FINANCIAL sector has remained stable, expand and deepen due to the implementation of policy and regulatory framework coupled with innovations resulting from application of financial technology to improve the functioning of the sector.
The Bank of Tanzania (BoT) Annual Report 2018/19 shows that the number of supervised banks and other financial institutions increased to 61, of which 52 were banks and nine non-bank financial institutions and branch network expanded to 878 from 838 in 2017/18.
During the reference period, BoT sanctioned merging of several banks to improve capital and operational efficiency.
During the year under review, the banking sector performed satisfactorily, with all the indicators above the regulatory requirements.
Notably, the ratios of core capital and total capital to total risk weighted assets and off-balance sheet exposures, were 16.5 per cent and 18.4 per cent in June 2019, respectively, lower than 18.20 per cent and 20.2 per cent in 2018.
Nevertheless, the ratios exceeded the minimum regulatory requirement of 10 per cent and 12 per cent, respectively. The liquidity level was also above the regulatory requirement of 20 per cent, despite decreasing from the preceding year.
The ratio of liquid assets to demand liabilities was 34.8 per cent compared with 37.6 per cent. Assets grew by 13.6 per cent to 32.46tri/- as at the end of June 2019, mainly driven by deposits that increased by 14.2 per cent to 23.63tri/-.
The observed increase in deposits was largely due to mobilization efforts taken by banks through agent banking and digital platforms. Loans, advances and overdrafts continued to constitute a significant share of assets.
The ratio of non-performing loans (NPLs) of banks to gross loans slightly increased to 10.7 per cent at the end of June 2019 from 10.3 per cent at the corresponding period last year, and was above the desirable ceiling of 5 per cent.
Several strategies were executed by the BoT and banks to address the high level of non-performing loans. These include improving credit underwriting process, increase use of credit reference system to reduce exposure to credit risk and improve loan recovery efforts.
Furthermore the BoT, strengthened supervision and enforcement of banks.
These measures were complemented by government efforts to further improve the business environment through implementation of the Blueprint for regulatory reforms to improve the business environment.
Capitalising on accomplishments on financial sector reforms in the country almost over the last three decades, the BoT continued with initiatives aimed at financial sector deepening.
As a result, financial deepening, as measured by the ratio of bank credit to the private sector to GDP, rose from 3.3 per cent in 2000/01 to 14.0 per cent in 2018/19, with a peak of 16.4 per cent in 2015/16.
The ratio of money supply to GDP, an alternative measure of financial deepening, increased from 13.0 per cent to 22.2 per cent.
