What banks minting trillions in profits means for economy

At the forefront of this economic discussion are the implications of rising bank profits, particularly for the accessibility of financial services and the sustainability of economic growth.

According to financial experts, the notable rise in profits is a direct reflection of a thriving economy, where businesses and individuals are able to access loans and successfully repay them. This, in turn, indicates a healthy financial ecosystem that encourages further lending, investment, and economic activity.

Financial analyst and Rector at Mwalimu Nyerere Memorial Academy (MNMA), Prof Haruni Mapesa, said that the increased profits indicate that the country’s economy is moving in the right direction. “With Tanzanians increasingly relying on loans for both personal and business activities, the ability to repay these loans signals confidence in the economy,” Prof Mapesa said.

He said the banking sector’s robust performance shows that banks are successfully channeling their profits into economic activities, notably loans for Small and Medium Enterprises (SMEs) and government projects.

Prof Mapesa said that while banks charge high interest rates, which may raise the cost of borrowing, the money is being reinvested into projects that lead to broader economic benefits and growth. “This creates a cycle of lending, repayment and reinvestment, further fueling economic development,” he said.

A finance and banking lecturer at the University of Dar es Salaam (UDSM), Dr Tobias Swai, noted that the massive rise in profits signals strong financial confidence among Tanzanians.

He attributes part of this to the increased engagement with digital banking platforms, which has helped boost deposits across the sector.

As digital banking grows, the convenience and accessibility it offers are driving more people into formal financial systems, which in turn increases the volume of deposits and transactions.

“The ability of Tanzanians to increase their engagement with banks—whether through savings, loans, or investments—signals growing financial confidence,” Dr Swai said.

“When banks make significant profits, it usually indicates that people are financially active and businesses are able to access the capital they need for growth. This positive cycle benefits everyone, from individuals to large corporations.”

An Assistant Lecturer in Banking and Finance at Ardhi University Rashid Aziz, shared similar sentiments, saying growing profits was a positive sign that the economy is expanding.

“In general, is a positive development for banks because their primary role is to finance the economy, profits indicate that many loans have been distributed to the people, fulfilling that responsibility,” he said.

Work to be done

While this trend is promising, Prof Mapesa, Dr Swai and Mr Aziz point out that there is still work to be done to ensure that the financial system benefits all segments of society.

The banking sector’s increased profitability is largely driven by corporate and government loans, but this does not necessarily reflect equitable access for all Tanzanians, particularly those in rural areas or within the informal economy. They also believe that the interest rates and transaction fees charged by banks were exorbitantly high, limiting the broader population’s ability to benefit from the growth of the banking sector.

“Banks should be encouraged to reduce the cost of digital banking transactions, as this would further stimulate growth and financial inclusion,” said Dr Swai.

Making banking more affordable and accessible to all would help to ensure that the benefits of the banking sector’s success are more widely distributed across society.

And, according to Mr Aziz, it was also important to understand the sectors that were receiving the loans.

“For the economy to continue growing and for the profits to have a meaningful impact, the loans must be inclusive...if the loans are being directed towards sectors that employ a large number of people, such as agriculture and manufacturing, it indicates that a broad section of the population is being reached,” he said, warning against a tendency whereby only two largest banks account for about half of the sector’s profits.

Consumer awareness

Looking forward, Tanzania’s banking sector faces the challenge of sustaining this growth while improving access to financial services for the broader population.

Experts suggest that as profits continue to rise, banks should focus on improving financial literacy and consumer awareness, particularly regarding the use of digital platforms.

With the non-performing loan (NPL) ratio remaining low, analysts say, the focus must shift to ensuring that more people understand how to use digital financial services and manage loans effectively.

 By building greater awareness around responsible borrowing and leveraging technology to enhance service delivery, Tanzania’s banking sector can continue to thrive while fostering greater financial inclusion.