ASSESMENT ON THE PROVISION OF LOAN ITS IMPACT ON THE

ECONOMIC DEVELOPMENT OF PEOPLE IN TANZANIA.

A CASE OF CRDB BANK PLC

SAIDATI RIZIKI AWADHI

DSM/BHRM/19/65951

A Dissertation submitted toTanzania institute of Acountancy(TIA) In partial

fulfilment of the requirement for the ward of the degree of Bachelor of Human
resource management (BHRM)

2022
 ABSTRACT

This study investigated the influence of loans facilities provided by commercial banks
towards borrowing sectors on the economic growth of Tanzania using the data for the
period 2003-2018.Time series data on commercial banks loans to agriculture,
construction, manufacturing, tourism, transport and private sectors was used to
capture sectoral distribution of commercial banks loans facilities to different sectors of
the economy, while Real Gross Domestic Product (GDP) was used to capture economic
growth. The model was developed, and multiple linear regression analysis was
performed to investigate the relationship between variables. Diagnostic test was carried
out to make the model fit and free from spuriousness and make the results viable. The
results reveal that the model was significant and therefore can be used to make
prediction. Also was revealed that the loans facilities provided to agriculture, transport
and private sectors turned out to have a negative relationship towards economic growth
even though turned to be significant at 5% level of significant. On the other hand, loans
facilities to construction sector, manufacturing and tourism sector showed a positive
relationship with economic growth although with low percentage of positive increase in
gross domestic product. Based on the result.it was recommended that, commercial
banks should increase their loan to construction, tourism, and private sector to boost our
country’s gross domestic product.

ii
 CERTIFICATION

I, the undersigned certify that I have read and hereby recommend for acceptance
by Tanzania institute of Accountancy the dissertation entitled “Assessment on
provision of loan its impact on the economic development of people in Tanzania . A
case of CRDB BANK PLC. In partial fulfilment of the requirement for the ward of the
degree of Bachelor of Human resource management (BHRM)

…………………………………..

SIR. LAWRENCE J LUBIGILI

(SUPERVISOR)

Date ………………………

iii
 DECLARATION

I, Saidati Riziki Awadhi, declare that this research report is my original work and that it
has not been presented and will not be presented to any University or other degree
award.

Signature…………………………………….

Date…………………………………………..

iv
 COPYRIGHT

This dissertation is copyright material protected under the Berne Convention, the
Copyright Act 2002, and other international enactments, in that behalf, on intellectual
property. It should not be reproduced by any means, in full or in part, except for short
extract I a fair dealing, for research or private study, critical scholarly review of discourse
with an acknowledgement, without the written permission of the Directorate of
Postgraduate Studies, on behalf of both the author and the Tanzania Institute of
Accountancy Dar es Salaam

v
 ACKNOWLEDGEMENT

I would like to express my sincere gratitude to almighty God for giving me enough
energy to fulfill this report. I also wish to express my special thanks to all the members
of Human Resource management, class 2019/2022 for the support they showed me
from the beginning until the end of this report preparation.

Another special thanks and acknowledgment to my supervisor LAWRENCE J LUBIGILI

for his endless support during the entire period of report writing

Finally, I extend my sincere thanks to Tanzania Institute of Accountancy(TIA) for

providing enough guidelines and materials which in one way or another have
contributed towards completing this report.

vi
 LIST OF ABBREVIATIONS

ADF Augmented Dickey-Fuller

BOT Bank of Tanzania

CLA Commercial banks Loans to Agricultural sector

CLCS Commercial banks loans to construction sector

CLM Commercial banks loans to manufacturing sector

CLTRM Commercial banks loans to tourism sector

CLT Commercial banks loans to Transport sector

CLTPS Commercial banks loans to Private sector

GDP Gross Domestic Product

WB World Bank

vii
 LIST OF TABLES

Table 4:0Regression Output

Table 4:1The Equation for Predicting Economic Growth

Table 4:2 Shapiro wilk Test normal distribution

Table 4.43Breusch Pagan Test Results for Heteroskedasticity

Table 4:4 Durbin Watson Test for Autocorrelation

LIST OF GRAPHS
viii
Graph 1.1 Trends of Tanzania economic growth (GDP), (2003-2018)

Graph 1.2 Commercial banks loans to agriculture sector

Graph 1.3 Commercial banks loans to construction sector

Graph 1.4 Commercial banks loans to manufacturing e sector

Graph 1.5 Commercial banks loans to tourism sector

Graph 1.6 Commercial banks loans to transport sector

Graph 1.7 Commercial banks loans to private sector

ix
 TABLE OF CONTENTS

LIST OF
TABLES .............................................................................................................................
........... ix
LIST OF
GRAPHS ............................................................................................................................
........... x
CHAPTER
I ..........................................................................................................................................
....... 1
INTRODUCTION AND BACKGROUND OF THE
STUDY ........................................................................ 1
1.1Introduction .............................................................................................................
........................ 1
1.2 Background of the
Study ................................................................................................................ 2
1.3 Statement of the
Problem. ............................................................................................................. 3
1.4 Objective of the
study .................................................................................................................... 3
1.5 Research
hypothesis ...................................................................................................................
.. 4
1.6 Significance of the
study ............................................................................................................ 4
1.7 Limitations and delimitations of the
study ....................................................................................... 5
1.8 Scope of the
study ......................................................................................................................... 5
1.9 Layout of the
Report ...................................................................................................................... 5
CHAPTER
II .........................................................................................................................................
....... 6

x
 LITERATURE
REVIEW ...........................................................................................................................
6
2.0
Introduction .................................................................................................................
................... 6
2.1 The concept of economic growth
(GDP) ........................................................................................ 6
2.2 Theoretical literature
review ........................................................................................................... 6
2.3Empirical literature
review ............................................................................................................... 9
2.5 Conceptual
framework .................................................................................................................
13
2.6 Research
Gap .............................................................................................................................
14
CHAPTER
III ........................................................................................................................................
..... 15
DATA AND
METHODOLOGY ..............................................................................................................
. 15
3.0
Introduction .................................................................................................................
................. 15
3.1Research
design ..........................................................................................................................
. 15
3.2 Data processing and testing for
stationarity ................................................................................. 15
3.3Model
specification ................................................................................................................
....... 16
3.4Model Justification and
Results ..................................................................................................... 17
xi
CHAPTER
IV ....................................................................................................................................
......... 18 FINDINGS AND
DISCUSSIONS............................................................................................................
18
4.0
Introduction .................................................................................................................
................. 18
4.1
Findings .......................................................................................................................
................ 19
4.2 Decision on the General Results Based on F-statistics and P-
value ............................................ 26
4.4 Diagnostic
checking .....................................................................................................................
27
4.2
Discussion ...................................................................................................................
................ 29
CHAPTER
V .........................................................................................................................................
..... 31
CONCLUSION AND
RECOMMENDATIONS ......................................................................................... 31
5.1
Conclusion ..................................................................................................................
................. 31
5.2
Recommendations ......................................................................................................
................. 31
REFERENCES ...................................................................................................................
....................... 32
APPENDICES ....................................................................................................................
....................... 36

xii
APPENDIX01 .................................................................................................................
....................... 36
APPENDIX02 .................................................................................................................
....................... 36
APPENDIX03: ................................................................................................................
....................... 37
APPENDIX04: ................................................................................................................
....................... 37

APPENDIX05: ................................................................................................................
....................... 37
APPENDIX06: ................................................................................................................
....................... 37
APPENDIX07: ................................................................................................................
....................... 38

Loans to construction stationarity

test ................................................................................................ 38
APPENDIX08: ................................................................................................................
....................... 38
APPENDIX09: ................................................................................................................
....................... 39

APPENDIX10. ................................................................................................................
....................... 39
APPENDIX11: ................................................................................................................
....................... 40

APPENIX12: ...................................................................................................................
....................... 41

xiii
 CHAPTER I

INTRODUCTION AND BACKGROUND OF THE STUDY

1.1Introduction

Commercial banks loans to various economic agents which is considered as sectoral

distribution of loans aid in financial intermediation between deficit and surplus unit of the
economy. In that way it enhances productivity, leads to large production and it enable
the forward impact on economic growth. Schumpter (1991) strongly supported finance
lead growth hypothesis, which states that financial sector plays a key role in channeling
savings into productive investment, particularly in the formal sectors of the economy.
Adejayan and Sulaiman (2017) asserted that commercial banks are the key conduit for
financial intermediation in the economy.

Taking into consideration the importance of bank loans facilities in economic growth,
governments of many developing countries have been applying for loans from both
International Monetary Fund (IMF) and the World Bank (WB) for the purposes of
economic growth. John (2013).

Therefore, as the banking sector lives up to its expectation of mobilizing and channeling
loans facilities to productive sectors of the economy it can provide an immense deal of
services that can stimulate economic growth. That is, if loans facilities are properly
mobilised and channeled to both sectors it will enhance growth of the economy through
increase in capital investment, foreign exchange, job creation, food production,
improvement in infrastructures, income generation and as well as improvement in the
living standard of the people.

Despite series of monetary policies and financial sector reforms aimed at strengthening
the banks’ ability to effective and efficient services delivery towards the real sector so
that the Tanzania economy can become more vibrant and more dynamic, problems such
as insufficiency in allocating funds to the real sector, lack of long term funding to sectors
of economy, high concentrations of loans facilities to few sectors still lingers on. These

1
problems associated with commercial banks have made it difficult in one way or another
for them to make its expected contribution to the economy.

A survey of literature on this topic in Tanzania revealed that there is shortage of literature on the
assessment of sectoral distribution of commercial banks loans on the economic growth in
Tanzania. It is against this backdrops that this study intends to fill this gap and contribute to
existing body of knowledge and updating the data to reflect the effects of commercial banks’
lending to all sectors under the study.

1.2 Background of the Study

Following the Arusha declaration and nationalization of all commercial banks between

1970’s and 1980’s the banking sector became dominated by public-owned banks:

National Bank of Commerce (NBC), Cooperative Rural Development Bank (CRDB)

Tanzania Investment Bank, Tanzania Housing bank and Tanzania Postal bank. The

nationalization of these commercial banks intended to implement several development

plans which were initially believed to be hindered by shortage of funds. Profits that were

being remitted before would now be available for Tanzania development.

Those banks now would be able to channel funds to public programs aimed at

increasing productivity by limiting the number of loans to private consumption or

investment in private properties. Some key sectors of the economy such as agriculture,

of which the government thought had not been served adequately, were given a priority.

However due to some inefficiencies in those state-owned financial institutions, in1991

the Bank of Tanzania introduced The financial Institutions Act with new guidelines to

improve the management structure and financial growth. With these guidelines the

Central Bank initiated the licensing of banks and formed a prudential framework for
2
assets management, accrual of interest and provision for losses. These initiatives took

place to stop farther mismanagement in financial sector and to sustain the country’s

economic growth. Following privatization and liberalization Act in the 1990’s the financial

sector has been advanced with emphasis on enhancing quality and efficiency credit

allocation. The Act triggered competition as some new players have entered the financial

sector, particularly new commercial banks entered the market such as, Commercial

bank of Africa (CBA), Azania Bank, Stanbic Bank, Access Bank,

Exim bank, Akiba Commercial Bank, Equity bank, Bank of Baroda, just a few to mention. According to
Bank of Tanzania, The Tanzania financial sector for the past 10 years has grown rapidly. For the
quarter ended September 2018 the country’s commercial banks had total assets of TZS 32.
6trilion.This amount has been said to be contributed by the entrance of new commercial banks,
retention of profits and additional capital injection. On the other hand, in 2018 commercial banks
recorded TZS 18.237 billion of the loans amounts advanced to Private sector while Deposits
amounting to TZS 22.084billion. (BOT 2019).

1.3 Statement of the Problem.

It is noteworthy that, there is not enough empirical literature on this study in Tanzania.
Notably most provide conclusion on the long-run relationship between all the indicators
of financial development and economic growth. Constantine et al (2013). Other studies
document positive relationship between general indicators of financial development such
as broad money supply, banks credit to private sector and total deposits and overall real
GDP, Christine (2013). Thus it is due to this insufficiency this study intends to add more
knowledge into existing literatures by assessing the influence of commercial banks loans
towards agriculture, construction, manufacturing, tourism, transport and private sectors
on the economic growth in Tanzania.

3
1.4 Objective of the study

This part covers the objective of the study of which the first part is general objective

concerning the topic and the second part is about specific objectives under the study.

1.4.1 General objective

The general objective of the study was to study the provision of loan at CRDB BANK PLC
and its relationship on the economic development of people in Tanzania.

1.4.2 Specific objectives

I. To identify the impact of loan being provided by the people by CRDB BANK on Tanzania

II. To identify the relationship between loan and economic development of people in Tanzania
III. To identify the effect of loan to the people inTanzania.

1.5 Research hypothesis

Null hypothesis: Commercial banks loans to agriculture, construction, manufacturing,

tourism, transport, and private sectors cannot jointly contribute to economic growth of
Tanzania.

Alternative hypothesis: Commercial banks loans to agriculture, construction, manufacturing,

tourism, transport, and private sectors can jointly contribute to economic growth of Tanzania

1.6 Significance of the study

This study is significant to the policy makers because it provides the general picture to
what extent do commercial banks operations especially through lending to borrowing
4
sectors in Tanzania contribute to the economic growth. For Commercial banks, this
study stands as benchmark to assess their credit facilities policy for the benefit of the
banking industry and the economy as well.

Also, through this study the researcher was able to have a greater understanding about
the performance of the economy and the role played by commercial banks in Tanzania
to the growth of the economy. Adding on that, this study is expected to be
documented and kept in the Library of the Institute Of Accountancy Arusha (IAA)
which will be used by other students for reference and other researchers who have the
interest in the same topic.

1.7 Limitations and delimitations of the study

Challenges were experienced during the study such as, limited time available to conduct

the study due researcher being attached to other duties and limited financial resources

because the study was selffunded. Despite of those mentioned challenges, the

researcher managed to complete the study within a specified period.

1.8 Scope of the study

This study was carried out in Tanzania and assessed the influence of commercial banks

towards borrowing sectors under the study on the economic growth in Tanzania. Time

series data from WB and Central Bank of Tanzania spanning from 2003 to 2018 was

used.

5
1.9 Layout of the Report

The study is organized into five chapters. Chapter one includes the introduction of the

study and background, statement of the problem, objectives general objective and

specific objectives, scope of the study and significance of the study. Chapter two reviews

the related literatures to the study both theoretical and empirical literature review and

terms relating to the topic are defined. Chapter three covers research methodology and

model specification with estimation and interpretation of the results. Chapter four

focuses on the research results: data presentation, analysis, and interpretation of the

results. And chapter five

Summarizes the findings, conclusion of the study and recommendation based on the results of the
study.

6
 CHAPTER II

LITERATURE REVIEW

2.0 Introduction

Theoretical and empirical review of relevant literature to the study are covered under this

chapter, The concept of economic growth and the trends of sectoral distribution of

commercial banks loans with graphs are highlighted under this chapter, followed by

conceptual framework of the study, and critically analyses of past findings with gaps

identification from the studies related to the topic.

2.1 The concept of economic growth (GDP)

Economic growth of a country is defined as the increase in the market value of the

goods and services produced by an economy over time. As economic growth occurs

businesses create more profits as a results stock prices rise which gives companies

capital to invest and create more jobs. As more jobs are created, incomes rise. Rise in

income triggers people’s purchasing power which drives higher economic growth. Paul

Romer, (2018).

2.2 Theoretical literature review

Generally economic growth depends on the accumulation of inputs factors in the

production process and technical progress. Traditionally finance is among the linking

factors of economic growth primary sources by taking into consideration capital

formation as a condition for sustainable economic growth. Thus, this section critically

7
discusses various theories related to lending and economic growth such as Wicksell

theory of lending and economic growth and Cobb-Douglas theory of growth.

2.2.1 Wicksell theory of lending and economic growth

The theory was developed by a Swedish economist called Knut Wicksell in 1901. His

theory was based on comparison of the marginal product of capital with the cost of

borrowing money. The theory by Wicksell therefore took a monetary approach to

economic growth.

Wicksell (1901) argued that if the interest rate of borrowing money were below the

natural rate of return on capital, entrepreneurs would borrow at the money rate to

purchase capital goods. This would lead to increased demand for all types of resources

and in turn their prices. Conversely, if the interest rate of borrowing money were above

the natural rate of return on capital, entrepreneurs would sell the capital goods and hold

money. This would lead to higher demand of money and in turn the cost of borrowing.

This theory is important to this study since it explains a relationship between the demand

for and cost of money (in this context loans facilities) and output in a country. It explains

how interest rate affects borrowing, which in turn affects the purchase of capital goods

and how production is affected. That is if the interest rates are higher than the natural

rate of return borrowing will reduce, therefore reducing economic growth as the result of

low investment. However, Wicksell theory centered on capital goods and interest of

borrowing money, whereas this study is more focused on various sectors of the

8
economy and loans facilities advanced by commercial banks towards those sectors

under the study.

2.2.2 Cobb-Douglas theory of economic growth

This theory was put forth by Cobb-Douglas in 1928 to explain the relationship between

production (and therefore economic growth), labour and capital. Based on the data of

population (labour), capital and production he established that output was a function of

labour supply and capital connected with a given

level.

The Cobb-Douglas function can be represented as:

Y=F (K, L)
Where Y= Output (production)

K=Capital employed

L=Labour Supply

The capital component provided the way through which lending enters the equation.
A significant portion of credit borrowed from banks is used for capital accumulation. The
accumulated capital becomes one of the variables of economic growth in Cobb-Douglas
theory (Makali, 2014).

This theory is relevant to this study because it provides a mathematical expression of

how production is achieved using labour and capital. Even in this study the function
mathematical expression is different, of which economic growth was expressed as a
function of commercial banks’ lending to agriculture, construction, manufacturing,
tourism, and private sectors respectively as follows.

Economic growth (GDP) =f (CLA, CLC, CLM, CLTRM, CLT,

CLPS) + ε Where.

9
 • f = Function of
• GDP = Economic growth
• CLA = Commercial banks loans to agriculture sector
• CLC = Commercial banks loans to construction sector
• CLTRM = Commercial banks loans to Tourism sector
• CLT = Commercial banks loans to Transport sector
• CLPS = Commercial banks loans to private sector
• ε = Error term

2.3Empirical literature review

Several studies have been made on the analysis of commercial banks loans facilities and

their effects on the economic growth.

Musa (2019),examined the relationships between bank credits and economic growth in

Romania between 1981 and 2018.by using Bootstrap rorring window causality test, it

was determined that the banks loans don’t meet potential in economic growth of the

Romanian economy, that they have a disputable effectiveness and that the credit policy

need to be selected more carefully.

10
This study highlights the role of bank credit on economic growth, however it does not to

show how commercial banks loans facilities affects the economic through various

sectors. Thus, it was the obligation of a researcher to fill this gap by assessing the

commercial banks loans facilities to various sectors of the economy on the economic

growth of Tanzania.

Mohamed (2015).empirically investigated the impact of bank lending on economic

growth of Palestine by using time series data from 1996 to 2013.with the use of Granger

causality test, the results suggested that there was insignificant contribution of bank

lending to GDP.

This study is relevant as far as our study is concerned because time series data was

used also in this study however instead of Granger causality test Ordinary least square

method was used to estimate the parameters and draw conclusion.

Neelam et al. (2014), examines the impacts of commercial banks credits on economic

growth in Nepal from the period of 195-2014.the obtained results showed that the bank

credit to private sector has positive effects on economic growth. In the context of this

study, the findings are crucial as they provides the analysis of how bank credit influence

economic growth through private sector, however this study added more knowledge to

this analysis by assessing the contributions of loans facilities to the economic growth in

Tanzania through various sectors of the economy.

Anwar, Charan Singh (2016) and Asit Ranjan Mohaty et al (2016), Investigated the

impact of economic growth and bank credit in India provinces. In 21 states of India the

study revealed that bank credit, capital outlay and developmental expenditure have

11
favourable effects on the growth of the states. This study focused on the economy of

Tanzania as a whole and assessed the effects of loans facilities on economic growth

through economic sectors under the study.

Muthusamy, Dewasiri, weraakoon and Amarasinghe (2018) investigated the impact of

sectoral distribution of commercial banks credit on economic growth in Sri Lanka.

According to the results the industrial sector showed the long run positive relationship

with GDP. In the same analysis however focusing on commercial banks credits to the

private sector on economic growth of Bangladesh, Bishnupada and Mohamad (2016),

found that there was positive relationship between bank credit to private sector and

economic growth in Bangladesh and revealed further that about 40percent variation of

GDP was explained by bank credit to private sector.

Ajibola, Ishola and Samuel Olajide (2014), reviewed the impact of commercial banks

credit on sectoral distribution and economic growth in Sub-Saharan Africa for the period

of 1970-2011.by using linear regression model analysis the results showed that credit

advances to services sectors had positive impact on economic growth. The relevant of

this research to the topic under the study is that, time series data were also used as well

as linear regression model, however, it is only manufacturing and construction sectors

showed a positive relationship with economic growth despite that both were significant.

Ipalibo and Emeka (2016) examined the impact of bank credits to agricultural and

manufacturing sectors in Nigeria using annual time series data from 1970-3013.with the

use of co-integration and error correlation mechanism for the analysis, the study

12
revealed that a long run relationship exist between bank credits to agricultural and

manufacturing sectors and economic growth. The analysis from the above authors is

important to this study as it explored the bank credit effects on economic growth through

sectors of the economy. However this study added to the knowledge by including

construction sector and transportation sector and use ordinary least square method to

assess the effects of loan facilities distribution sector wise on economic growth of

Tanzania.

In more analysis on the commercial banks loans facilities and advances on the

economic growth through sectors of the economy, Adejayan and sulaiman (2017),

investigated the impact of sectoral distribution of commercial banks loans on the

economic growth of Nigeria. By using time series data, their focus was on commercial

banks loans to manufacturing, export, transport and communication sectors and their

impact on the economic growth. Basing on the results they pointed out that, the sectoral

distributions of commercial banks loans and advances had a significant impact on

economic growth and concluded that commercial banks are important in stimulating

economic growth and should be more favourable disposed to extending more loans and

advances to the real sectors of the economy. However the authors did not include other

sectors of the economy in their analysis such as a agriculture and construction sectors,

therefore to add more knowledge into existing literature like this, this study assessed

loans facilities towards those sectors, agriculture, construction, manufacturing and

transportation on economic growth of Tanzania.

Iwed Marshal et al (2015), examined banks domestic credit and economic growth nexus.

Using time series data from 1980-2013, the study revealed the existence of poor long

13
run relationship between banks domestic credit indicators and gross domestic product in

Nigeria. On contrary John (2013) analysed the effects of bank credit credits on the

economic growth in Nigeria, using time series data the results obtained showed that

bank credit had a significant relationship with economic growth and socio-infrastructural

development.

In addition to that Jason (2014) investigated the effects of commercial banks loans on

the economic growth of Kenya. The research was time series correlation study and the

results showed that economic growth in Kenya is not driven by changes in lending. The

study is important as it shows the trends of bank lending and their effects on economic

growth in Kenya which among of East African country like Tanzania. The author used

only two variables to make analysis. He used Economic growth as dependent variable

and changing in lending by commercial banks as independent variable .This study

assessed five variables that is Economic growth in terms of GDP as dependent variable

and loans facilities to agricultural, construction manufacturing and transportation sector

as independent variables.

Christina (2013) empirically investigated the causal relationship between financial

development and economic growth in Tanzania. Using time series data of extended

broad money supply (M3). GDP, Credit to private sectors and deposits as variables. The

results suggest the existence of a long-run relationship. between all the indicators of

financial development and economic growth. Also, by using Granger causality test the

study found that there is a bi-directional causality relationship between financial

development and economic growth in Tanzania.

14
Constantine et al (2013), in the process to determine the causal relationship between

financial development and economic growth in Tanzania co integration and vector error

correlation model (VECM) technique was employed. The results suggested that there is

a stable long-run relationship between financial development and economic growth.

Using a unique sectoral-level bank lending and output data sets on the Nigerian

economy over the period 1981-2014.Tobech et al (2018), examined the impact of

banking lending on economic growth. Empirically, they found that bank lending to

agriculture, Industry, real estate, construction, and commercial sectors had a significant

positive impact on economic growth.

Aniekan et al (2015), examined the relationship between banking sector and economic

growth in Nigeria. With the use of Granger causality test, the results showed that private

sector credit impacts positively on economic growth. However, lending interest rate

impedes economic growth. They recommended the need of more financial market

development that favours more credit to private sector with minimal interested rate to

stimulate economic growth.

Makinde O. Hassan (2019), investigated the implications of commercial banks loans on

economic growth in Nigeria. The study employed a secondary data from central bank of

Nigeria and National bureau of statistics. Gross Domestic Product (GDP) was used as

dependent variable while commercial banks loans to industrial sector, agriculture and

services sectors were used as independent variables. Using ordinary least square

estimation technique the results revealed that only agricultural sector had a positive

impact on the economic growth.

15
2.5 Conceptual framework

Conceptual framework showing the relationship of commercial banks loans to

agriculture, construction, manufacturing, tourism, transport, and private sectors (as
independent variables) and economic growth in Tanzania. (GDP as dependent variable).

2.6 Research Gap

Various studies have explained how financial sector enhance economic growth
especially in developing economies like Tanzania. Some of studies to explain the
relationship between financial sector and economic growth by providing empirical
evidence and suggestions based on the findings. However, in Tanzania t not many
studies have been conducted showing assessment of sectoral distribution of commercial
banks loans on economic growth of Tanzania. Therefore the intention of this study was
to fill the gap and contribute to the existing body of knowledge and updating the data to

Commercial banks loans

to agriculture
sector (CLA)
E

Commercial banks loans

to construction sector.
(CLC)

Commercial banks loans to

Economic manufacturing sector
Growth (GDP) (CLM)

Commercial banks loans to

tourism sector
(CLTRM )

Commercial banks loans

to
transport sector
(CLT)

Commercial banks loans to

16private sector
(CLPS)
reflect the effects of commercial banks’ lending to all sectors under the study on the
economic growth in Tanzania.

17
 CHAPTER III

DATA AND METHODOLOGY

3.0 Introduction

Kothari (2013) pointed out that research methodology is the science of understanding
how research is conducted scientifically. Thus, is the systematic procedure to solve
research problem and answer research questions. This chapter presents the methods
and techniques that will be used to approach the research problem. It includes research
design, types and source of data and methods of data collection.

3.1Research design

The study employed a time series data spanning from 2003 to 2018. A multiple linear
regression analysis was applied to validate the model. Researcher collected data on
economic growth (gross domestic product), amount of loan provided by commercial
banks to agriculture, construction, manufacturing, tourism, transport, and private sectors.
Data were collected from the World Bank and Central Bank of Tanzania and it was given
in millions Tanzanian shillings. The rationale of using time series data in this study is
because of its easy availability and time saving.

3.2 Data processing and testing for stationarity

Collected data were treated for stationarity that is at their first difference by using
Augmented Dickey Fuller (see attached appendices) and researcher used stationarity
data for predicting the model and to make analysis. Data collected assisted the
researcher to run a multiple regression analysis to examine the level of influence and
significance of the variables in the model.

18
3.3Model specification

Economic growth or the real GPD growth was identified as dependent variable in this
study while commercial banks loans to agriculture, construction, manufacturing, tourism,
transport, and private sectors were identified to be independent variables. Variables
were tested to examine the level of significance at 5% decision criteria. The developed
model was also tested for heteroskedasticity problem, serial Correlation and Shapiro
Wilk test was also applied to validate the model.

After the scrutiny of the variables, the researcher expressed these variables in the
following function to help assess the influence of loans facilities towards these borrowing
sectors under the study on the economic growth in Tanzania where four independent
variables were taken for this purpose and one dependent variable. Economic growth
(GDP) was expressed as a function of commercial banks loans to agriculture,
construction, manufacturing, tourism, transport, and private sectors respectively:

Economic growth (GDP) =f (CLA, CLC, CLM, CLTRM, CLT,

CLPS) + ε Where.

• f = Function of

• GDP = Economic growth

• CLA = Commercial banks loans to agriculture sector

• CLC = Commercial banks loans to construction sector

• CLTRM = Commercial banks loans to Tourism sector

• CLT = Commercial banks loans to Transport sector

• CLPS = Commercial banks loans to private sector

• ε = Error term

19
The above function could then be expressed in the following equation

d(GDP)=β0+β1d(CLA) +β2d(CLC)+β3d(CLM) + β4d(CLTRM) + β5d(CLT) +

β6d(CLPS) + ε Where.

• F = Function of

• d(GDP) = Gross Domestic Product

• d(CLA) = Commercial banks loans to Agriculture sector

• d(CLC) = Commercial banks loans to Constructions sector

• d(CLM) = Commercial banks loans to Manufacturing sector

• d(CLTRM) =Commercial banks loans to Tourism sector

• d(CLT) =Commercial banks loans to Transport sector

• d(CLPS) =Commercial banks loans to Private sector

• ß1, ß2, ß3, β4, β5, β6 = Coefficients

• ε is the error term

The collected data in the equation were processed using Stata for the multiple regression output.

3.4Model Justification and Results

Economic growth was set as dependent variable while the independent variables were
commercial loans to agriculture, construction, manufacturing, tourism, transport, and
private sectors. The main objective was to determine whether loans towards agriculture

20
sector, construction sector, manufacturing sector, tourism sector and transport sector
and private sector is jointly significant to explain growth or not.

The finding and results from this study shows that three out of six independent variables are
significant to explain about the model and therefore a valid model.

21
 CHAPTER IV

FINDINGS AND DISCUSSIONS

4.0 Introduction

The aim of this study was to assess the sectoral distribution of commercial banks loans
on the economic growth in Tanzania. where loans towards agriculture sector,
construction sector, manufacturing sector, tourism sector and transport sector and
private sector were treated as explanatory variable and economic growth in terms of
GDP was treated as dependent variable. Multiple regression analysis through STATA
software was conducted to investigate the relationship between these variables. The
finding and results from this study shows that the model is valid and therefore can be
used to make prediction.

Table 4:0 Regression Output

. edit

. *(8 variables, 16 observations pasted into data editor)

. tsset year
time variable: years, 2003 to 2018
delta: 1 unit

. regress dgdp dcla dclc dclm dcltrm dclt dcps

Source SS df MS Number of obs = 16

F( 6, 9) = 3.49
Model 18229146.6 6 3038191.11 Prob > F = 0.0458
Residual 7841278.17 9 871253.13 R-squared = 0.6992
Adj R-squared = 0.4987
Total 26070424.8 15 1738028.32 Root MSE = 933.41

d g d p C o e f . S t d . E r r . t P > | t |
[ 9 5% C o n f . I n t e r v a l ]
d c l a . 0 0 2 1 2 1 9 . 0 0 0 8 2 5 7 2 . 5 7 0 . 0 3 0
. 0 0 3 9 8 9 7 . 0 0 0 2 5 4 1 d c l c . 0 0 6 5 2 3 5
. 0 0 4 0 3 8 9 1 . 6 2 0 . 1 4 1 . 0 0 2 6 1 3 2 . 0 1
5 6 6 0 2 d c l m . 0 1 3 9 8 9 6 . 0 0 4 1 4 0 9
3 . 3 8 0 . 0 0 8 . 0 0 4 6 2 2 3 . 0 2 3 3 5 7 d c
l t r m . 0 0 8 4 7 3 . 0 0 6 6 7 6 9 1 . 2 7 0 . 2 3
6 . 0 0 6 6 3 1 3 . 0 2 3 5 7 7 2 d c l t . 0 0 7
0 8 4 . 0 0 2 7 7 6 2 2 . 5 5 0 . 0 3 1 . 0 1 3 3 6 4 1
. 0 0 0 8 0 3 8 d c p s 1 . 4 4 2 0 3 5 . 7 9 1 8 9 2
1 . 8 2 0 . 1 0 2 3 . 2 3 3 4 2 . 3 4 9 3 4 8 6 _ c
o n s 3 8 5 6 . 0 6 4 4 9 6 . 8 1 5 8 7 . 7 6 0 . 0 0 0
2 7 3 2 . 1 8 9 4 9 7 9 . 9 4

22
4.1 Findings

This section covers analysis of findings from the regression table 4.0

4.1.1 Value of R squared R2

The results value of R2 is 69.9% which is significant level to explain about our model.
This implies that variation in economic growth can be influenced by loans facilities to
agriculture, construction, manufacturing, tourism, transport, and private sectors. The
value of R2 represents six independent variables where the rest of 30.1% can be
explained by other variables which were not included in this study.

Therefore, with R2 of 69.9% it suggests that the model can be used for prediction. This
implies that we can have the policy developed based on this relationship which can aid
towards achieving a desired level of economic growth in Tanzania.

Below is the equation that states the relationship and prediction among the dependent and

independent variables.

Table 4:1 The Equation for Predicting Economic Growth

DGdp =3856.064 – 0.0021219 DCla + 0.0065235 DClc + 0.039896 DClm

- 0.008473 DCltrm -0.007084DCt -1.442035DCps+ ε
The above equation is derived from table 4.0 for regression output. It explains the
relationship existing between dependent and independent variables for time series data for
the period 2003 to 2018.

23
 Figure 1.1 Tanzania GDP Growth Rate (2003-2018)

Tanzania GDP Growth Rate

80000
GDP

60000

40000

2000 2005 2010 2015 2020

YEARS

Source: World bank 2020

The table above shows that Tanzania economic growth has been growing positively throughout
the period 2003-2018.

4.1.2 Commercial banks Loans to Agricultural Sector (DCla)

It is expected that as more funds are channelled to agricultural sector economic growth
in terms of GDP will also be attained. However, even though in this study CLA is
significant at 5% level with p-value of 0.030 the study reveals that there is a negative
relationship between commercial banks loans towards agricultural sector and economic
growth in Tanzania. This implies that when Cla increases by one percent will cause
0.21 percentage decrease in GDP.

The inverse relationship could be due to the fact that large percentage of agricultural
sector in Tanzania is dominated by small farmers who have low access to loans facilities

24
from commercial banks hence the amount of loans facilities advanced to this sector is
not productive enough to stimulate economic growth.

Figure1.2 Commercial banks lending trends to agriculture sector(2003-2018)

Commercial banks lending trends to agriculturere sector

0
2000 2005 2010 2015 2020
YEARS

Source: Central bank of Tanzania 2019

The table above shows that, Commercial banks’ lending to agriculture sector has not been
that stable with upwards and downwards movement of loans between 2003 to 2018.In2016
there was a sharp fall of loans towards agriculture sector but stale in the following year.

4.1.3 Commercial banks Loans to Construction Sector (DClc)

The theory suggests that when interest rate of acquiring capital is low more capital will
be available to facilitate production, thus in our model as more loans are injected into
construction projects it will lead to economic growth.it is revealed from regression table
4.0 the variable is insignificant since it has p value of 0.141 which is more than 5%level
of significant, however it has positive coefficient and therefore it verify our model.

25
Meaning that it can influence our economy by 0.065235percentage increase given
1%increase in loans towards the same sector.

Figure 1.3 Commercial banks’ lending trends to construction sector (2003-2018)

Commercial banks lending trends to construction sector

0
2000 2005 2010 2015 2020
YEARS

Source: Central bank of Tanzania 2019

The table above shows that, Commercial banks’ lending to construction sector has been
stable to some points, with consistence increase from 2008 to 2017.

4.1.4 Commercial banks Loans to Manufacturing Sector (DClm)

CLM is statistically significant at 5% level of significance with p-value of 0.008 and

positive coefficient of 0. 039896.This implies that a percentage increase in commercial
banks loans towards manufacturing sector will lead to rise in GDP by 3.9896 percent.

26
However, our result is different from other literature related to this topic, Adejayan &
Sulaiman (2017) found that commercial banks loans to manufacturing sector had no
significant impact and were negative related to economic growth.

Figure 1.4 Commercial banks’ lending trends to Manufacturing sector (2003-2018)

Commercial banks lending trends to manufacturing sector

0
2000 2005 2010 2015 2020
YEARS

Source: Central bank of Tanzania 2019

The table above shows that, Commercial banks’ lending to manufacturing sector with
some years of growth in terms of loans advanced to the sector and also a slight
decrease in those loans to some years and with the highest level in 2018.

4.1.5 Commercial banks Loans to Tourism Sector (DCltrm)

Loans to Tourism sector from regression analysis results is statistically insignificant at 5% level of
significance with p-values of 0.236 which is more than 5% level of significance.

27
However, it shows that the loans channelled to tourism sector for over the period under
study covering from 2003 to 2018 had positive relationship with GDP because the
coefficient values of CLTRM is positive. This implies that a percentage increase in loans
to tourism sector will lead to increase in economic growth by
0.8473 percent.

Figure 1.5 Commercial banks’ lending trends to Tourism sector (2003-2018)

Commercial banks lending trends to Tourism sector

0
2000 2005 2010 2015 2020
YEARS

Source: Central bank of Tanzania 2019

Commercial banks’ lending to tourism sector as shown in the table above, indicates
fluctuations of loans issued to the sector across the years under the study. It shows the
trends was not steady for all the years under the study, with almost similarities between
2016 to 2018.

4.1.6 Commercial banks Loans to Transport Sector (DClt)

The theory suggests that when more funds is increase towards transport sector, the
economic growth will be attained and when the same is reduced the economic growth
28
also will be attained at a slow pace or may not be attained at all. The results from
regression table 4.0 reveals that commercial banks loans towards transport sector has
inverse relationship with economic growth even though it is statistically significant at 5%
level of significance with p value of 0.031 which is less than 5% level of significance.
The significance level of transport sector is in line with Adejayan & Sulaiman (2017),
findings when assessing the impact of sectoral distribution of commercial banks loans
and advances on economic growth in Nigeria. The results showed that commercial
banks loans and advances towards transport and communication sector has a significant
impact and was positively related to economic growth.

Figure 1.6 Commercial banks’ lending trends to Transport sector (2003-2018)

Commercial banks lending trends to Transport sector

0
2000 2005 2010 2015 2020
YEARS

Source: Central bank of Tanzania 2019

Commercial banks’ lending to transport sector as shown in the table above, indicates
fluctuations of loans issued to the sector across the years under the study. It shows the
trends was not steady for all the years under the study, with a slight fall in 2017 and
2018, respectively.

29
 4.1.7 Commercial banks Loans to Private Sector (DClps)

The regression results shows that loans to private sector is statistically insignificant at 5% level of
significance with p-values of 0.102 which is more than 5% level of significance.

Despite the fact that, the loans directed towards private sector is expected to have a
positive relationship with economic growth, this is different with our findings in this study
since the amounts of commercial banks loans towards private sector under the study
period from 2003 to 2018, it has showed a negative relationship with economic growth.
However the most important thing about this variable is that it can still command results
about economic growth and it can still jointly make the model valid for prediction and
policy formulation.
Figure 1.7Commercial banks’ lending trends to Private sector (2003-2018)

15000 Commercial banks lending trends to Private sector

10000

5000

0
2000 2005 2010 2015 2020
YEARS

Source: Central bank of Tanzania 2019

Commercial banks’ lending to private sector as in the table above, shows that there has
been a consistency in the loans issued to this sector across the years under the study
with a slight decrease in 2009.

30
4.2 Decision on the General Results Based on F-statistics and P-value

In order to examine whether commercial banks loans provided to borrowing sectors of

the economy under the study that is, agriculture, construction, manufacturing, tourism,
transport and private sectors can or cannot influence the economic growth of Tanzania,
the researcher investigated the F statistics and P-value results. The following hypothesis
were used to validate the study based on F statistics and P value.

Hypothesis:

Ho: Commercial banks loans to agriculture, construction, manufacturing, tourism, transport,

and private sector cannot jointly influence the economic growth of Tanzania.

H1: Commercial banks loans to agriculture, construction, manufacturing, tourism, transport,

and private sector can jointly influence the economic growth of Tanzania.

Decision criteria

Decision criteria on the above hypothesis is that reject the null hypothesis when P value is
greater than 5% level of significant and F statistic should be above 5% level of significant.

Results

The results from our table shows that F statistic is 3.45 and p value is 0.04.Given this
value of p value found to be less than 5% level of significant the researcher reject the
null hypothesis and accept the alternative hypothesis that loans facilities to agriculture,
construction, manufacturing, tourism, transport and private sector can jointly influence
the economic growth of Tanzania.

31
4.4 Diagnostic checking

4.4.1 Shapiro Wilk Test

The researcher also looked at the model whether the residual is normal distributed or not.
The decision was based on the following hypothesis.

Ho: Residual is normally distributed

H1: Residual is not normally distributed

Decision Criteria

Decision criteria on the above hypothesis and results from Shapiro wilk Test for normal
data is that accept the null hypothesis when p value is more than 5% level of significant
and reject the null hypothesis when p value is less than 5%.

Table 4:2 Shapiro wilk Test

. swilk re

Shapiro-Wilk W test for normal data

Variable Obs W V z
Prob>z
re 16 0.90107 2.004 1.381
0.08361

Based on the above hypothesis results from Shapiro Wilk test for normal data shows
that the probability is 8.361% which is more than 5% and therefore we cannot reject the
null hypothesis and the researcher conclude that the residual are normally distributed.

4.4.2 Heteroskedasticity

The researcher also looked at the model whether the model has heteroskedasticity
problem or not under the following hypothesis.

Ho: Residual are homoscedastic

32
H1: Residual are not homoscedastic

Decision criteria

Decision criteria on the above hypothesis and results from Breusch Pagan test for
heteroskedasticity is that accept the null hypothesis when p value is more than 5% and
reject the null hypothesis when p value is less than 5% significant level.

Table 4.3 Breusch Pagan Test Results

Breusch-Pagan / Cook-Weisberg test for heteroskedasticity

Ho: Constant variance
Variables: fitted values of dgdp

chi2(1) = 1.89
Prob > chi2 = 0.1687

Based on the Breusch Pagan Test for heteroskedasticity it shows that the probability
value is 16.87% which is more than 5% significant level and therefore we accept the null
hypothesis that residual are homoscedastic.

4.4.3 Serial Correlation

The researcher also tested for serial correlation to determine whether there is serial correlation
among the independent variables or not. The Durbin Watson test was used to make investigation
under the following hypothesis

Ho: Residual are not serial correlated

H1: Residual are serial correlated

Decision criteria

Decision criteria on the above hypothesis the results from Durbin Watson test is that
accept the null hypothesis when p value is more than 5% and reject the null hypothesis
when p value is less than 5% significant level.

Table 4:4Durbin Watson Test for Autocorrelation

Durbin's alternative test for autocorrelation

33
 l a g s ( p) c h i 2 d f
P r o b > c h i 2
1 0 . 7 1 8 1 0 . 3 9 6 6

H0: no serial correlation

Based on the findings results shows that the probability value is 39.66% more than 5%
significant level and therefore we cannot reject the null hypothesis and we conclude that there is
no serial correlation.

4.2 Discussion

Some empirical literatures highlighted in this study have some similar and different
results with ones obtained by this study. And this provides the rooms for discussion
based on the findings of other researchers in comparison to our study results:

The significance of transport sector in this study was found to be similar with the findings
of Adejayan & Sulaiman (2017), when assessed the impact of sectoral distribution of
commercial banks loans and advances on economic growth in Nigeria. The results
showed that commercial banks loans and advances towards transport and
communication sector has a significant impact and was positively related to economic
growth. However, in this study, the sector shows the negative relationship with economic
growth in Tanzania, meaning that it might be that the commercial banks issued to
transport sector are not in favour to stimulate economic growth like other sectors.
Aniekan et al (2018), investigated the banking sector credit and economic growth in Nigeria,
with their results suggesting that private sector credit has a positive impact on economic
growth. Contrary with our study of which loans facilities towards economic sector had a
negative relationship with economic growth even though and insignificant as well. The study
reveals that in Nigeria the credit advanced to private sector had a minimal interest rate as
revealed by the researcher to stimulate economic growth. Therefore, this study recommends
the more financial markets development that favours more credit to private sector with
minimal interest rate to stimulate economic growth.

Makinde O. Hassan (2019), investigated the implications of commercial banks loans on

economic growth in Nigeria. Using ordinary least square estimation technique the results
revealed that only agricultural sector had a positive impact on the economic growth. The
same technique was used in this study, whereby loans to agriculture sectors was among
of the six independent variables and the same was significant but negative related to
economic growth. This caught the researcher attention and recommends that credit

34
policies should be reviewed so that they can be more productive and meet the expected
goal of attaining economic growth in the country.

In addition to that Jason (2014) investigated the effects of commercial banks loans on
the economic growth of Kenya. The research was time series correlation study and the
results showed that economic growth in Kenya is not driven by changes in lending.
Basing on the results which shows that our model is valid to make prediction and policy
recommendations, it is clear that as the findings in Kenya suggest that economic growth
is not driven by banks’ lending, the model it shows that commercial banks’ lending
towards different sectors of the economy under the study can jointly influence economic
growth whether positive or negative.

Apart from the findings of the results and the related findings from other literatures
reviewed under this study, the major aim of this study was to investigate whether the
loans from commercial banks towards economic sectors under this study has influence
on economic growth in Tanzania or not. With the guidance of the study objectives and
research hypothesis ,the researcher concludes that, even though the influence level of
commercial banks loans towards the sectors on economic growth in Tanzania is not
uniform among all the sectors, they can still jointly influence economic growth in
Tanzania.

35
 CHAPTER V

CONCLUSION AND RECOMMENDATIONS

5.1 Conclusion

The aim of this study was to assess the influence of sectoral distribution of commercial
banks loans on economic growth in Tanzania for the period covering 2003 to 2018.We
estimated our model using time series data for the period 2000-2018. The results show
that commercial banks loans to agriculture, manufacturing and transport were only
significant at 5% level of significant on the other hand commercial banks loans to
construction, tourism and private sectors were both insignificant at 5% level of
significant. Also, the results value of R 2 is 69.92% which is significant level to explain
about proposed model and therefore we conclude that our model can be used to make
prediction.

5.2 Recommendations

Based on empirical findings, R2 results and the predicted multiple regression model, the
study recommends the following.

• Commercial banks are important in stimulating economic growth and therefore

should be more favorable disposed to extending more loans and advances to the
real sectors of the economy.

• Government and monetary authorities should ensure that better and stronger credit
culture should be promoted and sustained.

• There should be strong and comprehensive legal framework that will continue to aid
in monitoring the performance of credit to various sectors, and recovery of debts
owed to commercial banks.

• Banks should share among themselves information on bad debt and every well
performing sector should be given a priority in terms of granting of loans and
advances.

• Also to ensure economic growth and development is achieved, the government of

Tanzania must make sure adequate monetary and fiscal policy are put in place to

36
 encourage the demand and supply of commercial banks loans and advances to the
real sectors of the economy

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 APPENDICES

APPENDIX01

. edit

. *(8 variables, 16 observations pasted into data editor)

. tsset year
time variable: years, 2003 to 2018
delta: 1 unit

. regress dgdp dcla dclc dclm dcltrm dclt dcps

Source SS df MS Number of obs = 16

F( 6, 9) = 3.49
Model 18229146.6 6 3038191.11 Prob > F = 0.0458
Residual 7841278.17 9 871253.13 R-squared = 0.6992
Adj R-squared = 0.4987
Total 26070424.8 15 1738028.32 Root MSE = 933.41

d g d p C o e f . S t d . E r r . t P > | t | [ 9 5
% C o n f . I n t e r v a l ]
d c l a . 0 0 2 1 2 1 9 . 0 0 0 8 2 5 7 2 . 5 7 0 . 0 3 0 .
0 0 3 9 8 9 7 . 0 0 0 2 5 4 1 d c l c . 0 0 6 5 2 3 5 . 0 0
4 0 3 8 9 1 . 6 2 0 . 1 4 1 . 0 0 2 6 1 3 2 . 0 1 5 6 6 0 2
d c l m . 0 1 3 9 8 9 6 . 0 0 4 1 4 0 9 3 . 3 8 0 . 0 0 8
. 0 0 4 6 2 2 3 . 0 2 3 3 5 7 d c l t r m . 0 0 8 4 7 3 .
0 0 6 6 7 6 9 1 . 2 7 0 . 2 3 6 . 0 0 6 6 3 1 3 . 0 2 3 5 7 7
2 d c l t . 0 0 7 0 8 4 . 0 0 2 7 7 6 2 2 . 5 5 0 . 0 3
1 . 0 1 3 3 6 4 1 . 0 0 0 8 0 3 8 d c p s 1 . 4 4 2 0 3 5
. 7 9 1 8 9 2 1 . 8 2 0 . 1 0 2 3 . 2 3 3 4 2 . 3 4 9 3 4 8 6
_ c o n s 3 8 5 6 . 0 6 4 4 9 6 . 8 1 5 8 7 . 7 6 0 . 0 0 0
2 7 3 2 . 1 8 9 4 9 7 9 . 9 4

APPENDIX02

Durbin's alternative test for autocorrelation

l a g s ( p) c h i 2 d f
P r o b > c h i 2
1 0 . 7 1 8 1 0 .
3 9 6 6

H0: no serial correlation

42
APPENDIX03:

. swilk re

Shapiro-Wilk W test for normal data

Variable Obs W V
z Prob>z
re 16 0.90107 2.004 1.381
0.08361

APPENDIX04:

Breusch-Pagan / Cook-Weisberg test for heteroskedasticity

Ho: Constant variance
Variables: fitted values of dgdp

chi2(1) = 1.89
Prob > chi2 = 0.1687

APPENDIX05:

Dgp stationarity test.

. dfuller dgdp, noconstant lags(0)

Dickey-Fuller test for unit root Number of obs = 15

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) 0.418 -2.660 -1.950 -1.600

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APPENDIX06:

Loans to agriculture stationarity test:

. dfuller dcla, noconstant lags(0)

Dickey-Fuller test for unit root Number of obs = 15

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) -7.094 -2.660 -1.950 -1.600

APPENDIX07:

Loans to construction stationarity test.

. dfuller dclc, noconstant lags(0)

Dickey-Fuller test for unit root Number of obs = 15

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) -1.937 -2.660 -1.950 -1.600

APPENDIX08:

Loans to manufacturing stationarity test,

. dfuller dclm, noconstant lags(0)

Dickey-Fuller test for unit root Number of obs = 15

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

44
 Z(t) -1.539 -2.660 -1.950 -1.600

APPENDIX09:

Loans to transport stationarity test

. dfuller dclt, noconstant lags(0)

Dickey-Fuller test for unit root Number of obs = 15

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) -2.040 -2.660 -1.950 -1.600

APPENDIX10.

Loans to private sector stationarity test.

. dfuller dcps, trend lags(0)

Dickey-Fuller test for unit root Number of obs = 15

Interpolated Dickey-Fuller
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value

Z(t) -3.373 -4.380 -3.600 -3.240

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APPENDIX11:

DATA ON GROSS DOMESTIC PRODUCT AND COMMERCIAL BANKS LENDING TO

THE BORROWING SECTORS IN TANZANIA.
(AMOUNT MILLION TANZANIA SHILLINGS)
CB Loans CB Loans
to CB loans to to CB Loans to
Agriculture Construction Manufacturi CB Loans to Transport CB Loans to
YEARS GDP Sector Sector ng Sector Tourism sector setor Private sector
97,795. 38,669.
2003 44,575.7 0 1 213,204.2 20,020.40 74,697.30 2541.77342
143,109. 42,157.
2004 47,920.6 9 1 242,075.5 27,418.20 92,206.10 3148.737975
177,320. 83,074.
2005 51,503.3 3 3 293,812.5 35,870.60 108,426.10 3823.890364
279,986. 134,452.
2006 54,867.6 5 2 436,049.1 11,768.10 189,097.60 5116.199467
309,543. 104,102.
2007 58,581.4 1 5 559,422.8 124,954.00 202,628.00 6504.523838
523,361. 142,992.
2008 61,912.5 6 8 612,670.6 180,143.90 320,600.60 7213.568202
485,211. 148,713.
2009 65,174.8 7 4 565,775.5 214,302.30 457,407.20 7173.034579
706,969. 182,071.
2010 69,304.6 9 6 786,470.6 300,712.00 533,990.00 7973.154128
912,331. 320,938.
2011 74,621.8 8 2 928,746.6 410,258.40 544,894.40 9110.425477
838,915. 410,746.
2012 77,979.8 0 0 991,795.9 423,187.00 610,053.90 9926.170475
966,140. 514,408.
2013 83,268.1 6 4 1,160,593.7 484,403.00 727,538.00 10375.79263
660,147.
2014 88,874.1 1,057,347.9 8 1,386,236.9 589,847.90 948,015.00 11754.85429
741,401.
2015 94,349.3 1,174,242.9 0 1,695,767.4 691,268.30 1,231,805.70 13654.2729
110,645. 740,726.
2016 100,828.4 3 8 1,627,766.0 724,872.20 1,180,904.60 13671.86719
837,159.
2017 107,670.3 1,134,818.7 1 1,777,572.5 771,317.10 975,551.50 13970.53703
952,883. 643,251.
2018 113,532.9 8 8 2,087,896.2 779,228.70 956,000.80 15422.58956

Source; World banks and Central bank of Tanzania Websites.

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APPENDIX12:

PROCESSED DATA USED FOR REGRESSION ANALYSIS IN STATA

YEAR Dgdp Dcla Dclc Dclm Dcltrm Dclt Dcps

S
2003 2788. 111.9 7997.3 67347.2 6874.7 12327.1 615.3640
3 2
2004 3344. 45314. 3488 28871.3 7397.8 17508.8 606.9645
9 9 6
2005 3582. 34210. 40917.2 51737 8452.4 16220 675.1523
7 4 9
-
3364. 142236. 24102. 1292.309
2006 3 102666 51377.9 6 5 80671.5 1
2007 3713. 29556. - 123373. 11318 13530.4 1388.324
8 6 30349. 7 6 4
7
2008 3331. 213819 38890.3 53247.8 55189. 117972. 709.0443
1 9 6 6
- -
3262. 46895. 34158. 136806. 40.53362
2009 3 -38150 5720.6 1 4 6 2
2010 4129. 221758 33358.2 220695. 86409. 76582.8 800.1195
8 1 7 5
2011 5317. 205362 138866. 142276 10954 10904.4 1137.271
2 6 6 3
2012 3358 -73417 89807.8 63049.3 12928. 65159.5 815.745
6
2013 5288. 127226 103662. 168797. 61216 117484. 449.6221
3 4 8 1 6
2014 5606 91207. 145739. 225643. 10544 220477 1379.061
3 4 2 5 7
2015 5475. 116895 81253.2 309530. 10142 283790. 1899.418
2 5 0 7 6
2016 6479. -1E+06 -674.2 - 33603. - 17.59429
1 68001. 9 50901. 2
4 1
2017 6841. 102417 96432.3 149806. 46444. -205353 298.6698
9 3 5 9 4

47
 2018 5862. - -193907 310323. 7911.6 - 1452.052
6 18193 7 19550. 5
5 7

Source; World bank and Central Bank of Tanzania

48