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Commercial banks are increasingly shifting the provision of loans from the productive sector to individuals as they seek to remain profitable amid a tight liquidity situation, a new study shows.
The study conducted by the Tanzania Private Sector Foundation (TPSF) shows that commercial banks have increased the amount of loans issued to traders and other individuals on the grounds that they now repay more readily than manufacturers, contractors, farmers and other players in major investment projects.
The report, titled The Assessment of the Effects of the Measure Taken by the Government to Withdraw its Accounts from Commercial Banks in Tanzania, says major projects are being perceived as too risky by banks, which are still struggling to come to terms with the impact of the government's decision to transfer about Sh900 billion from commercial banks to a single treasury account at the Bank of Tanzania (BoT).
"The shift of focus poses a challenge to the private sector accessing loans to implement various development and other investment projects, contrary to private individuals and traders," TPSF director of policy Gilead Teri told journalists yesterday.
He said lending people who neither produced nor invested posed a danger to the future of development projects and job creation.
The findings could be a wake-up call to policymakers as available official data shows that the value of manufactured goods exports dropped to a six year-low during the year ending May 2017 as manufacturers grappled with various challenges in an uncertain global environment. Read more on All Africa.
Source: All Africa