Macro-prudential tools, banking sector resilience and economic growth in Tanzania = Amathuluzi asabalele anobuhlakani, ukubekezela komkhakha wezamabhange kanye nokukhula komnotho eTanzania.

Abstract

This study assessed the relationship between macro credit risk stress tests, economic growth, and countercyclical buffers in Tanzania. The financial sector in Tanzania is predominantly dominated by banks with growing development in agent banking, digital platforms, and deposit mobilization. Credit risk is observed as the most significant risk in the banking sector, where various studies show that financial instability originates from exposure to this risk. Hence, in this growing interaction and integration between domestic and global activities, studies have shown that the potential risk of transmission may affect the domestic economy at large. This has called for a significant adoption of macroprudential policy tools that interact with other segments of the financial sector, due to the growing global integrations. The study aimed to establish the interlinkages between macro-prudential tools and economic growth from a balance sheet to a prudential perspective, to support policy objectives related to credit and capital in Tanzania. The study was implemented using three objectives, of which the first one was to assess the impact of the macro-credit risk stress test on banking sector resilience in Tanzania, using the Global Vector Autoregressive (GVAR) model and the Generalised Method of Moments (GMM) estimations. The second objective assessed the effect of bank credit risk to real economic growth by sector in Tanzania, using both a linear and non-linear Autoregressive Distributed Lag (ARDL) model. The third objective analysed the implication of the stress test results in influencing macro-prudential policy decisions in Tanzania, using the Hodrick Prescott (HP) filter to compute the credit-to-GDP gap indicator that represents a countercyclical buffer. The study covered a 15-year period from 2006 to 2020, with data from six major trading partners (USA, EU, India, China, South Africa, Kenya, and UAE), banking sector indicators from 15 banks, and credit composition data for six major economic sectors. The study revealed that foreign and global transmissions have an impact to the banking sector in addition to domestic factors. More specifically, the increase in the crude oil price index and domestic inflation rate, revealed a significant effect on the aggregate credit portfolio compared to the other macro-shocks applied in the study. Regarding individual vii bank analysis, banks are the most exposed to domestic GDP shocks, though generally the banking sector in Tanzania is still resilient and above the regulatory capital threshold. The study further revealed that there is a long-run and short-run effect of credit risk on the economic growth of most sectors; thus when this is amplified, the effect differs across various sectors of the economy. This study also drew findings that contribute to the existing literature by introducing a macro-credit risk stress testing work to Tanzania’s framework, and assessing the transmission with its major trading partners. Further, this study also contributed to the integration of banking sector specific factors, in addition to macro-economic variables, when assessing the exposure to credit risk. Therefore, this assessment broadens the literature on assessing the impact of credit risk on sectoral economic growth and sector impact. This study revealed a crucial finding, that even during the financial global crisis of 2007/2009 the Tanzanian economy was not very vulnerable to the potential of having negative recessions, as reflected by the magnitude of credit exposure in the country. The study recommends enhancing Tanzania’s banking sector’s resilience assessment and providing mitigation measures in advance, to contain the anticipated exposure to macroeconomic factors, both domestic and global, to ensure financial stability. The study also recommends that the Tanzanian economy adopt the countercyclical buffer, which can be relevant to cushion against potential credit risks in case they materialise. Further, the study recommends the need for policymakers to conduct sector-wise assessments rather than aggregate exposure, to come up with specific policies targeted to particular sectors, instead of generic policies.

Iqoqa.

Lolu cwaningo luhlole ubudlelwane phakathi kwezivivinyo zokuhlola ingcindezi yobungozi besikweletu esisabalele, ukukhula komnotho, kanye nesigcinalwazi somqulu wokuphendula umnotho eTanzania ngokugxila emkhakheni wezamabhange. Ucwaningo olwehlukene luveza ukuthi ukungasimami kwezezimali kuqhamuka ekuvulelekeni kobungozi besikweletu, lapho ubudlelwane obukhulayo phakathi kwemisebenzi yangaphakathi neyangaphandle, buveza ukuthi ubungozi bokutheleleka buba nomthelela emnothweni wangaphakathi jikelele. Ucwaningo luhlose ukuqamba ukuxhumana phakathi kwamathuluzi asabalele esigcinalwazi somqulu wokuphendula umnotho kanye nokuthuthuka nomnotho emabhukwini okusebenza kuze kufinyele ekulungiseni umnotho, ukweseka izinhlosongqangi zomgomo ohlobene nesikweletu kanye nemali yokuqala umsebenzi eTanzania. Inhlosongqangi yokuqala ihlole umthelela wesivivinyo esisabalele sokuhlola ingcindezi yobungozi besikweletu emkhakheni wezamabhange eTanzania, ngokusebenzisa umfanekisomumo weGlobal Vector Autoregressive (GVAR) eyaba nemiphumela eyaveza ukuthi ukutheleleka kwangaphandle nokwamazwe omhlaba kunomthelela emkhakheni wezamabhange ngaphezu kokwenzeka nangaphakathi. Inhlosongqangi yesibili ihlole umthelela wobungozi besikweletu sasebhange ekukhuleni kwangempela komkhakha wezomnotho eTanzania, ngokusebenzisa kokubili umfanekisomumo owumugqa nongewona umugqa weDistributed Lag (ARDL). Inhlosongqangi yesithathu ihlaziye umthelela wemiphumela yesivivinyo sokuhlola ingcindezi ngokuba nomthelela ezinqumweni zomgomo osabalele wesigcinalwazi somqulu wokulungisa umnotho eTanzania, wokudlulisa kancane kusetshenziswa iHodrick Prescott (HP) ukubala inkomba yegebe lemali efakwayo kusambamkhiqizo sezwe (GDP) emele isigcinalwazi somqulu wokuphendula umnotho. Lolu cwaningo luvese ukuthi ngesikhathi sokuhlukumezeka komnotho wamazwe omhlaba kweminyaka yezi-2007/2009, umnotho waseTanzania awuzange ube sengcupheni wokungaba nokwehla komnotho komhlaba wonke, njengoba kuvezwe ukwenekeleka okukhulu ezikweletini ezweni. Ngakho-ke, lokhu kuhlola kwandisa ucwaningo lokuhlola umthelela wobungozi besikweletu emkhakheni wokukhula kwezomnotho kanye nomthelela womkhakha. Ucwaningo luphakamisa ukuthi umnotho waseTanzania usebenzise isigcinalwazi somqulu sokuphendula umnotho, okungayisebenzela ukunabukelisa ubungozi besikweletu uma kungenzeka. Okunye futhi, ucwaningo luphakamisa ukuthi abaqambi benqubomgomo babuke ukuqhuba ukuhlola okuphusile komkhakha kunokuthi babe nehaba lokunekela abaqambi benqubomgomo eqondile eqondene nemikhakha ethile, kunokuthi bakhe imigomo efaka konke.