Central Zone’s Dominance in Agriculture, Forestry, and Fishing Loans

The Central Zone leads in agricultural, forestry, and fishing loans, capturing 45 percent of sector loans, which is significantly above the national average. With Sh5.57 trillion in loans, the region shows a year-on-year growth of 59.4 percent. The financial surge is attributed to various factors such as lower interest rates and increased confidence in agriculture as a viable investment sector.

The Central Zone of Tanzania has become a significant hub for bank loans in agriculture, hunting, forestry, and fishing, securing 45 percent of all sector loans, which is nearly three times the national average of 16.9 percent. As per the latest Consolidated Zonal Economic Performance Report for the quarter ending September 2024, the total value of loans in this region reached Sh5.57 trillion, representing 17.1 percent of the country’s total bank loans, which totaled Sh32.66 trillion.

Trailing only Dar es Salaam, which leads with 53.6 percent of bank loans, the Central Zone stands as the second-largest recipient of credit in Tanzania. The year-on-year growth rate for loans in this region is an impressive 59.4 percent, reflecting a substantial 35 percent increase since June 2024. This surge in agricultural lending underscores the region’s reliance on farming and agribusiness, crucial to its economy.

The Central Zone is known for producing key cash crops such as tobacco, sunflower, grapes, and cotton, alongside staple food crops including maize, millet, and sorghum. Additionally, sectors like livestock, forestry, and beekeeping have contributed to the increased demand for bank loans, as financial institutions provide credit facilities aimed at supporting agribusiness.

Various economic policies, improved access to credit, and a growing recognition of agriculture as a viable investment sector are driving this spike in loans. Dr. Tobias Swai, an economist at the University of Dar es Salaam, noted that the increase in agricultural loans signals financial institutions’ growing confidence in agriculture. He highlighted that improved access to credit enables farmers to invest in better resources, enhancing their productivity.

While the potential for growth is promising, risks associated with unpredictable weather and market volatility remain. Dr. Swai advocated for collaboration between banks and insurance companies to safeguard farmers against these risks. Dr. Mwinuka Lutengano from the University of Dodoma attributed the rise in agricultural lending to lower interest rates, resulting in more farmers being willing to borrow for enhanced operations, thereby boosting productivity and employment.

Furthermore, Dr. Lutengano emphasized that increasing financial support for agriculture could yield long-term benefits not just for farmers, but also for the broader economy by improving food security and export earnings. Dr. Donald Mmari, Executive Director of Repoa, expressed optimism about the rise in agricultural loans, viewing it as an opportunity to modernize agricultural practices and uplift rural incomes.

Lastly, Dr. Daudi Ndaki from Mzumbe University indicated that the upsurge in agricultural lending heralds a shift in perception, recognizing agriculture as a profitable venture rather than merely a subsistence activity. Such a trend could attract further investment into the sector, fostering the commercialization of farming in Tanzania.

In conclusion, the Central Zone’s dominance in securing agricultural loans reflects its critical role in Tanzania’s economy, marked by substantial growth and increased investment potential. The region’s impressive loan uptake signifies confidence in the agricultural sector, supported by lower interest rates and evolving perceptions towards farming. While opportunities abound, recognizing and mitigating inherent risks is essential for sustainable development and economic stability.

Original Source: www.thecitizen.co.tz