Banking on Stability


Tanzania's banking sector is well regulated and is working to lift penetration above today's low print.

Starting off on the macro plain before tapering off to the nitty gritty, Tanzania’s GDP has enjoyed sustained annual growth of over 6% since 2008 and is projected at approximately 7% until 2019. This stability has reflected in key events of the past decade. A landmark of 2006 was the end of Tanzania’s IMF Poverty Reduction and Growth Facility (PRGF), a lending facility stipulating a nation’s prioritization of poverty reduction and sustainable growth. Graduation brought about Tanzania’s Policy Support Instrument (PSI), the performance of which was applauded by the IMF in 2007, 2010, and 2013. The new era of hands-off support amid burgeoning private sector activity found the fund assisting in policymaking. And in October 2014, it spotlighted fiscal discipline, which has remained a key benchmark of the local banking sector. This has contributed to the sector’s inherent durability and rising confidence locally and further afield.

Enter the Free Market

This confidence stems from the reforms of 2009, when the Financial Sector Stability Department (FSSD) and related sectoral programs were introduced. The local banking sector got the early boost it needed from the Banking and Financial Institutions Act of 1991, which closed the curtain on the burden of insolvent state-owned banks, primarily the National Bank of Commerce (NBC), which had held 90% of total commercial bank deposits, and the Cooperative & Rural Development Bank (CRDB). In fact, momentum was ultimately felt in broader financial sector development within the new private sector paradigm, as Tanzania’s capital markets, in the form of the Dar es Salaam Exchange (DSE), also opened its doors in 1998. Central Bank of Tanzania (BoT) Governor Prof. Benno Ndulu explained to TBY how the Banking and Financial Institutions Act (BFIA), 1991, the Foreign Exchange Act, 1992, and Bank of Tanzania Act, 1995, “introduced new guidelines to improve the management of the financial sector and capital flows, while safeguarding the economy against unprecedented shocks.”

And in contrast to the 2000s, where the BoT worked to maintain low and stable prices in pursuit of economic growth, “in 2006, the Bank of Tanzania Act of 1995 was amended to pave the way for a more effective monetary policy mechanism in a liberalized market environment.” More recently, the 2016/17 budget featured steps to curb bureaucracy and render the private sector more appealing to investors by making credit more available through TIB Development Bank and other local financial entities.

Push for Inclusion

The National Financial Inclusion Framework (NFIF) 2016-2020, a public-private initiative, is Tanzania’s roadmap to widen financial inclusion among the unbanked population. According to BoT Governor Ndulu, “As a result of the NFIF, it is estimated that by 2017 at least 70% of the adult population will be accessing and using financial services, leaving 30% without or with partial access; an improvement on the 57.7% of 2013.”

No Branch? No Problem

Tanzania is shooting for middle-income nation status within the next decade. Therefore, with limited financial inclusion spawning lateral approaches, the digital platform continues to provide financial access across the continent. Annually, while emigrants send remittances of USD60 billion to Africa, a mere 5% of Africans have bank accounts. This leaves a field shared by the informal route, or the key money transfer players, namely Western Union and MoneyGram, holding 75% of the market. Yet BBVA research indicates that by 2017, 350 million Africans will be staring at mobile screens, opening up the digital route further still. World Bank data indicates that in Sub-Saharan Africa 12% of adults (64 million people) have mobile money accounts, compared to 2% for the rest of the world. And while Kenya has mobile money account ownership of 58%, Tanzania and Uganda follow with around 35%. Moreover, in Tanzania’s agricultural sector today around 25% of those collecting payments look to mobile solutions. Locally, Ndulu recalled how, “In 2008, Vodacom Tanzania introduced the M-Pesa product followed by similar solutions from Millicom and Airtel in 2009, and then Zantel in 2010.” And according to Ineke Bussemaker, Managing Director & CEO of National Microfinance Bank (NMB), speaking to TBY on the likely future of banking in Tanzania, “Today, in Tanzania about 15% of the population has a bank account, which is 7.5 million people out of 50 million. However, 60% have a mobile phone and use mobile financial services, which equates to 28 million new customers.” Viju Cherian is the CEO of Diamond Trust Bank, which has enjoyed a 30% growth rate over the past eight years. Not altogether convinced of the mobile banking route for complex transactions due to the lack of smartphone penetration (c.21%), he still believes in bricks and mortar since, “in bucking a widespread trend to the contrary, this has really helped us. (…) We opened our 26th branch in 2016 and want to open three to four every year, a rate that should give us 40 to 50 branches by 2020.” The bank caters heavily to SMEs, which account for around 60% of its credit portfolio.

Today’s Scene

The banking sector presides over the financial system, claiming 70.8% of total assets as at end-September 2015, according to recent official data, respectively followed by pension funds and insurance companies on 26.7% and 1.9%. While the field is home to 56 banks, the lion’s share of total assets is parked at around five banks (54%), with around 70% held by the top 10. Very much the lion, CRDB is the largest entity by assets and market share, respectively at USD2.4 billion and 20% as at end-2015. Active also in Burundi, it caters to over 1.8 million customers. National Microfinance Bank, on assets of USD2 billion at end-2015 had a share of 17%. It was followed by NBC and Standard Chartered Tanzania, both on 6%, and Stanbic Bank with a 5% share of total assets. Foreign banks have not stayed away either, and those looking to leverage Tanzania’s growth story include South Africa’s FNB, UBA from Nigeria, Ecobank from West Africa, and Kenyan Equity Bank. Those institutions keen to open a commercial bank must display regulator-stipulated capital of TZS15 billion, and TZS2 billion for a community bank. And as the latter of the two categories must meet full compliance by 2017, one might logically conclude the likelihood of consolidation.


Talking of Tanzania’s advantageous geographical positioning, Enoch Osei-Safo, Director General of Nigerian Ecobank, observes that, “Tanzania is surrounded by eight landlocked countries dependent on its port facilities, (making it) the gateway to East Africa and the Southern African Development Community (SADC) region.” Ecobank alone has a footprint spanning them all, “and is, therefore, perfectly positioned to drive business in the region.” Moreover, responding to the vast Chinese presence on the continent in infrastructural projects, the bank opened its Chinese desk—China Direct—in partnership with the Bank of China in 2013.

Mucoba Bank Plc

On June 8, 2016 the bank was the 24th company to enter the DSE, listing 8,156,423 shares at an opening price of TZS250 per share on the Main Investment Market Segment (MIMS). Mucoba became the eighth domestic bank to be listed on the DSE after CRDB, NMB, DCB, Mkombozi, Mwalimu, Maendeleo, and Yetu Microfinance. Mucoba’s main focus is SMEs in outlying areas of the country.

Amana Bank

In the sharia-compliant segment lies Amana Bank, another entity keen to go public when circumstances permit. According to Managing Director Dr. Muhsin Salim Masoud, the giants in this segment, namely the Gulf and Far East, have so far yet to bite as, “All the investment funds we have received are from shareholders and depositors in Tanzania, (although) we are cooperating with certain banks in the Middle East through correspondent accounts.”
The bank recently introduced “a small business financing product for micro-businesses that may not have the conventional collateral required for a loan.”

Stanbic Bank

On September 30, 2016, the Dar es Salaam Stock Exchange (DSE) named this commercial bank Tanzania’s “Best Custodian Bank” for, among other reasons, its solid corporate governance, investor protection, and sustainable business growth. Stanbic Bank Tanzania is a member of South African Standard Bank Group, the leading African bank by assets, and with a footprint across 20 African nations.


National Board of Statistics (NBS) of Tanzania data indicates financial services sector saw YoY growth of 6.6% in 3Q2015. This was due to a modest rise in deposits from TZS14.8 trillion in 2014 to TZS16.8 trillion in 2015. Lending rose to TZS14.3 trillion in 2015 from TZS11.7 trillion in 2014. There was a corresponding banking asset rise of 12.4% to TZS26.35 trillion in September 2015 from March 2016. The loan-to-deposit ratio also climbed 78% in 2015; a marked improvement on the five-year average of 69%. Data also speaks well of banking asset quality, where for one, the ratio of non-performing loans (NPLs) to total loans, is on the up, falling from 8.5% in September 2014 to 6.5% by March 2015. Meanwhile, capital adequacy was kept in check, at above the regulatory stipulation of 12.5%.

Hearth and Home

The enactment of the Mortgage Law in 2008, and the subsequent establishment of the Tanzania Mortgage Refinance Company Limited (TMRC) in 2010, looked to boost the awareness, availability, and appeal of mortgages. Making clear headway, the number of banks providing mortgage products rose from just three in 2010 to 26 in 2015, and has reached 27 in 2016.

Today, the dominant five lenders in the local mortgage market hold a 70% overall stake. Equity Bank, with 25%, is followed by Stanbic (14%), Bank M (12%), Azania Bank (12%) and CRDB Bank (6%). Meanwhile, the mortgage arena more than quadrupled to 4.2% in 1Q2016, from 1% in 4Q2015, testament to rising awareness and a competitive field. And as of March 31, 2016, outstanding mortgage debt was at TZS374.5 billion, up from TZS359 billion as at December 31, 2015. Limited penetration notwithstanding, the local banking sector is robust enough to weather currently inclement conditions, and rest securely on its regulated base. And meanwhile, alternative platforms continue to emerge to bring more Tanzanians into the fold.

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