Local banks face rising climate risks despite low exposure, BoT study says
Tanzania's banking sector is increasingly vulnerable to climate change, with risks concentrated in loan portfolios and collateral tied to climate-sensitive sectors, according to a Bank of Tanzania report. The central bank warns that climate-related financial risks could lead to systemic stress if not adequately managed.
Tanzania's banking sector faces growing climate-related risks, despite current low exposure, a Bank of Tanzania (BoT) report reveals. The risks are concentrated in loan portfolios and collateral tied to climate-sensitive sectors such as agriculture, energy, and infrastructure. The BoT analyzed four major banks, finding 59.6% of loans exposed to low drought risk and over 94% to very low flood risk. However, climate change is expected to intensify, potentially eroding asset quality and increasing non-performing loans. The BoT recommends enhanced monitoring of climate-exposed assets and improved data collection to mitigate these risks. The central bank also urges banks to adopt more resilient lending practices and align with global standards on climate-related financial disclosures.
This content was automatically generated and/or translated by AI. It may contain inaccuracies. Please refer to the original sources for verification.