The Central Zone in Tanzania leads bank loans for agriculture, forestry, and fishing, making up 45% of all loans in these sectors. With total loans amounting to Sh5.57 trillion, this zone has witnessed a 59.4% year-on-year growth rate. Economists attribute this surge to favorable economic policies, reduced interest rates, and increased confidence in agriculture as an investment sector. Collaboration between financial institutions and insurance companies is suggested to mitigate risks associated with agricultural lending.
The Central Zone of Tanzania has established itself as a prominent region for bank lending in agriculture, hunting, forestry, and fishing, representing 45% of loans in these sectors. This substantial share is nearly three times the national average of 16.9%. The recent Consolidated Zonal Economic Performance Report indicates that loans in the Central Zone, which includes Dodoma, Morogoro, Singida, and Tabora, totaled Sh5.57 trillion, equating to 17.1% of Tanzania’s overall bank loans amounting to Sh32.66 trillion.
With a year-on-year growth rate of 59.4%, the demand for loans in the Central Zone has surged by 35% since June 2024, underscoring the region’s reliance on agribusiness. Major cash crops produced in this zone include tobacco, sunflower, and cotton, alongside staple foods like maize and millet. Additionally, sectors such as livestock, forestry, and beekeeping have fueled the rising loan demand, prompting financial institutions to adapt their credit products for agribusiness.
Economists attribute the increased agricultural lending to favorable economic policies, enhanced credit access, and a growing acknowledgment of the agriculture sector’s investment potential. Dr. Tobias Swai, an economist from the University of Dar es Salaam, noted that improved credit accessibility enables farmers to invest in quality inputs and advanced equipment, resulting in higher yields and competitive market positioning. However, he cautioned about the inherent risks posed by weather unpredictability and market volatility, advocating for stronger partnerships between banks and insurance firms to safeguard farmers.
Dr. Mwinuka Lutengano from the University of Dodoma linked the rise in agricultural lending to decreased interest rates that have made borrowing more feasible. He stated that competitive borrowing costs encourage farmers and agribusinesses to secure loans for operational expansion, thus enhancing productivity and job creation. Dr. Lutengano expressed anticipation that this increased financial backing would yield favorable economic outcomes for both farmers and the broader economy by improving food security and export potential.
Dr. Donald Mmari, the Executive Director of Repoa, highlighted how rising agricultural loans could revolutionize farming practices and elevate rural incomes. He emphasized that agricultural financing encompasses more than production; it promotes infrastructure development and rural transformation. Dr. Daudi Ndaki from Mzumbe University remarked that the uptick in agricultural lending signifies a positive shift in perceptions about agriculture, which is now regarded as a profitable rather than purely subsistence activity. This investment trend is likely to draw further investment into the sector and facilitate agricultural commercialization.
The Central Zone’s dominance in agricultural, hunting, forestry, and fishing loans demonstrates its significance in Tanzania’s economic landscape. With substantial growth driven by improved access to credit and favorable economic conditions, this region is positioning itself as a vital hub for agribusiness. Enhanced financial support is expected to yield considerable benefits, increasing productivity, food security, and overall economic stability. The collaboration between banks and insurance providers, alongside the shift in perceptions about agricultural viability, places the Central Zone on a promising trajectory for future growth and development.
Original Source: www.thecitizen.co.tz
