By Business Insider Reporter
Tanzania is experiencing a notable surge in private sector credit in 2025 – a trend that, if managed prudently, could drive inclusive growth.
Access to finance is widening for households, SMEs, and large firms alike, with agriculture, construction, trade, and transport emerging as key beneficiaries. The broader macroeconomic environment remains supportive: inflation is stable, exports are improving, and liquidity is adequate.
However, this growth comes with caveats. Ensuring credit flows translate into sustainable and inclusive development – without triggering bubbles, inequality, or debt distress – remains the challenge.
Credit growth in numbers
Data from the Bank of Tanzania (BoT) confirms this credit expansion. As of March 2025, private sector credit stood at nearly TSh 38 trillion, up from TSh 36.98 trillion the previous month. By July, it had reached almost TSh 41 trillion.
In the year ending August 2025, private sector loans totaled TSh 41.53 trillion, compared to TSh 35.73 trillion a year earlier – a 16.2 percent year-on-year increase.
“Credit to the private sector, the main driver of money supply growth, rose by 16.2 percent in August, compared with 15.9 percent in July,” notes the BoT’s September 2025 Monthly Economic Review (MER).
Key sectors saw robust growth
Key sectors saw robust growth, with Agriculture surging by 30.1 percent, trade expanding by 29.2 percent, and transport and communication increasing by 18.8 percent – a clear sign of broad-based economic momentum and improving sectoral resilience.
In terms of credit distribution, personal loans – primarily supporting micro, small, and medium enterprises (MSMEs) – accounted for the largest share at 36% of total credit, underscoring the sector’s vital role in driving grassroots economic activity.
Trade followed with 14.2 percent, reflecting strong commercial dynamism, while agriculture comprised 13.2 percent, highlighting continued financial support for rural and food security initiatives.
In Q1 2025 alone, lenders disbursed nearly TSh 2 trillion in new loans. March saw TSh 1.01 trillion disbursed, up sharply from TSh 406.4 billion in February.
Macroeconomic implications
The rising credit volume is impacting the economy on multiple fronts:
Stimulating Growth:
Increased access to capital is supporting investment and productivity.
Inflation in Check:
With inflation mostly under four percent (e.g., 3.1 percent in January 2025), the economy appears to be absorbing the increased demand without overheating.
Financial Deepening:
The credit-to-GDP ratio rose to 19.1 percent, up from 16.5 percent a year earlier, reflecting greater access to formal finance.
External sector holding firm
While credit expansion can fuel import demand, Tanzania’s external position remains resilient. Strengthening exports – particularly gold, tourism, and cash crops – have helped offset potential current account pressures.
Even so, policymakers must stay vigilant against external imbalances driven by credit-fueled demand.
Winners and risks: Corporates vs SMEs
Large corporates benefit from easier access to finance and competitive borrowing rates, thanks to their strong collateral and credit history, along with a greater capacity for scaling operations and investing in infrastructure.
SMEs, while central to the credit ecosystem, continue to face high borrowing costs, collateral-related challenges, and limited access to financing – particularly in rural or underserved regions.
Personal loans, often the only credit route for small enterprises, indicate heavy reliance on microcredit – but also signal limited access to structured SME lending.
Household credit: Opportunity with caution
Household credit presents a growing opportunity, though it warrants cautious oversight, as families increasingly leverage loans to invest in durable goods, healthcare, education, home improvements, and micro-enterprises – signaling both rising aspirations and deeper financial integration at the grassroots level.
Agricultural loans, in particular, are driving productivity among rural households. Yet rapid personal lending growth raises concerns around over-indebtedness, especially where income is unstable or financial literacy is low.
Red flags to monitor
Several emerging risks in the credit landscape require close monitoring to safeguard financial stability.
Credit quality remains manageable for now, with non-performing loan (NPL) ratios at reasonable levels, but they could deteriorate rapidly in the event of economic shocks or external volatility.
Access to credit also remains uneven, as lending continues to favor larger, well-collateralized borrowers, leaving smaller firms and underserved populations at a disadvantage.
Additionally, the crowding out effect is becoming more pronounced – rising government domestic borrowing, particularly through Treasury bonds, may constrain banks’ ability to extend credit to the private sector.
Finally, while interest rate spreads have narrowed slightly, shifts in global or domestic rates could quickly raise borrowing costs, impacting both household and business lending.
Policy priorities for safe growth
To turn the credit boom into long-term economic transformation, key policy actions are needed:
Target Productive Sectors: Prioritize value-added manufacturing, agro-processing, and high-growth services.
Support SMEs: Expand collateral registries, credit guarantee schemes, and enterprise training.
Promote Digital Financial Inclusion: Leverage fintech for credit access, especially in rural areas.
Ensure Regulatory Vigilance: Monitor credit risks early and protect borrowers.
Maintain Macro Stability: Keep inflation in check and manage fiscal discipline to sustain a healthy credit environment.
A tipping point for Tanzania?
Tanzania’s private sector credit boom in 2025 signals a maturing financial sector and rising private enterprise activity. With lending volumes now measured in tens of trillions of shillings, the impact on farms, firms, and families is tangible.But success will depend on the quality, direction, and inclusivity of this credit flow. If well-managed, this could mark a shift from a liquidity-constrained economy to one powered by capital, innovation, and broad-based prosperity.
