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Tanzania’s Banking and Capital Markets Show Resilience Amid Global Challenges

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Dar es Salaam, Tanzania - Despite a challenging global environment, Tanzania’s banking and capital markets have demonstrated remarkable resilience, according to the latest financial stability report released by the Bank of Tanzania.

Improved Performance in the Banking Sector

The non-performing loan (NPL) ratio in the banking sector decreased significantly from 5.8% in 2022 to 4.3% in 2023, a testament to intensified loan recovery initiatives and improved credit underwriting standards. The capital adequacy ratio also remained stable, with the banking sector’s risk exposure well-managed.

Growth in Capital Markets

The capital markets exhibited growth, with the total value of investments increasing by 9.3% to reach TZS 37,410.1 billion in 2023. Trading activities in equity and bond markets rose by 31.4%, while net asset values (NAV) of collective investment schemes increased by 50.2%.

Key Statistics

  • Total value of investments: TZS 37,410.1 billion
  • Trading activities in equity and bond markets: 31.4%
  • Net asset values (NAV) of collective investment schemes: 50.2%

Insurance Sector Growth

The insurance sector also showed robust growth, with total assets increasing by 12.1% to reach TZS 1,870.8 billion by December 2023. Net worth strengthened by 7.5%, reflecting improved financial positions, while investments rose by 12.7%.

Key Statistics

  • Total assets: TZS 1,870.8 billion
  • Net worth: 7.5%
  • Investments: 12.7%

Social Security and Payment Systems

Social Security sub-sector in Mainland Tanzania and Zanzibar remained stable, with adequate funding, liquidity, and efficiency. The growth was attributed to increased investments, employment, and contributions income.

Payment and settlement systems also remained stable, with improved efficiency in clearing and settlement, as well as increased usage of digital channels providing financial services.

Risks and Challenges

The report highlights that while risks emanating from the global and domestic environment remained moderate, the banking sector’s resilience to shocks is evident. Risk to the corporate sector decreased due to improvements in the business environment and increased public and private investment. Risks to households also decreased due to increased disposable income attributed to Government employees’ salary increases and employment opportunities.

However, there are potential risks identified in the financial stability risk map and financial system stability index, including:

  • Tighter global financial conditions
  • Climate risks
  • Increased commodity prices
  • Geopolitical tensions

Financial Stability Risk Map and Index

[Insert Figure 1.1 Financial stability risk map]

[Insert Box 1: Financial System Stability Index]

Conclusion

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The report concludes that while challenges persist, Tanzania’s banking and capital markets have demonstrated remarkable resilience, driven by prudent risk management practices, improved regulatory environment, and strategic investments. The country is well-positioned to navigate the complexities of a rapidly changing global landscape.