Demand for loans up despite higher interest rate

DAILY NEWS Reporter

 

 

DESPITE the rise of the overall lending rate to 16.19 per cent in September this year from 16.11 per cent in the previous month, strong demand for credit from lenders remained highe

According to the Bank of Tanzania (BoT) monthly economic review, commercial banks lending to major economic activities including the private sector grew at annual rate of 24.7 percent in September compared with 20.7 percent in the corresponding period in 2014.

The strong demand for money to fund the general elections concluded last month is one of the reasons that led to the increased lending despite rise of interest rate. Also, during September the overall deposit rate declined to 9.03 percent from 9.05 percent in the previous month.

The 12-month deposit rate rose slightly to 10.87 percent from 10.50 percent in the preceding month, whereas interest rate on one-year loans declined to 14.27 per cent from 14.36 per cent. The interest rate spread between one-year loans and deposits narrowed to 3.40 percentage points from 3.86 percentage points in August 2015.

During the period under review, the Bank of Tanzania (BoT) conducted two Treasury bills auctions by offering 285bn/-. Bids received amounted to 372.3bn/-, implying an over-subscription of 87.3bn/-. Successful bids amounted to 355bn/-.

The overall weighted average yield rose slightly to 13.93 percent from 13.83 percent in August 2015. Also, the three actions for five, seven and ten year Treasury bonds were conducted.

The amount offered for 5-year bond was 47bn/-, while that of 7 and 10 year bonds were 98.4bn/- and 40bn/- respectively. All the auctions were undersubscribed as bids were received were 45bn/-, 50.6bn/- and 32.2bn/-respectively.

The Inter-bank cash market transactions amounted to 844.9bn/- in September 2015, significantly higher than 493.2bn/-transacted in August 2015.

Overnight transactions accounted for 73.4 percent of inter-bank cash market transactions compared with 79.3 percent in the preceding month. In line with adequate liquidity in the banking system, the overall inter-bank cash market rate decreased to 6.62 percent from 9.78 percent in August 2015.

The overnight inter-bank cash market rate decreased 6.27 percent from 9.75 percent.