central bank of Tanzania (BOT) has said. Interest rates paid by banks to customers’ deposits increased in July 2016, whereas those charged on loans and advances decreased somewhat marginally.

This development is attributed to efforts taken by some banks in mobilising more deposits from the market. The overall time deposit rate (average interest rate on deposits of various maturity spectrum) rose to an average of 9.97 percent in July 2016 from 8.18 percent in June 2016.
The overall lending rate was 15.79 percent, slightly down from 15.99 percent in June 2016. Similar developments were observed in interest rates on loans of shorter maturities, whereby the one year lending rate eased to an average of 13.31 percent in July 2016, from 13.67 percent in the preceding month.
According to the BOT review, the 12-month deposit rate rose to 12.40 percent in July 2016 from 11.52 percent in June 2016. The spread between 12-month time deposit rate and one year lending rate narrowed to 0.90 percentage points from 2.16 percentage points in the preceding month.
However, despite the fall of lending rates, the annual growth of credit to the private sector slowed to 15.2 percent in July 2016 from 23.5 percent in July 2015 .
 The decline partly reflects the cautious approach taken by some commercial banks in providing credit as part of efforts in addressing the recent increase in non-performing loans.
The slowdown was recorded in almost all major economic activities, with a notable deceleration in building and construction, manufacturing and hotels and restaurant.
Nonetheless, it is worth noting that, the share of personal loans, loans to trade and manufacturing activities were almost 48 percent of the total outstanding credit offered in July 2016.

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