Unveiling Financial Intermediation: Growth Nexus in Tanzania

Study investigates influence of financial intermediaries on expansion of Tanzania economy. Ideally, the study focuses on ascertaining impacts of bank deposits, interest rate spread and total insurance premiums on growth. Time series data spanning from 1990 through 2020 was used. Results indicate that a 1% change in deposits lead to 9.13% increase in GDP per capita. Interest rate spread were found to have a significant but negative impact on growth. It was also revealed that 1% increase in interest rate spread resulted in a 6.78% decline in GDP per capital. This outcome suggests that while interest rate spread can enhance liquidity and manage risks, they may also introduce instability in development of financial markets. The study found that non-life insurance premiums have negative influence on growth, 1% increase in non-life insurance premiums led to a 6.9% regress in GDP per capital. This study recommends the need for better risk management strategies and more robust financial market infrastructure to mitigate the risks. Insurance regulatory authority should deploy effective measures which allows the sector to flourish hence attract new investments as well protect the existing ones. Study recommends that future research should concentrate on examining informal financial sectors, such as savings groups and microfinance as part of financial inclusion for better understanding of Tanzania's financial landscape.