Economics and Business
ISSN 2775-9237 (Online)
Published: 29 July 2023
Does Banking Sector Advancement Provide a Growth-Supporting Role to Tanzania Economy?
The Institute of Finance Management, Tanzania
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Keywords: Financial Sector Development, Economic Growth, Banking Sector
This paper aimed at examining the role of banking sector development on economic growth in Tanzania. To explore the long-run relationship between financial growth and economic development a log-linear equation with auto-regressive term, accounting for serial correlation, is estimated after conducting a regression diagnostic test. The results show that financial depth positively influence economic growth, and this technically shows that the financial depth accelerates economic growth through expanding access to those who do not have adequate access to finance. The paper recommends the Government to have a policy of subsidizing access to finance to enable informal businesses, which do not have easy access to finance, to boost the growth of their businesses. Furthermore, the policymakers are encouraged to embrace an efficient banking system, and more specifically, Central Bank of Tanzania must spearhead the policy of lowering banking lending rates so as to promote investment which will ultimately foster economic growth.
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