In February 2025, Tanzania experienced a slight easing in lending rates, with the overall lending rate falling to 15.14% from 15.73% in January—indicating a move toward more affordable credit. At the same time, deposit rates declined, with the 12-month deposit rate dropping to 9.48% from 10.08%, and the negotiated deposit rate easing to 11.40% from 11.80%. Meanwhile, the savings deposit rate remained low at 2.98%, offering limited incentives for household saving. The interest rate spread narrowed to 6.29 percentage points, down from 7.04 a year earlier, reflecting improving efficiency in the financial sector and potentially greater competitiveness among banks.

Interest rates in Tanzania, focusing on lending and deposit interest rates on the Tanzania Monthly Economic Review – March 2025:

1. Lending Interest Rates (February 2025)

• Overall Lending Rate:
  ➤ 15.14%, decreased from 15.73% in January 2025
• Short-Term Lending Rate (Up to 1 year):
  ➤ 15.77%, slightly up from 15.70%
• Negotiated Lending Rate:
  ➤ 13.42%, up from 12.80%

The slight drop in the overall lending rate indicates an easing of credit conditions, potentially aimed at boosting private sector investment. However, the increase in negotiated rates might reflect higher credit risk premiums or tailored credit conditions for larger borrowers.

2. Deposit Interest Rates (February 2025)

• Overall Deposit Rate:
  ➤ 8.13%, slightly down from 8.31% in January
• 12-Month Deposit Rate:
  ➤ 9.48%, down from 10.08%
• Negotiated Deposit Rate:
  ➤ 11.40%, down from 11.80%
• Savings Deposit Rate:
  ➤ 2.98%, marginally up from 2.97%

The declining deposit rates suggest increasing liquidity in the banking system. This could reduce the incentive for savings but might help lower the cost of funds for banks.

3. Interest Rate Spread (February 2025)

• Short-Term Interest Rate Spread:
  ➤ 6.29 percentage points, down from 7.04 in February 2024.

A narrowing spread indicates a reduction in the cost of borrowing relative to deposit returns, signaling improved financial intermediation efficiency and potential support for economic activity through cheaper credit.

Quick Reference Table (Interest Rates, %)

Source: Bank of Tanzania Monthly Economic Review – March 2025​​

What the lending and deposit interest rate figures tell us about Tanzania’s financial and economic environment:

1. Cost of Borrowing Is High, but Decreasing

• Lending rates remain high (15.14% overall), meaning it’s still costly for businesses and individuals to take loans.
• However, the decline from 15.73% to 15.14% shows a gradual easing—likely a monetary policy strategy to stimulate credit for investment and economic growth.

🟢 Implication: The Bank of Tanzania may be trying to support economic activity by making borrowing slightly more attractive.

2. Return on Savings Is Falling

• Deposit rates are dropping slightly—especially the 12-month deposit rate (from 10.08% to 9.48%) and the negotiated deposit rate (from 11.80% to 11.40%).
• The savings deposit rate remains low at around 2.98%, barely enough to beat inflation.

🔴 Implication: There’s less incentive to save, especially for ordinary savers. Money might shift toward spending or investing in assets with better returns (e.g., land, informal lending, or business).

3. Narrowing Interest Rate Spread = Improved Efficiency

• The interest rate spread (difference between lending and deposit rates) is narrowing:
  ➤ 6.29% in Feb 2025, down from 7.04% in Feb 2024.
• This usually signals:
  • Healthier banking competition
  • Lower profit margins for banks per loan
  • Better efficiency in financial intermediation

🟢 Implication: The banking sector may be becoming more competitive and efficient, which is good for the economy, especially for businesses seeking loans.

📊 4. What It Suggests About Monetary Policy

• These movements suggest the central bank is balancing between promoting credit and containing inflation.
• If inflation is under control, they might continue gradual rate reductions to stimulate growth.

In Summary: