In a recent Monetary Policy Report released by the Bank of Tanzania (BoT) for January of this year, the country's financial stability is highlighted as moderate, thanks to a positive economic outlook and a steadfast macroeconomic and business environment. Despite facing challenges such as a scarcity of foreign currency, the banking sector, comprising the largest part of the financial industry, has proven to be liquid, profitable, and adequately capitalized.
During the review period, the banking sector witnessed an increase in deposits, assets, and loans. The growth in assets mirrored the surge in deposits, attributed to the expansion of the agent banking model and the introduction of new financial products and digital banking services. Improved business conditions were cited as a contributing factor to the expansion of loans.
Liquidity in banks remained robust, with the ratio of liquid assets to demand liabilities and total assets consistently surpassing regulatory requirements. The positive trend in asset quality continued, with nonperforming loans decreasing to 4.3% in December 2023 from 5.2% in September 2023, well below the target level of 5%.
Analysts anticipate a continued decline in non-performing loans as banks implement measures to enhance asset quality. Stress testing conducted on the sector reveals its resilience to various shocks across major risk factors, indicating a strong foundation for continued stability.
According to statistics from Statista, Tanzania's banking market is poised for significant growth, with net interest income expected to reach 6.7 billion US dollars this year. Traditional banks are projected to dominate the market, accounting for an estimated 6.7 billion US dollars in the same period.
The Tanzanian banking landscape is undergoing a transformation towards mobile banking, with an increasing number of people opting for digital platforms in their financial transactions. Statista predicts an annual growth rate of 5.07% in net interest income from 2024 to 2028, reaching a market volume of 8.2 billion US dollars by 2028.
Comparatively, the United States is expected to generate the highest net interest income globally, amounting to 877.4 billion US dollars this year. The Statista report on Tanzania's banking sector also forecasts online banking penetration to reach 4.41% this year, with credit card penetration at 0.27%. Meanwhile, bank account penetration is projected to be 64.65%, and debit card penetration is forecasted to be 13.28% in the same year.