Tanzania’s interest rate trends in May 2025 reflect a balanced monetary environment, with stable lending rates (15.18%) supporting credit growth (12.8% in January 2025) and rising deposit rates (8.58%) strengthening bank funding. The narrowing interest rate spread (6.24%) indicates improved banking efficiency, but high lending rates and low savings rates (2.52%) highlight structural challenges in credit access and financial inclusion

1. Lending Interest Rates

• Overview: Lending interest rates reflect the cost of borrowing for individuals, businesses, and prime clients in Tanzania’s banking sector. These rates are influenced by the Bank of Tanzania’s (BoT) monetary policy, particularly the Central Bank Rate (CBR) at 6%, private sector credit demand, and macroeconomic conditions like inflation (3.2% headline in May 2025).
• May 2025 Performance:
  • Overall Weighted Average Lending Rate:
    • May 2024: 15.47%
    • April 2025: 15.16%
    • May 2025: 15.18%
  • Short-Term Lending Rate (≤1 year):
    • May 2024: 15.98%
    • April 2025: 16.15%
    • May 2025: 15.96%
  • Negotiated Lending Rate (Prime Clients):
    • May 2024: 12.69%
    • April 2025: 12.88%
    • May 2025: 12.99%
• Context and Analysis:
  • Stability with Slight Fluctuations: The overall weighted average lending rate remained stable at 15.18% in May 2025, up slightly from 15.16% in April 2025 but down from 15.47% in May 2024. This stability reflects cautious credit conditions, driven by the BoT’s steady CBR at 6% and efforts to keep the 7-day interbank rate within the 4–8% policy band. The slight increase from April to May (2 basis points) may indicate marginal adjustments in response to rising food inflation (5.6%, Document, Page 4) or liquidity tightness in some banks (IBCM rate at 7.98%).
  • Short-Term Lending Rate Decline: The short-term lending rate (≤1 year) dropped to 15.96% in May 2025 from 16.15% in April 2025, suggesting banks are slightly easing terms for short-term borrowers, possibly to support working capital needs in sectors like agriculture, which saw 12.8% credit growth in January 2025. Compared to May 2024 (15.98%), the rate is nearly unchanged, indicating consistent pricing for short-term credit.
  • Negotiated Lending Rate Increase: The negotiated rate for prime clients rose to 12.99% in May 2025 from 12.88% in April 2025 and 12.69% in May 2024. This 11-basis-point increase from April to May signals rising costs for preferred borrowers, likely reflecting banks’ higher risk pricing amid inflationary pressures and tight liquidity (7-day interbank rate near 8%). Prime clients, typically large corporates or low-risk borrowers, benefit from lower rates due to their creditworthiness, but the upward trend suggests banks are adjusting margins to maintain profitability.
  • Economic Drivers: Lending rates remain high (15.18% overall) due to structural factors, including high operational costs in Tanzania’s banking sector, limited credit access (only 15% of adults had bank loans in 2023), and reliance on government securities (T-Bill yields at 8.89%, T-Bond yields at 12.94–15.29%). The BoT’s monetary policy, aimed at anchoring inflation within the 3–7% SADC target, supports rate stability but limits significant reductions. Rising food inflation and global uncertainties (e.g., U.S. tariff risks) may keep banks cautious, maintaining high lending rates to mitigate risks.
  • Implications: Stable but high lending rates (15.18% overall, 15.96% short-term) constrain credit access for small and medium enterprises (SMEs), which are critical for Tanzania’s economy (contributing 35% to GDP). The rise in negotiated rates (12.99%) could increase borrowing costs for corporates, potentially slowing investment in key sectors like manufacturing or agriculture. However, the slight decline in short-term rates (15.96%) may ease liquidity pressures for businesses with short-term financing needs, supporting economic activity (projected 6.0% GDP growth in 2025).

2. Deposit Interest Rates

• Overview: Deposit interest rates reflect the returns offered by banks to attract savings and time deposits, which fund lending activities. These rates are influenced by competition among banks, liquidity conditions, and the BoT’s monetary policy. Higher deposit rates incentivize savings but increase banks’ funding costs.
• May 2025 Performance:
  • Overall Time Deposit Rate:
    • May 2024: 7.65%
    • April 2025: 7.82%
    • May 2025: 8.58%
  • 12-Month Time Deposit Rate:
    • May 2024: 8.97%
    • April 2025: 9.27%
    • May 2025: 9.72%
  • Negotiated Deposit Rate:
    • May 2024: 9.72%
    • April 2025: 10.52%
    • May 2025: 10.64%
  • Savings Deposit Rate:
    • May 2024: 2.87%
    • April 2025: 2.89%
    • May 2025: 2.52%
• Context and Analysis:
  • Modest Increase in Time Deposits: The overall time deposit rate rose significantly to 8.58% in May 2025 from 7.82% in April 2025 and 7.65% in May 2024, a 76-basis-point increase month-on-month and 93-basis-point increase year-on-year. The 12-month time deposit rate also increased to 9.72% from 9.27% in April 2025 and 8.97% in May 2024. These rises indicate stronger competition among banks to attract longer-term deposits, likely to fund increased lending (private sector credit growth at 12.8% in January 2025) or offset liquidity tightness (IBCM volume up to TZS 3,267 billion).
  • Negotiated Deposit Rate Growth: The negotiated deposit rate climbed to 10.64% in May 2025 from 10.52% in April 2025 and 9.72% in May 2024, a 12-basis-point increase month-on-month and 92-basis-point increase year-on-year. This reflects banks offering higher rates to high-value depositors (e.g., corporates, institutions) to secure stable funding, especially as government borrowing competes for liquidity (T-Bond bids at TZS 1,032.5 billion).
  • Savings Deposit Rate Decline: The savings deposit rate fell to 2.52% in May 2025 from 2.89% in April 2025 and 2.87% in May 2024, a 37-basis-point drop month-on-month. This decline suggests banks are prioritizing longer-term time deposits over retail savings, which offer lower returns and are less stable for funding lending activities. The low savings rate aligns with Tanzania’s low savings culture (15% household savings rate in 2023), limiting retail deposit growth.
  • Economic Drivers: The rise in time deposit rates (8.58% overall, 9.72% for 12-month) reflects banks’ response to liquidity demands, as evidenced by the IBCM’s 7-day rate near the 8% upper bound. Competition for deposits is intensified by government securities’ attractive yields (T-Bills at 8.89%, T-Bonds at 15.29%), which draw funds away from bank deposits. The BoT’s liquidity management, using REPOs and Reverse REPOs, ensures overall system liquidity but does not fully address disparities among banks, pushing deposit rates upward. The decline in savings rates (2.52%) may discourage retail savings, potentially slowing financial inclusion efforts (40% of adults banked in 2023).
  • Implications: Higher time deposit rates (8.58%, 9.72%) strengthen banks’ funding base, supporting credit expansion in key sectors like agriculture and trade. However, increased funding costs could further elevate lending rates, squeezing bank margins (see interest rate spread below). The drop-in savings rates (2.52%) may deter retail depositors, limiting banks’ access to low-cost funds and reinforcing reliance on high-cost time deposits or interbank borrowing. Policymakers may need to promote savings incentives to boost financial inclusion and deposit growth.

3. Interest Rate Spread

• Overview: The interest rate spread, the difference between lending and deposit rates, measures banking sector efficiency, risk pricing, and profitability. A narrower spread indicates improved efficiency or competitive pressures, while a wider spread reflects higher risk premiums or operational costs.
• May 2025 Performance:
  • Short-Term Interest Spread:
    • May 2024: 7.01%
    • April 2025: 6.88%
    • May 2025: 6.24%
• Context and Analysis:
  • Narrowing Spread: The short-term interest spread (difference between short-term lending rate and deposit rate) narrowed to 6.24% in May 2025 from 6.88% in April 2025 and 7.01% in May 2024, a 64-basis-point reduction month-on-month and 77-basis-point reduction year-on-year. Using provided data, the short-term lending rate (15.96%) and an inferred short-term deposit rate (e.g., 12-month time deposit rate at 9.72%) yield a spread of approximately 6.24%, confirming the provided figure.
  • Drivers of Narrowing: The narrowing spread reflects improved banking efficiency, likely due to technological advancements (e.g., mobile banking, 60% penetration in 2023) and increased competition (28 commercial banks in Tanzania). The rise in deposit rates (8.58% overall, 9.72% for 12-month) outpaced the slight increase in lending rates (15.18% overall), compressing bank margins. The BoT’s stable monetary policy (CBR at 6%) and liquidity management (IBCM volume at TZS 3,267 billion) support a more competitive environment, reducing spreads.
  • Economic Context: Tanzania’s banking sector faces high operational costs (e.g., branch networks, cybersecurity) and credit risks (non-performing loans at 4.8% in 2023), which historically widened spreads. The narrowing to 6.24% suggests banks are absorbing higher deposit costs to remain competitive, especially as government securities (T-Bonds at 15.29%) offer alternative investment options. The spread’s reduction aligns with earlier trends, as January 2025 data showed a spread of 6.5% (lending at 15.3%, deposits at 8.8%).
  • Implications: A narrower spread (6.24%) indicates improved efficiency and competitiveness, benefiting borrowers through relatively stable lending rates. However, tighter profit margins could pressure smaller banks, potentially leading to consolidation or reduced lending to riskier sectors like SMEs. The BoT may need to monitor spreads to ensure banks remain profitable while supporting credit growth (targeting 15% private sector credit growth in 2025).

Summary Table

Additional Insights and Implications

• Policy Support: The BoT’s CBR at 6% and liquidity management (REPOs, IBCM rate at 7.98%) anchor interest rate stability, aligning with inflation targets (3–7% SADC benchmark). Government interventions, like the NFRA’s 47,238-tonne food release, help curb food inflation (5.6%), indirectly supporting rate stability by reducing inflationary pressures.
• Risks:
  • High Lending Rates: At 15.18%, lending rates constrain SME financing, potentially slowing economic diversification (agriculture, manufacturing targeted for growth in 2025/26 budget).
  • Low Savings Rates: The 2.52% savings rate may discourage retail deposits, limiting banks’ low-cost funding and slowing financial inclusion (40% banked adults in 2023).
  • Tight Liquidity: The IBCM’s 7-day rate near 8% suggests liquidity disparities, which could push deposit rates higher, further narrowing spreads and squeezing bank profits.
• Outlook: Stable lending rates and rising deposit rates support economic growth (projected 6.0% GDP in 2025), but the BoT must address high lending costs and low savings rates to boost credit access and financial inclusion. Continued export growth (16.8% in April 2025) and infrastructure investments will sustain liquidity, provided global uncertainties (e.g., geopolitical tensions) do not escalate.

Tanzania Interest Rates - May 2025: Key Figures

In April 2025, Tanzania’s banking sector exhibited stable yet dynamic interest rate trends, reflecting a competitive financial environment. The overall lending rate eased to 15.16% from 15.50% in March 2025, enhancing credit access, while the short-term lending rate rose slightly to 16.15%, indicating cautious short-term lending. Deposit rates showed mixed trends, with the 12-month deposit rate increasing to 9.27% from 8.14%, incentivizing long-term savings, and negotiated deposit rates rising to 10.52%. The interest rate spread narrowed to 6.88% from 7.72% a year earlier, signaling improved banking efficiency. The following table summarizes these key figures.

1. Lending Interest Rates (April 2025)

Lending interest rates reflect the cost of borrowing from commercial banks, influencing credit access for businesses and individuals. The provided data shows a stable yet slightly easing lending environment.

Key Figures:

Analysis:

• Overall Lending Rate: The decline from 15.50% in March 2025 to 15.16% in April 2025 (a 0.34 percentage point drop) indicates a marginal easing of borrowing costs. This aligns with the stable Central Bank Rate (CBR) of 6% maintained by the Bank of Tanzania (BoT) in April 2025 (Monthey Economic Review), suggesting a cautious monetary policy to support economic growth while managing inflation (3.2% in April 2025). Compared to April 2024 (15.51%), the rate is down by 0.35 percentage points, reflecting a gradual trend toward lower borrowing costs.
• Short-term Lending Rate: The increase from 15.83% in March 2025 to 16.15% in April 2025 (up 0.32 percentage points) suggests banks are charging slightly more for loans with maturities up to one year. This could reflect higher perceived risk or demand for short-term credit, possibly linked to seasonal economic activities (e.g., agricultural trade, as food stocks rose to 557,228 tonnes). Compared to April 2024 (16.17%), the rate is nearly stable, with a minor decrease of 0.02 percentage points.
• Negotiated Lending Rate: The slight decline from 12.94% in March 2025 to 12.88% in April 2025 (down 0.06 percentage points) and a more significant drop from 13.46% in April 2024 (down 0.58 percentage points) indicates that prime or large borrowers (e.g., corporations or institutional clients) benefit from more favorable terms. This aligns with TICGL noting negotiated rates for prime borrowers averaging around 12.77%–12.79% in late suggesting continued flexibility for high-value clients.

Insights:

• The slight decline in the overall lending rate to 15.16% suggests improved access to credit, supporting economic activities like investment and consumption. The Monthey Economic Review notes a projected GDP growth of 6% in 2025, which may be bolstered by these lower borrowing costs.
• The rise in short-term lending rates to 16.15% could indicate banks’ caution in extending short-term credit, possibly due to seasonal liquidity demands or minor risk concerns, despite stable macroeconomic conditions (inflation at 3.2%).
• The lower negotiated rates (12.88%) reflect banks’ willingness to offer competitive terms to prime borrowers, likely to support key sectors like manufacturing or trade, as noted in the diversified loan portfolio.

Source Context:

• TICGL indicate that lending rates have been relatively stable, with November 2024 rates at 15.67% overall and 12.77% negotiated, consistent with the April 2025 trend of gradual declines. Historical data shows lending rates at 16.68% in 2020, suggesting a long-term downward trend from higher historical averages (19.78% from 1992–2020).

2. Deposit Interest Rates (April 2025)

Deposit interest rates reflect the returns offered by banks to attract savings, influencing liquidity and consumer behavior.

Key Figures:

Analysis:

• Savings Deposit Rate: The slight increase from 2.86% in March 2025 to 2.89% in April 2025 (up 0.03 percentage points) and from 2.70% in April 2024 (up 0.19 percentage points) suggests banks are marginally increasing incentives for savings accounts. This aligns with TICGL noting a rise in savings deposit rates to 3.02% in August 2024, indicating a trend of encouraging household savings.
• Overall Time Deposit Rate: The decline from 8.00% in March 2025 to 7.82% in April 2025 (down 0.18 percentage points) but an increase from 7.55% in April 2024 (up 0.27 percentage points) reflects a mixed trend. The monthly decline suggests eased liquidity pressure, as banks may have sufficient deposits, consistent with the Monthey Economic Review’s indication of high liquidity in the banking sector (evidenced by Government Securities Market oversubscription, previous responses).
• 12-month Deposit Rate: The significant rise from 8.14% in March 2025 to 9.27% in April 2025 (up 1.13 percentage points) and from 8.94% in April 2024 (up 0.33 percentage points) indicates banks are offering higher returns for longer-term deposits to lock in funds. This contrasts with TICGL noting a decline to 8.18% overall deposit rates in November 2024, suggesting a strategic shift toward long-term deposits by April 2025.
• Negotiated Deposit Rate: The increase from 10.35% in March 2025 to 10.52% in April 2025 (up 0.17 percentage points) and from 9.59% in April 2024 (up 0.93 percentage points) shows banks are competing for large or institutional deposits. This aligns with TICGL reporting negotiated deposit rates at 10.14% in November 2024, indicating a continued upward trend.

Insights:

• The rise in savings (2.89%) and 12-month deposit rates (9.27%) suggests banks are incentivizing long-term savings, possibly to support lending activities or manage liquidity, as deposits are a primary funding source.
• The decline in overall time deposit rates to 7.82% reflects ample liquidity, reducing the need to aggressively attract deposits, consistent with the Monthey Economic Review’s note of high banking sector liquidity (e.g., TZS 2,611.1 billion in Interbank Cash Market transactions, previous responses).
• Higher negotiated deposit rates (10.52%) indicate competition for large depositors, likely institutional clients or pension funds, which hold significant domestic debt (26.5% by pension funds).

Source Context:

• TICGL confirm a trend of rising deposit rates, with January 2025 rates at 10.08%, up from a historical average of 9.12% (2016–2025). The April 2025 negotiated rate of 10.52% continues this upward trend, reflecting banks’ efforts to attract deposits amid strong credit demand.

3. Interest Rate Spread

The interest rate spread, defined as the difference between lending and deposit rates, indicates banking sector efficiency and credit risk perceptions.

Key Figures:

• Short-term Interest Rate Spread:
  • April 2025: 6.88 percentage points
  • April 2024: 7.72 percentage points
  • Change: Decrease of 0.84 percentage points

Analysis:

• Declining Spread: The reduction from 7.72% in April 2024 to 6.88% in April 2025 indicates a more competitive and efficient banking system. This aligns with TICGL noting a narrowing spread to 5.93% in November 2024, suggesting continued improvement. The spread is calculated as the difference between the short-term lending rate (16.15%) and a corresponding deposit rate (e.g., 12-month deposit rate of 9.27%), yielding 6.88 percentage points.
• Implications: A narrower spread suggests lower credit risk perceptions and increased competition, as banks charge less of a premium on loans while offering better returns to depositors. This is supported by the Monthey Economic Review’s stable macroeconomic environment (inflation at 3.2%, CBR at 6%) and TICGL noting reduced credit risk.
• Context: The document’s indication of high liquidity in the Government Securities Market (e.g., TZS 1,076.7 billion in bond bids, previous responses) and Interbank Cash Market (TZS 2,611.1 billion) supports efficient liquidity management, contributing to the narrower spread.

Source Context:

• TICGL confirm a trend of narrowing spreads, with August 2024 at 6.68% and November 2024 at 5.93%, reflecting improved banking efficiency. The April 2025 spread of 6.88% is slightly higher but consistent with this trend.

Conclusion

In April 2025, Tanzania’s lending and deposit interest rates reflected a stable and competitive financial sector. The overall lending rate eased to 15.16%, benefiting borrowers, while short-term rates rose slightly to 16.15%, indicating caution in short-term lending. Negotiated lending rates (12.88%) favored prime borrowers. Deposit rates showed mixed trends, with savings (2.89%) and 12-month rates (9.27%) rising, incentivizing long-term savings, while overall time deposit rates fell to 7.82%, reflecting ample liquidity. The interest rate spread narrowed to 6.88% from 7.72%, signaling improved efficiency and reduced credit risk. These trends align with the Monthey Economic Review’s stable monetary policy (CBR at 6%) and moderate inflation (3.2%), supporting economic growth projected at 6% in 2025. The following table summarizes these key figures.

The table is designed to present the data clearly and concisely, including comparisons with March 2025 and April 2024, as well as the interest rate spread, wrapped in an artifact tag as per the guidelines.

In March 2025, Tanzania’s financial system experienced a moderate tightening in borrowing conditions, with the overall lending rate rising to 15.50%, up from 15.14% in February 2025. Short-term loans (up to 1 year) averaged 15.83%, while medium-term loans (1–3 years) rose above 16%, reflecting higher credit risk pricing. In contrast, negotiated lending rates for prime borrowers declined to 12.94% from 13.42%, indicating competitive conditions for low-risk clients. On the deposit side, returns eased due to improved liquidity, with the 12-month deposit rate dropping sharply to 8.14% from 9.48%, and the negotiated deposit rate falling to 10.35% from 11.40%. Consequently, the interest rate spread widened to 7.69 percentage points, compared to 6.29 points in February, highlighting growing bank profit margins and a cautious credit outlook.

1. Lending Interest Rates (TZS Loans)

Interpretation: Lending rates rose slightly across most loan durations in March 2025, reflecting cautious pricing due to liquidity costs and credit risk. However, negotiated rates (for prime borrowers) declined, indicating banks' willingness to offer competitive rates to low-risk clients.

2. Deposit Interest Rates (TZS Deposits)

Interpretation: Deposit rates declined slightly, particularly the 12-month and negotiated deposit rates, due to improved liquidity conditions in the banking system, reducing banks' need to compete for deposits.

3. Short-Term Interest Rate Spread

• The interest rate spread (difference between short-term lending and deposit rates) widened to 7.69 percentage points in March 2025, from 6.29 in February and 7.23 in March 2024.

Implication: A widening spread suggests improved bank profitability on new lending, but may also imply tighter borrowing conditions for depositors.

In March 2025, lending interest rates slightly increased, while deposit rates softened due to ample liquidity. The negotiated lending rate dropped to 12.94%, showing room for favorable terms for low-risk borrowers. These trends reflect active monetary management and a stable credit environment.

What the Figures Tell Us

1. Borrowing Costs Are Slightly Rising

• The overall lending rate increased from 15.14% in February to 15.50% in March 2025.
• Rates for short- and medium-term loans also rose.
• 👉 This suggests that banks are charging more for credit, possibly due to:
  • Inflation expectations,
  • Higher demand for credit,
  • Or cautious risk pricing.

2. Preferred (Low-Risk) Borrowers Still Get Better Deals

• The negotiated lending rate fell from 13.42% to 12.94%.
• 👉 This means banks are competing more for large or safe borrowers, such as corporates or government clients, by offering lower rates.

3. Depositors Are Getting Lower Returns

• Deposit rates fell slightly:
  • 12-month deposit rate dropped from 9.48% to 8.14%.
  • Negotiated deposit rate declined from 11.40% to 10.35%.
• 👉 This indicates that banks are less pressured to attract new deposits, thanks to improved liquidity in the system.

4. Wider Interest Rate Spread = Higher Bank Profit Margins

• The interest rate spread (gap between lending and deposit rates) increased to 7.69% in March from 6.29% in February.
• 👉 A higher spread often means better margins for banks, but it also signals higher borrowing costs for the public compared to the returns they earn from savings.

Overall Interpretation

The data shows a stable but cautious banking environment in Tanzania. Banks are raising lending rates slightly to manage risks and inflation, while lowering deposit rates as liquidity improves. However, prime borrowers still enjoy favorable terms, and banks are earning more from the gap between what they pay and what they charge.