DAR ES SALAAM: IN 2026, Tanzania’s banking sector is expected to maintain its strong performance, supported by resilient balance sheets, improved asset quality and steady credit growth, clear indicators of macroeconomic stability and a healthy economy.
With audited results for Q1–Q3 of 2025 pointing to consistent Q4 performance, the outlook is reinforced by a stable interest-rate environment and rising economic optimism. These conditions are likely to boost credit demand, driving loan growth of about 18 per cent year on year by end-2026.
From an investment perspective, banks remain well positioned to sustain profitability, as the Bank of Tanzania’s policy rate, expected to hold at 5.75 per cent, supports strong net interest margins and further improvements in credit quality.
With minimal economic disruption and easing tensions following the October 29, 2025 election, business confidence and banking operations are expected to remain intact.
A peaceful environment continues to underpin economic activity, reinforcing the sector’s positive outlook.
As 2025 closes, interest-rate stability provides a solid base for margin resilience. The Bank of Tanzania’s policy stance, expected to keep the Central Bank Rate at 5.75 per cent through 2026 after a single 25bps cut in July 2025 should sustain strong profitability.
Net interest margins are likely to remain elevated, supporting sector ROA of about 5.0–6.0 per cent and a modest easing of ROE to 24.0–25.0 per cent by end-2026.
Credit growth is projected to remain robust at around 18.0 per cent year on year in 2026, driven by stable rates and expanding corporate and retail demand.
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Mining, infrastructure projects such as the Standard Gauge Railway and port upgrades, and rising financial inclusion will continue to support lending activity.
Asset quality is expected to improve further, with the NPL ratio approaching 3.0 per cent by 2026 and NPLs net of provisions to capital stabilising at 12.0–13.0 per cent, reflecting stronger credit risk management and sound economic fundamentals.
Strong economic growth should also drive deposit growth of about 19.0 per cent, easing liquidity pressures and lowering the loan-to-deposit ratio below 90 per cent.
Digitisation and mobile money expansion will boost non-interest income and financial inclusion, while contained inflation (around 3.5 per cent) and a stable shilling averaging 2,550/- per USD will support real incomes and private-sector-led credit expansion.
Overall, fiscal conditions remain manageable, though external shocks pose a risk. Absent such disruptions, Tanzania’s banking sector enters 2026 on a stable and resilient footing.
Considering the pivotal role banks play in the economy, it is my assessment that by 2026 Tanzania’s banking sector will maintain a contained exposure to government securities.
As of September 2025, banks’ securities portfolios, 96.0 per cent of which comprised government securities accounted for 12.1 per cent of total assets.
While this level remains modest compared with the Sub-Saharan African average of 18.0 per cent in 2024, any increase in government borrowing could heighten concentration risks and crowd out private-sector lending.
Looking ahead to 2026, the financial sector’s outlook based on audited and published 2025 financials appears optimistic. The civil unrest surrounding the October 29, 2025 general election has subsided, allowing business activity to normalise from early November.
Together with the policy direction under President Samia Suluhu Hassan and her administration, these conditions support a banking system characterised by strong capital buffers.
As of 20 March 2025, the capital adequacy ratio stood at 21.0 per cent, well above the regulatory minimum of 12.0 per cent. This robust capital position should enable banks to sustain private-sector credit growth while accommodating increased government financing needs.
Moreover, enhanced liquidity management under the leadership of Bank of Tanzania Governor Mr Emanuel Mpawe Tutuba is expected to support solid M3 growth, keep the seven-day interbank rate within ±200 basis points of the central bank rate and reduce the likelihood of further policy rate cuts in 2026.