TanzaniaInvest had the pleasure of interviewing Gift Shoko, CEO of Commercial Bank of Africa (CBA) Tanzania.

CBA Tanzania is a member of the Commercial Bank of Africa Group, headquartered in Nairobi, with subsidiaries in Kenya, Tanzania, and Uganda.

CBA Tanzania offers personal, corporate and investment banking solutions.

Shoko discusses the Tanzanian banking sector and CBA’s future plans.

TanzaniaInvest (TI): The Tanzanian banking system is currently experiencing a credit crunch. The transfer of parastatals’ accounts from commercial banks to the Bank of Tanzania (BOT) that took place this year seems to be among the reasons. What is your take on that? Could consolidation take place?

Gift Shoko (GS): Centralizing treasury accounts for control purposes has been done in other countries before.

Tanzania is indeed currently experiencing a period of tight liquidity; however, this is not enough to judge whether consolidation should take place.

Whether expansion or consolidation should occur depends on certain key factors such as the target market and the potential of that market.

The case for consolidation depends to a large extent on the time it will take to stabilize the liquidity situation in the market and the continuity and sustainability of the regulatory interventions under the Open Market Operations (OMO).

The current liquidity stress also raises the question of whether Tanzania is overbanked which is difficult to assess but the country has great potential and a lot of unexplored opportunities in agriculture, mining, industry, tourism etc.

Overbanking is a function of the economy’s capacity to convert its available resources into liquidity.

However, I believe that the liquidity crunch is temporary because banks in Tanzania are actually highly segmented with quite different target markets.

There are banks focused on particular communities, others on certain segments of the economy, and commercial banks, which are not that many.

TI: The Non-Performing Loans (NPLs) ratio has risen in recent years, with 22 banks having NPL ratios above the indicative ceiling of 5% set by the BOT. What is the current situation at CBA?

GS: In general, the rate of NPLs depends on each bank’s approach and the exposure that it has.

NPL is a general albatross of the banking sector and this is linked to Tanzania’s economic performance. It is the phase that the industry is going through.

All banks including CBA Tanzania have been affected but what differs is the approach and management of the situation.

The causes for these high NPL rates are various but the main ones are general liquidity tightness in the economy and slow circulation of money.

At CBA Tanzania we have taken a proactive approach in engagement with our clients.

Going forward we have put measures and controls that ensure prevention as a better approach to cure.

TI: CBA offers a wide range of financial services, including personal, corporate, and investment solutions.  Considering the performances so far in 2016, which segment has proven the most profitable for you?

GS: In 2016, we witnessed the fastest growth in the low end banking segment and the Small and Medium Enterprises (SMEs), in particular through our product MPAWA [a technology-based product, which enables people to make savings and access loans through the mobile platform].

Our corporate banking segment has also experienced significant growth, particularly in the construction industry.

CBA is one of the biggest banks supporting construction in Tanzania, in terms of guarantees and asset financing.

TI: The current Government has made the decision to move its headquarters to Dodoma. How do you think this would impact real estate in Dar es Salaam?

GS: I do not foresee significant changes. I expect some short-term changes as the government relocates to Dodoma; however, I think that Dar es Salaam will remain the commercial hub of Tanzania due to its strategic location.

Taking Nigeria as an example, Lagos remains the country’s commercial centre and land prices are quite high despite the government’s relocation to Abuja.

TI: Tanzania is aggressively pursuing its financial inclusion strategy and mobile technology is playing a key role in that. How is fintech impacting CBA’s strategy?

GS: Our focus is on the use of technology, as we believe that the customer of the future wants to move with their bank in their own hands, doing the transactions on-the-go.

We started with the mass market and came up with a technology-based product, MPAWA.

Through MPAWA, our customers can access loans using the mobile platform; and we are now coming up with products for the other segments as well.

First, we have started with an enhanced form of internet banking that will be launched soon.

Two months ago we have also launched our Private Banking targeted at decision makers for whom time is critical and technology will be key for this segment.

Also, there will be a number of other technology-driven products that are coming forth for each segment of the market.

We aspire all of our products to be accessible using digital platforms but we will remain a bank in essence with a focus on providing loans and creating technology enhanced products.

In addition, our parent company has a big bancassurance division, and we have started to implement the same model as well.

TI: How do you keep competitive while using technology?

GS: In terms of competitiveness, the available customer databases are critical.

But these databases do not necessarily have to come from the mobile companies.

For example, municipalities have at their disposal huge databases.

The question is how can we convert those prospects into clients and derive mutual value with partners.

TI: Tanzania is on the path of an industrial revolution. In which segments of the Tanzanian economy do you see the best opportunities for CBA’s growth?

GS: We see huge opportunities in manufacturing as the government has a strong focus on value addition and we believe that we will also derive a lot of value from that process that will be carried out.

We are also planning to enter specific segments of agriculture, such as fisheries, which is highly untapped and offers a lot of potential. In this area we are targeting companies focussing on value addition.

We also consider increasing our presence in the tourism sector as it is also full of potential.

TI: What are CBA’s overall ambitions and development strategy for the coming years?

GS: In the next couple of years, I see us identifying ourselves with technology, for which we have planned vast investments engaging technology partners.

CBA is a technology-driven bank, and it will remain focused on that.

We anticipate some external constraints and challenges, including changes across the board.

Nonetheless, I believe that in the next 2–3 years there will be a solid path, and the government would have created a predictable and dependable economic model for Tanzania and for us to thrive.

TanzaniaInvest had the pleasure of interviewing Tom Philibert, Tax Partner for Tanzania at Ernst & Young (EY), one of the largest professional services firm in the world with strong expertise in tax, accounting, audit and advisory.

Philibert talks about the current tax environment of Tanzania, and the importance of implementing the right tax framework to support business and investments. He also discusses the expertise of EY in the Tanzanian tax space.

TanzaniaInvest (TI): The Tanzanian tax system relies on the contribution of VAT, income tax, import duties, and excise taxes.

To what extent do you consider the current tax framework to be competitive and conducive for investment?

Tom Philibert (TP): Unfortunately the tax system of Tanzania has somewhat worsened in the past years.

Due to severe pressure on public finance, the Government is reacting with several fiscal measures.

The complexity and lack of clarity of certain new tax rules and the tremendous focus on tax collection are often indicated by clients as factors creating concerns for the business and investment climate.

In the first place, companies need stable and predictable tax treatments for doing business and making investments and expansions.

I believe that companies do not mind paying taxes as long as the tax system is fair and reasonable, predictable and as long as there is a legal basis for these taxes.

Although the need for public funds is clear, there is a limit to how much tax companies can withstand, and if this limit is breached, it might disrupt business and prevent taxpayers of making additional investments.

I think the level of taxation for certain sectors is already quite high; for example tourism, mining, oil and gas, telecom.

Taxation should be predictable as well, not suddenly changing the landscape. Otherwise it is impossible for investors to calculate the cost and return on investment.

I believe that the Tanzanian tax system would be significantly improved if taxpayers could conclude rulings with TRA to agree and clarify the tax treatments of certain investments and transactions upfront.

This would give taxpayers and investors more certainty on how certain transactions would be treated from a Tanzanian tax perspective.

It would also make the job of the TRA easier, and the TRA will get more insight in the running of the companies.

If this could be carefully and efficiently implemented, it would be very beneficial for the Tanzanian business and investment climate, as well as for Tanzania’s ranking on the ease-of-doing-business scale.

In practice, companies in Tanzania are often faced with long audit cycles.

Typically, a company files tax returns, and after a couple of years, the Tanzania Revenue Authority (TRA) reviews the returns and conducts an in-depth tax audit of the company, which is a very time-consuming process for the taxpayers and the TRA.

This could put the continuance of the business in jeopardy, because companies are busy with reconstructing what has happened in the past and sometimes are faced with huge unexpected tax bills as a consequence of the tax audits that are performed.

This could be partly prevented by concluding advance tax rulings.

TI: What causes such unexpected tax bills arising years later? Is it due to the introduction of new taxes along the way, or a possible misunderstanding of the tax framework?

TP: In principle new taxes do not have retro-active effect; so new legislation should not have a direct impact on tax audits of earlier years.

To a certain extent, tax audit adjustments are related to errors that were made by the company in the past, or items that cannot be sufficiently substantiated by underlying documentation.

But it could also be the consequence of a different interpretation of an applicable law between the TRA and the taxpayer.

This happens because the law is often not clear, with the TRA and the taxpayers having a different interpretation of how the law should be applied.

That is also the reason why it is a concern that the audit cycle is so long and that no advance tax rulings are concluded, because it means that that uncertainty continues.

If decisions are taken on how certain items should be interpreted and treated, then that gives guidance and precedence for the future.

We notice that in practice the TRA is coming in very keen on concluding the first part of the audit, based on which they issue their tax assessment.

If the taxpayer disagrees, he can object to the assessment, but based on the Tanzanian Tax Law, he has to pay 1/3 of the total assessment amount to be able to object, which is a direct cash out for the company while the subject is still undecided and in dispute.

But after the taxpayer has filed his note of objection, it takes in general a very long time before the discussion continues and a decision is obtained.

This gives the impression that the first focus is on collecting the 1/3 payment rather than on closing the tax audit; apparently there is a huge pressure on immediate cash collection by the TRA.

TI: On July 1st, 2016 the VAT was suddenly introduced on tourism and financial services. What is your take on that?

TP: There is no issue with changing the landscape as such, but as already mentioned it is always a balancing act between enhancing revenues and maintaining a fair and attractive taxation system.

If the tax pressure gets too high or the landscape changes too often, companies may refrain from making further investments and even may decide to continue the business elsewhere in the region.

Tourism and the financial sector were traditionally already high taxed; so one should be prudent when introducing new taxes in this sector.

If tourism is overtaxed, travels to Tanzania may become too expensive compared to other destinations and tourists may decide to go on safari elsewhere in Africa.

This would be a disaster for the sector and the employment in the industry, including their suppliers, and would have a big negative impact on the economy of the country.

So before introducing new taxes or an increase of the existing taxes, one should carefully assess the possible impact.

Further, new legislation should be clear. In my opinion, the law with respect to the amendments to the VAT legislation is not clear enough.

For example, as of 1st July 2016, fee based financial services are subject to VAT. So based on the law, interest payment on loans should be subject to  18% VAT.

When announcing the law changes, the Minister however indicated that interest should not be affected by the new law amendment with respect to fee based financial services.

Taxpayers can rely on this policy statement, but needless to say that the tax technical dimension of the statement is not very clear and that it would be much more preferable to have this governed by the law itself rather than by unwritten policy that can be changed overnight.

TI: What are EY’s competitive advantages in tax advisory in Tanzania?

TP:  EY has a very large and strongly experienced team which understands the law and the business environment.

We also have a large network, on which we can rely, and so, we are exposed to a vast experience on how similar issues are treated in different countries, and this is a major asset for us.

TanzaniaInvest had the pleasure of interviewing Stephen Lokonyo, Chief Executive Officer of Britam Tanzania, part of Britam (NSE: BRIT), a diversified financial services group with operations in Kenya, Uganda, Tanzania, Rwanda, South Sudan, Mozambique and Malawi, offering insurance, asset management, banking, and property.

Lokonyo talks about the Tanzanian insurance sector, its outlook and the opportunities available.

TanzaniaInvest (TI): Tanzania is among the 20 fastest economies in the world and yet the insurance penetration ratio is less than 1%. In your opinion, what is the reason for such low penetration?

Stephen Lokonyo (SL): The reasons for the low insurance penetration in Tanzania are varied, ranging from economic, social to political.

Poverty levels are still high in the country making insurance and other financial services unaffordable.

Insurance awareness is also low, combined with general low financial literacy.

Socially, most communities had their own mechanisms for dealing with misfortunes both at family and at community level. These are forms of social insurance that are still very strong.

TI: The Tanzanian insurance market grew by 17% in gross premium returns in 2015, reaching more than TZS650b. How do you see the future outlook for the insurance market?

SL: Tanzania has experienced consistent economic growth over the last 10 years and the forecast is that this growth will continue.

This has led to general improvement in the standards of living and purchasing power.

The future outlook is very bright for the insurance industry. The growth for 2016 may not be as high as 2015 but the economic fundamentals are right and we foresee continued growth.

With the government’s plans to launch major infrastructure projects, focus on industrialization and the continued fight against corruption, the future can only get better.

TI: Which segment of the insurance industry hold the greatest potential for growth?

SL: We see tremendous growth opportunities in the middle class, SME sector and in manufacturing and processing driven by the new government’s focus on industrialization.

Tanzania is greatly endowed with natural resources and the exploitation of oil and gas will transform the economy and insurance premiums generated from this sector will be substantial.

The insurance sector must, therefore, prepare itself well to exploit this potential.

Currently, we have partnered with A rated securities from around the world to provide bespoke insurance solutions for the oil and gas sector.

We believe that every risk is unique and coverage must be suited to the risks presented.

Agriculture is another major driver of the Tanzanian economy as it currently contributes over 25% of the GDP.

The agricultural sector has not received enough interest from the insurance sector mainly due to lack of suitable and affordable products and the subsistence nature of the current practices.

Lately, though there has been a lot of activities aimed at designing suitable products and deepening insurance awareness in order to harness this potential. Britam has been and will continue to be part of these industry initiatives.

TI: In 2014, Real Insurance Company Tanzania became part of Britam, a Kenyan diversified financial services group in Kenya. What are the benefits of this takeover and what has been the market’s feedback?

SL: With the acquisition of Real Insurance in 2014 Britam became a pan-African company operating in 7 countries in East and Southern Africa.

This has enabled Britam Tanzania to tap into synergies in IT, actuarial and legal expertise not previously available.

The expansive regional reach that we now have across the 7 countries has also put in us in a very good position to serve our clients better, particularly those with regional operations.

With group’s assets in excess of USD800m in 2015, Britam Tanzania is part of strong financial services group.

The launch of the Britam brand in Tanzania has been received very well by our customers, partners, and potential clients.

The Britam brand has brought with it financial strength and experience gained over a period of 50 years.

Our new identity is a renewal of our commitment to values of Integrity respect, innovation, and customer focus.

TI: Britam has branches Dar es Salaam, Arusha, Dodoma, Mwanza, Mbeya, and Mtwara. What are your plans for further expansion of Britam’s branch network in Tanzania? What are your ambitions in term of market share, what are your competitive advantages and the challenges ahead?

SL: For now our focus is to explore the distribution of our products using alternative channels, hence opening of new offices is not a priority.

Britam’s ambition is to be a market leader in service and profitability.

Key challenges include adherence to ethical standards in the industry, high poverty levels and the low financial literacy in the country.

However, we have qualified staff, the IT infrastructure and the financial strength to support our ambitions.

TanzaniaInvest had the pleasure of interviewing Edward Marks, Managing Director of NBC Bank Tanzania, the oldest bank in the country and the 3^rd largest by assets and market share.

Barclays Africa Group Limited holds 55%, while The government of Tanzania holds 30%, and the remaining 15% is held by the International Finance Corporation (IFC), a member of the World Bank Group.

Prior to his appointment in May 2015, Marks served as Managing Director of Barclays Bank Egypt where he led the bank through a difficult operating environment.

In this exclusive interview Marks discusses the challenges and opportunities in the Tanzanian banking sector and the role and strategy of NBC.

TanzaniaInvest (TI): There are approximately 53 banks, not including other financial institutions in Tanzania in spite of limited banking penetration. The sector is currently affected by credit squeeze and increased Non-Performing Loans (NPLs). What is your assessment of the situation and how has NBC been performing in the midst of the overlying situation? 

Edward Marks (EM): As a bank, we were quite proactive in Quarter 1 2016 and as a result we had one of the best liquidity position in the market in Quarter 3 and Quarter 4.

This is because we predicted the incoming liquidity challenge and we bought bulk deposits, which tightened our budget but provided us with extra liquidity; this allowed us to be able to lend and execute large deals in those challenging conditions.

That said, the new incoming capital requirements expected in 2017 are going to impact the banks nationally and we are all forced to evaluate our decisions around whether to lend or keep our capital.

In as much as the liquidity challenge will continue, we are also concerned with Non-performing loan percentage.

We have already come up with a plan, in conjunction with the Bank of Tanzania on how to get back to the 5% threshold [of NPLs set by BOT].

However, 5% is a chosen figure, it is a KPI that shows that the banking sector portfolio is in good health. Market conditions can cause upswings so it is normal to be above. The trick is how to bring it down quickly.

Overall, banks can be profitable even with higher levels of NPL. This is because banking is a business of risk and reward and when you take risks, you will have some losses.

TI: Interest rates applied by banks are pretty high in Tanzania. What is the correlation between high NPL levels and high interest rates?

EM: It is logical for banks to set higher interest rates to cover their losses when NPLs are present.

However, what really drives interest rates is supply & demand and when the government announces the budget and the amount it will borrow from T-bills, it is setting the demand, and as mentioned earlier we (banks) are all conserving capital to meet new requirements & with increasing NPLs the supply side is restricted as well.

TI: NBC offers a wide range of services, including retail, business and corporate banking, and treasury. Which segments have proved to be more profitable in 2016? 

EM: Retail banking has been very profitable but each of our segments has been profitable during 2016.

Corporate banking took the interest expense hit because we bought large corporate deposits, which led to improved liquidity.

TI: The banking penetration in Tanzania is still very low; nonetheless, the use of mobile money is rapidly growing. What is your take on that and how is fintech going to impact your growth?

EM: Banking in the traditional sense is indeed quite limited in Tanzania, but financial inclusion has improved dramatically, thanks to the spike in the use of mobile money provided by mobile network operators (MNOs).

The advancements in technology have also contributed to an increase in banking penetration, and are morphing the linkages between banks and MNOs.

We already see banks acquiring mobile licences and I see the merging of banks & MNOs inevitably happening at some point.

There are opportunities happening in the coming year where the MNOs will list 35% of their capital.

I think that the retail appetite for this is going to be extensive and from an investment bank side NBC will be active in the advisories of these IPOs and the collection of the subscriptions from Investors.

TI: What is NBC’s strategy for 2017?

EM: Our strategy has been deliberately spent on fixing our core systems and introducing technological improvements to ensure that we run efficiently, which in the end drives sustainability and improves our customer’s experience.

Consequently, we have also been investing in our people, providing real career ladders & attracting the best from the market when we have to.

We now have a comparable e-footprint to other banks, providing internet banking, mobile payments and other paperless banking services like cash management and business banking advisory services among others.

The plan for 2017 is to bring in even more bridging innovations to Tanzania, contributing to the country’s financial inclusion agenda and empowering Tanzanians.

Our main drivers will be in the retail, business banking with select corporate / investment bank with large deals.

In the retail space it will be all about making banking easier and accessible through alternate channels.

We are also quite invested in the SME segment, from a commercial and a CSR perspective.

We will be investing in entrepreneurial and financial skills and offering advisory services to nurture infant SMEs.

We are definitely working on growth and in providing an improved user experience, but we will not be investing in network expansion,

TI: What are your ambitions and what are the challenges ahead? 

EM: In 2015, our profit was TSH 17.6b. In 2016, we grew that by 32%.

We are going to be selective in our choice of liabilities. We are not buying expensive deposits, so you’ll see us focus on current accounts, and we will consequently try to make them interest-bearing. We will bring in new products and put more capability into electronic platforms.

Payments are also key because they will keep the currents account balanced. So, it is all about current accounts and fast execution of payments.

We also want to keep our liquidity, enabling us to execute deals in the infrastructure sector and with the large corporates.

I foresee our biggest challenge being the balance between asset growth and capital position. This is because every asset creates risk-weighted assets, which in turn means that we have to set aside more capital.

Tanzania is evolving quite fast; I believe the government efforts in curbing corruption and driving revenue collection is the right thing and is setting an efficient base for the country’s progress.

We are confident about the future and we will keep on making bountiful leaps in the banking sector in Tanzania.

TanzaniaInvest had the pleasure of interviewing Mr. Rajab S. Kakusa, CEO of TAN-RE, the only reinsurance company licensed in Tanzania.

TAN-RE provides a broad range of reinsurance products and services to clients in Africa and selected parts of Middle East and Asia.

Mr. Kakusa discusses the company’s expansion strategy, the Tanzanian insurance sector’s outlook, and the opportunities available.

TanzaniaInvest: The Tanzania insurance market is crowded with 32 insurance companies but only one reinsurance company, TAN-RE.Is this ratio adequate for the market to grow?

Rajab Kakusa: TAN-RE was established in 2001, by the Government of Tanzania, to transact reinsurance business in respect of both, short-term and long-term reinsurance business, locally as well as across the region.

The Government of Tanzania saw the need to protect the growth of the insurance industry in the country, with the aim of curbing insurance premiums flight out of the national boundaries, and extended mandatory cessions to TAN-RE.

This has contributed greatly to our course and increased our competitiveness with giant reinsurance companies in the region.

Protecting national reinsurers for a certain period of time, is a norm practiced in other countries as well, like Kenya (Kenya Re), Ghana (Ghana Re), Senegal (Sen Re) Algeria (CCR Algeria), Tunisia (Tunis Re), Namibia (Namib Re), Uganda (Uganda Re) and Ethiopia (Ethiopia Re, the newly established company) just to mention a few.

With adequate capacities to support the market growth, the Mandatory Treaties shares ceded to TAN-RE will remain at twenty percent (20%) indefinitely, and Policy Cessions are at ten percent (10%) to cease in year 2025.

Therefore additional capacity for full placement of reinsurance business is sought from other reinsurance companies not domiciled in Tanzania.

There are a few specialized classes of insurance that TAN-RE is not providing yet, like cover to protect against cybercrimes, underground mining, just to mention a few, hence for these specialized types of risks companies continue to obtain coverage from other reinsurers outside this market.

As we continue to grow, we strive to expand our portfolio to also cover emerging classes of business in support of insurance industry growth and its contribution to the economy of our country.

TI: In 2015, TAN-RE was trading with 222 (208 in year 2014) companies in 48 markets in Africa, Middle Eaast and South East Asia. How relevant is the Tanzanian markets to your overall operations?

RK: The Tanzanian market is the largest market in our portfolio (being over 80% of our portfolio) when compared to the business written from the international market.

TAN-RE values the growth of the local market given potential for growth and its direct contribution to the well-being of our people and economic growth at large.

Our local insurance penetration rates are still low, and the insurance fraternity under the leadership of TIRA strives to increase the penetration rate.

The local context in other African countries mandates that local capacity must be exhausted before insurance business can be externalized to foreign reinsurers; this limits the volume of insurance business transaction from international markets, where also certain classes of business like life, motor and marine classes of business in some cases, are localized.

Recognizing this niche market in our business portfolio, and responding to the needs of our local market, TAN-RE is working with partners and regulatory authorities in promoting micro insurance as a key strategy to rapidly increase insurance penetration rates in Tanzania, particularly by capacity building through provision on trainings in close collaboration with lead global experts in insurance and reinsurance.

TI: In your 2015 report you indicate that diversification of TAN-RE portfolio remains critical and paramount to its business strategy. How competitive are you in the African market?

RK:Our vision is ‘to be among the best Reinsurers in Africa’, and our current 2015-2019 Strategic Plan provides a road map with details.

Briefly, we are pursuing the diversification of our portfolio, at two main levels: first by introducing new products into our portfolio, and second by expanding our footprint across the region.

We now have the facility to write political violence and terrorism business, oil and energy business, and are working on introducing new products to cater for micro insurance business and takaful (Islamic compliant) business.

In addition, we have recently established our presence in the Southern region of Africa, through Ezulwini Re. This extends our reach in the SADC region, and strengthens our competitiveness in Africa.

TI: The Tanzanian insurance industry total premiums reached TZS618.9b in 2015, increasing by 12% from 2014 and by 30% from 2013. What is your preliminary feedback for 2016?

RK: Our 2016 financial report will be released by the end of Q1 2017. I would suggest we wait for this official announcement of our performance for 2016.

What I can tell you for now is that, based on the trends from the past few years, we can confidently project continued growth of our premiums by end 2016.

Equally important to mention is the fact that our focus goes beyond premium growth, to emphasize not just quantity of business that we do but also the quality of our business operations.

We have successfully maintained our credit rating of A+ (local currency claims paying ability) and B+ (international currency claims paying ability) rated by GCR of South Africa, and in 2016 were awarded with Quality Management Systems Certification on new Standard ISO 9001:2015.

The award of ISO 9001:2015 QMS Certification to TAN-RE demonstrates compliance and commitment to industry-respected practices and sustained client satisfaction as well as better determination and planning for risks arising as a result of external and internal issues relevant to TAN-RE’s purpose and strategic direction.

TI: What has been the effect of the introduction of 18% VAT on insurance products?

RK: I think it is too early to comment. However, VAT is applicable on all services and/or transactions thus not unique for insurance services. This is one way that growth of insurance directly supports our economy.

I commend the steps taken by the Government and I urge the insurance community to educate our beneficiaries on importance of paying appropriate taxes.

I believe going forward there is always room for improvement including on the applicable VAT rates etc.

TI: The insurance penetration (premiums as a percentage of GDP) remained at 0.7% in 2015 as recorded in 2014. How do you see the future outlook for the insurance market?

RK: The future is very promising for increased penetration rates for insurance in Tanzania.

This requires deliberate efforts and innovations in expanding and scaling up micro insurance.

At the moment TAN-RE is working closely with the Association of Tanzania Insurers (ATI), the Tanzania Insurance Brokers Association (TIBA) and the Insurance Institute of Tanzania (IIT) to increase public awareness on the importance of insurance.

We have a remarkable opportunity to do this now than before, given the population growth and the overall efforts by our Government on taking Tanzania to a middle-income level economy by 2025.

TI: Which segments hold the greatest potential for growth?

RK: In ensuring that every individual in Tanzania attains basic insurance coverage, life as well as non-life, and that insurance supports core economic activities and business growth – especially small entrepreneurs, we must not forget that 80% of our population is made of farmers, small holder farmers for the vast majority.

So the question is, how do we reach them more efficiently and provide appropriate micro insurance products, in particular, agriculture insurance products for farmers.

There is potential growth on microinsurance through increasing use of information technology, especially mobile phones, and the expansion of mobile banking services, including in rural areas, provides us with unique opportunities to transform insurance industry, and rapidly increase insurance penetration rates across the country.

This is in line with TAN-RE mission that is to provide sustainable reinsurance capacity and security in the best interest of our customers, shareholders and other stakeholders.

TanzaniaInvest had the pleasure of interviewing for the second time Ms. Tusekile Kibonde, Resident Underwriter for Tanzania at the African Trade Insurance Agency (ATI) to discuss in details ATI’s core product: credit insurance.

ATI is a multilateral insurer, providing political risk and trade credit risk insurance products with the objective of reducing the business risk and cost of doing business in Africa.

ATI operates in Benin, Burundi, Democratic Republic of Congo, Kenya, Madagascar, Malawi, Rwanda, Tanzania, Uganda and Zambia. Ethiopia, and Zimbabwe, and is currently expanding to West Africa with Cote D’Ivoire, expected to join in Q1 2017.

TanzaniaInvest: Ms Kibonde, can you kindly remind us, what is credit insurance?

Tusekile Kibonde; Credit insurance is known by a variety of names including; trade credit insurance, bad debt insurance, debtor insurance, debtor protection, business credit insurance and export credit insurance, amongst others.

Credit insurance is an insurance policy and a risk management product offered by private insurance companies and governmental export credit agencies (known as insurers) to business entities and lenders wishing to protect their accounts receivable from loss due to credit risks such as protracted default, insolvency or bankruptcy.

This insurance product is specialised and should not be confused with such products as property, casualty insurance, credit life or credit disability insurance which individuals take to protect against the risk of loss of income needed to pay debts.

Credit insurance can include a component of political risk insurance (another one of our products) which is offered by the same insurers to cover the risk of non-payment by foreign buyers due to currency issues, political unrest, expropriation etc.

TI: What is the major role of credit insurance?

TK: The major role that credit insurance plays is facilitating trading activities at both the local and international level.

Credit insurance supports customers or borrowers as an alternative to prepayment or cash on delivery terms, providing time for them to generate income from sales to pay for the product or service.

For suppliers and lenders, accounts receivable is a loan and represents capital invested. If the customer’s debt is credit insured, risky asset becomes more secure and can be realised faster than other forms of collateral offers.

It helps to reduce transaction expenses and produce more trading activities. Credit insurance is therefore, a trade finance tool.

TI: From ATI’s perspective, who can benefit from such a product?

TK: Credit insurance is offered to both business entities and lenders to insure their accounts receivable from delayed payment, non-payment and loss due to the insolvency of the debtors.

The product is not available directly to individuals but companies can request the cover from their financiers.

Our main clients are financial institutions such as banks, both local and international, which currently account for over 80% of our business.

In Tanzania, we work with 80% of the banks, including local, international, developments banks and other DFI lenders.

Over the years, our products have become very well known among lenders as we provide alternative solutions to their businesses.

We also have a growing list of manufacturing clients, contractors, exporters from the agricultural sector, and importers from Europe and Asia. All of these seek for credit insurance to cover their business against potential losses.

We are also attracting more local companies and in this way we are helping to increase intra-African trade of goods, services and financing.

TI: Why do financial institutions and lenders need credit insurance?

TK: Financial institutions and lenders use credit insurance to protect their businesses against default by both corporate and government borrowers on their obligations under trade, commodity finance, export finance, project finance transactions, general corporate loans and other financial assets against default on scheduled payments.

The product’s broad applicability and flexible policy wordings offer benefits to financial institutions and lenders of all sizes. Advantages which come with credit insurance policies include, but are not limited to, the following:
• Helps financial institution adhere to standards for a qualified risk mitigant under Basel II/III. The Basel II & III framework stresses on the need for banks to have better collaterals and prudential requirements with a view to achieving a safer financial system. The guidelines on capital, liquidity, maturity and leverage aimed at reducing the incentives for building-up high-risk and highly leveraged banks assets.

Given the above, the banks in the region are today more willing to share their spreads with investment grade credit insurers such as ATI as an excellent collateral to minimize their non- performing assets and reduce their regulatory capital under Basel II & III;

• Maintain competitive advantage by holding the borrower in their books as opposed to down selling the loan or seeking a risk participation from another financial institution;

• Increase lending capabilities via management of single obligor and/or country limit constraints;

• Access to credit remains the biggest challenge for SMEs in the region; credit insurance cover will help extend credit facilities such as short term loans, invoice discounting, bank guarantees and letters of credit even where there is inadequate solid collateral as is the current practice;

• Helping local banks compete with international banks. This type of insurance allows banks to offer great conditions to their clients including capital relief of up to 100% for transactions backed by national ECAs. Subject to agreement of the local bank regulator, ATI can address this handicap.

TI: How do you differ from other insurance companies in Tanzania?

TK: Due to the nature of the business, offerings specialised products, ATI does not compete against local insurance companies. Our mandate is to help the local insurance market by bringing added capacity.

ATI was created to act similarly to the export credit agency (ECA) for African countries. In Africa when a transaction occurs in an ATI-member country it is not unusual for ATI to participate.

We partner with international ECAs and other insurers on many transactions in Africa because these partners have come to trust ATI’s risk assessment and because of our unique relationships with governments.

TI: How efficient is your claims Process?

TK: The true test of the relationship between an insurer and their customer is what happens when a claim is filed. We strive to fully support our customers throughout the process.

In the unfortunate event that a client incurs a loss, the claims process begins when they notify ATI of a potential loss. We will immediately start working to minimize or avert a loss within the waiting period specified in the policy.

If a claim materializes despite our best efforts at recovery, we would then launch a full-scale investigation with the objective of paying our client upon expiration of the waiting period.

TI: What are your plans in the future to bring more awareness to banks?

TK: That is a timely question! For the first time in Tanzania, we will host a Bankers’ forum that will be held here in Dar Es Salaam in early March 2017.

The purpose of this forum is to bring more awareness to our major clients (banks) on the various products we offer as solution to their business.

We have developed a specific product which banks will find very useful in increasing their lending portfolio.

In addition, at the request of banks, we normally hold in-house training to their key departments such as Business Generation units, Credit and Recovery departments.

Should any Bank request for such service, ATI – Tanzania office is available at Private Sector House – 1st Floor, 1288 Mwaya Road, Masaki.

Our telephone numbers: Landline: +255 22 260 1727/2751/2818 and Mobile: +255 782 390 531.

You can also read TanzaniaInvest first interview with Tusekile Kibonde about ATI’s role in Tanzania, and with John Lentaigne, Chief Underwriting Officer, explaining ATI’s ambitions in Tanzania and in Africa.

TanzaniaInvest interviewed David Mestres Ridge, CEO of Swala Oil and Gas (Tanzania) plc (DSE: SAWLA), a Tanzanian oil and gas exploration company that is actively exploring the East African Rift System.

David discusses the prospect for oil discoveries in Tanzania, provides an update of the exploration activities of Swala in Tanzania and abroad, and clarifies about the ongoing corporate bond offering to investors.

TanzaniaInvest: Swala Tanzania was established in 2011 to undergo exploration of hydrocarbon in Tanzania. Particularly, the company is focused on the Rift System oil potential. Why Tanzania, and why oil, when no oil has been discovered to date in this country, but proven gas reserves abound?

David Mestres Ridge: Whilst there may be proven gas reserves, most if not all are deep offshore in environments suited to bigger companies.

Swala started by focusing on the Rift System, an environment in which oil has already been discovered (Uganda, Kenya…).

We know that there are indications of oil systems in Tanzania – seeps, slicks, tar balls, the Tundaua oil seep on Pemba Island – and are confident that commercial oil can be discovered in Tanzania.

TI: Swala currently has equity in a number of exploration licences in Tanzania, and has an active business development program in Tanzania and elsewhere. Can you provide an up-to-date description of your licenses, Swala’s interests and the actual status of explorations? What is your drilling program for 2017?

DMR: We started off with two exploration licences in Tanzania – Pangani and Kilosa-Kilombero.

We were awarded both in 2012 and, in the subsequent years, we invested heavily in surveys and seismic acquisition to determine the potential of each of the licences.

Unfortunately, Pangani has no commercial potential and we asked to be allowed to surrender it.

On the other hand, Kilosa-Kilombero showed significant potential, with a large-scale prospect (which we called Kito) and a number of additional prospects around it.

In 2017 we shall be drilling the Kito prospect and we are already preparing the team that started work on the project in 2016.

In 2016 we also took our first step overseas as a way to start to grow the company. Block D in Burundi is a technically very interesting block in an area where oil slicks and tar balls have been identified.

We are carrying out technical work on the available data on the block and look forward to investing further once the political situation in Burundi stabilizes.

TI: Swala listed at DSE in August 2014. Why did you choose to list at DSE, when other companies active in minerals in Tanzania are listed at LSE? What are the prospects for dividends in the near future?

DMR: Natural resources companies typically list in established markets – London, Sydney, Toronto…

Our view when we set up the company was that we wanted to open the investment opportunity to Tanzanians and we wanted to contribute to the development of the Tanzanian capital markets.

There is plenty of evidence showing that liberalized and active capital markets are important contributors to economic growth.

That said, Tanzania must also recognize that there are significant barriers to that development, ranging from -at one extreme- a fiscal and regulatory regime that hinders economic activity through to -at the other extreme- the lack of market infrastructure (liquidity, research, etc…) that we find in the places I mentioned earlier. It will come, but we need to help make it happen.

TI: In October 2016 Swala engaged Exotix to place corporate bonds of up to a value of USD120 million in order to finance a material transaction. What has been the success of the placement? What are you future financing need and what are the investment opportunities available?

DMR: Buyer and seller want to ensure that Swala opens up investment opportunities to Tanzanian institutions and individuals within this Exotix transaction.

What we did was to split the USD120 million into two tranches – a USD60 million tranche that is primarily placed within London and a second tranche, also of USD60 million, that we aim to make available in Tanzania.

We have started to talk to some of the banks and the pension funds, and have received quite a lot of interest in what are essentially USD-linked, but shilling-denominated, corporate bonds.

The main problem is the requirement that institutions may only invest in bonds with coupons greater than that provided by Government bonds with the same tenure.

No-one is going to place corporate bonds that pay an interest of 20% when they can raise money elsewhere at much lower rates.

Look at our raise, as an example: if we raise USD60 million at -say- 10% for five years we are paying a total of USD30 million on the debt. At 20%, this would be USD60 million. Why would we pay another USD30 million for the same instrument?

By keeping rates uncommercially high, the danger is that – in this example – USD30 million that could go into the Tanzanian economy go elsewhere.

This is one of those things I mentioned earlier that will require a review of policy if we are to encourage the development of the local economy.

TanzaniaInvest had the pleasure of interviewing Ineke Bussemaker, MD and CEO of the National Microfinance Bank (NMB), Tanzania.

NMB is one of the biggest commercial banks in Tanzania, 32% of which is owned by the government. 

Bussemaker talks about the current lack of liquidity in the banking sector, the country’s investment potential and economic outlook.

TanzaniaInvest (TI): Tanzania is among the top African destinations for FDI. What is your view on the country’s potential and framework for investments?

Ineke Bussemaker (IB): Tanzania, as well as Kenya and Cote d’Ivoire, are the top African countries that investors are very interested in.

The investment appetite for Tanzania is largely driven by its size with 50m people but the country is still quite underdeveloped so there is high growth potential, especially in agriculture.

However, Tanzania is struggling to transform that potential and ideas into practical projects.

This is due to a range of issues that Tanzania has to solve.

One is political decision-making: it is taking investors a very long time between their first visit to Tanzania and the time when they reach an agreement with any government entity.

TI: In which sectors in Tanzania do you see the highest potential for growth?

IB: Tanzania’s largest potential is hiding in agriculture and particularly in the agro-processing industry.

However, the sector is dominated by smallholder farmers, which is somewhat limiting in terms of size of the investments.

I believe that medium or large commercial farms will help Tanzania to develop, because these farms will also create infrastructure.

Accordingly, there will be power, water, and means of transportation.

Large farmers have the advantage of scale, and the small farmers can benefit from it.

For example, there are 7,000 smallholder farmers benefiting from the infrastructure of the Kilombero Plantations (KPL), a farm in the Kilombero Valley, charged with developing over 5,800ha of land.

I strongly believe in this model and I think that Tanzania can make significant progress by applying it. 

At NMB, we work with farming cooperatives and farmer groups, providing them with loans and working capital as well as training / capacity building by NMB Foundation.

TI: Which other sectors of the Tanzanian economy have the greatest realistic potential for growth? 

IB: I believe that Tanzania’s gas, helium, energy, and construction sectors also have great potential for growth.

The government is very focused on building infrastructure, including roads, schools, and health clinics, and so, the building sector is growing especially in the rural areas.

Tanzania is also endowed with large mineral resources, which will continue to support the country in the future.

Also, the potential of Tanzania to double its population from 50 to 100m people in the next few decades is calling for industrialization.

TI: Tanzania is currently experiencing a lack of liquidity in the market. What are the reasons behind this situation and how is this impacting your balance sheet? 

IB: Part of the liquidity was in the banking system, but the government has asked all of that to be transferred to Bank of Tanzania (BOT), especially the deposits from parastatals and local governments.

So, in the last few months there has been a shortage of liquidity in the market, which in turn impacts our capacity to lend and our balance sheet significantly. 

We have tried to mitigate these effects by using other funding sources.

These include our own bond issue and longer-term funding from the Netherlands Development Finance Company (FMO) and The European Investment Bank (EIB).

However, these sources of funding are more expensive, resulting in higher interest rates on loans, which is not conducive to a growing economy.

TI: According to NMB’s results for Q3 2016, net income after tax increased by 8.5% over the period, and by 9% in the cumulative year. What has been the driver of this growth, considering that other large banks are showing losses for Q3?

IB: The driver of our growth has been stability with a solid and growing customer base.

In addition, over the last 3 years, we have completely renovated our entire branch network and provided better IT services to all of our customers.

This attracts new customers, and at the same time, we have trained our staff in the branches to become more customer-sales focused. 

TI: In Q3 2016 several Tanzanian banks have shown high percentages of Non-performing Loans (NPLs), above the 5% threshold set by the Bank of Tanzania (BOT). What is the situation at NMB?

IB: The percentage of NPLs at NMB is around 3%.

We have invested a lot in our credit-scoring systems, and we are also using the credit bureaus that were recently introduced.

And after the loans are approved, we conduct a proper follow-up with our customers.

However, we also foresee that some businesses that we support will default on their loans because of the current challenging environment.

TI: Tanzania’s banking penetration is limited; however the use of mobile money is widespread. How is fintech impacting your expansion strategy in light of the fact that you have the largest banking network in the country?

IB: In Tanzania roughly 15% of the 50m population have a bank account, while 30m people have a mobile phone, and potentially use a mobile wallet.

So, there are at least 20m more potential customers for us in the market that we can reach with digital technology, which is scalable, cheaper, and far more reachable.

We will never reach those 20m in a scalable, profitable way, through our branch network.

TI: Does this mean that you’re not going to open new branches? 

IB: NMB is partly owned by the government and when it is establishing new districts, which need banking services, we consider opening a branch.

But if we can work with agents and through digital services instead of opening a branch, that would be our preference.

Overall, our vision is to make the whole value chain digital, building credit history and historical data, so that businesses and individuals can get microloans based on the transaction history in the use of digital services.

TI: The Tanzanian market includes 60 banks and other financial institutions. Do you foresee new players coming into the market or consolidation taking place?

IB: In my opinion a healthy banking sector is comprised of a smaller number of stable banks, and I think 60 banks are a bit too many.

In addition, the investments that banks need to make in modern and digital technology, might be overwhelming for small banks.

So, yes, I foresee a consolidation in Tanzania’s banking sector.

TI: Tanzania is on its path of becoming a middle-income country by 2025. For this, it needs a GDP growth of 10% against the current growth of 7%. Is this feasible in your opinion?

IB: The government’s ambition of reaching a GDP growth higher than the current 7% keeps me optimistic.

The plans are in place, but Tanzania needs to speed up the execution process, which will require better collaboration between the government and the private sector.

TanzaniaInvest interviewed Warren Deats, Chief Operating Office of Obtala (LON:OBT), a vertically integrated group focused on sustainable agriculture and forestry in Tanzania and Mozambique.

Warren is based in Tanzania where he oversees the Group’s operations in Africa. In this interview, he discusses the company’s focus and operations in Tanzania and the ambitions for further expansion.

TanzaniaInvest: Obtala has 2 primary focuses, agriculture in Tanzania and forestry in Mozambique. Why Tanzania?

Warren Deats: We looked at the successes of Kenya as an agricultural producer and questioned why Tanzania hasn’t had the same results.

Tanzania has many of the qualities Kenya does, such as a great climate, access to a workforce, arable land, improving ports and support from the government.

Where it is lacking is in experience and a legacy of years of agricultural production.

We see this as a huge opportunity to be part of the growth and development of Tanzania

TI: In Tanzania, Obtala has 1,735 hectares of farmland. How conducive has been the investment framework to your project?

WD: Tanzania is definitely moving in the right direction as far as business friendliness but there are still quite a few challenges and delays in starting businesses.

I feel the government is very motivated to help us. They do sometimes lack the resources but not the motivation.

TI: Your focus is on short‐term revenues on fresh and dried produce. How much is destined to local, regional and international markets?

WD: Our focus isn’t on short-term revenues. It’s on long-term development while still offering short-term returns to our investors.

We are balancing short-term crops to create revenues now, with long-term orchard development to create sustainable assets for the future.

Our goal is to supply as much as we can locally and regionally with the balance going to the Far East, Middle East and Europe.

As it stands there is significantly more demand for produce in the export market, however, with the demographics of Dar es Salaam and the rest of the region, we expect that to change over the coming years

TI: You intend to move into large-scale orchards in the medium‐term. Which other agricultural products yield the great opportunities?

WD: We are currently analyzing the best crops to produce. This involves assessing the climate, soil, water, export markets and various other factors.

Mangoes and avocados are at the top of our list for the moment but that could change before we plant.

TI: What are you overall ambitions in Tanzania in term of crop production and turnover?

WD: I think our mission statement says it best: “To take the lead in the sustainable commercialization in Sub-Saharan Africa of two of the world’s most in demand and diminishing natural resources, arable land and forestry. To pursue every opportunity to move up the agriculture and forestry value chain, in partnership with key stakeholders, contributing to long-term economic and social development in the markets we operate in.”

TI: What are the greatest opportunities and challenged ahead?

WD: The two main challenges in Tanzania are logistics and global recognition.

Tanzania still needs additional development and investment in cold chain and port handling.

This will be key to becoming a world class producer and exporter.

Secondly, we hope to play a role in putting Tanzania on the map as being recognized as a high-quality producer.

We are already seeing this in coffee and chocolate, we just need to develop this for other produce.

This is one of our major focuses when we are at trade shows. Not just marketing our products, but marketing Tanzania as a whole.

As I mentioned before, the greatest opportunity is to harness all the agricultural qualities that Tanzania has and develop the industry.

TanzaniaInvest had the pleasure of interviewing Christophoros Panagiotou, Africa Country Manager of TICKMILL, a leading global broker regulated by the Seychelles Financial Services Authority (FSA) to trade in forex, but also stock indices, commodities, and bonds.

Forex trading – the trade involving the conversion of one currency into another and exploiting the value difference between the entry and exit points of currency to earn a profit – has been gaining popularity over the last few years among investors. Panagiotu explains its advantages and the benefits of using the TICKMILL platform.

Forex Trading

Why has it become so popular compared to the trading of other assets? What are its peculiarities?

Forex Trading has become more popular compared to other assets mainly because of the ease of entry and low margin requirements. Also due to the high volume and liquidity, traders can get their orders executed more easily and closer to the prices they want. In addition, major forex pairs have very low spreads, lower transaction costs and lower risk.

One characteristic of Forex trading is that you’re not actually buying or selling the currency itself. What you are doing is predicting the change in value of the currencies within each pair. Let’s assume that the Euro’s value will appreciate against the value of the Dollar, then you would buy EURUSD. 

ECN Brokers

How do Electronic Communications Network (ECN) Brokers differ from traditional ones and, what are the advantages of using them?

An Electronic Communication Network is a network of market participants like brokers, banks and other financial institutions that submit their price feeds to what we call a ‘liquidity pool’. ECNs brokers then consolidate all the prices within this pool, allowing them to offer their clients lower bid/ask prices!

ECN brokers give direct market access (DMA) to their clients by using this ECN network which ensures that their orders are very quickly executed at (usually) much lower prices.

One other benefit to the clients is that the ECN network automatically matches client orders, so there is not danger of a conflict of interest between the client and the broker itself!

TICKMILL

What are the advantages of using your platform?

Our clients use the MT4 platform to trade with us. It has a seriously user-friendly interface and a highly customisable trading environment so that our clients can customise the platform to suit their own method of trading.

As a globally renowned platform the MT4 has been specifically tailored with traders in mind. Aside from the user-experience our clients have access to a huge range of indicators and charts while also being able to use MQL language to automate their trading. Effectively letting them program indicators and expert advisors to employ automated trading strategies without the need for human intervention.

Within the platform our traders can access 80+ instruments across 4 asset classes, while being provided with some of the lowest spreads in the industry!

Stock, bonds, commodities, and precious metals.

In addition to forex, you provide CFD trading on stock indices, bonds, commodities and precious metals. What do you feel are the best assets for new investors?

It really depends on the type of trading that someone wants to do. Let’s look at Forex for example. If you’re starting out one, of the main things you need to understand is that you should have a stable partner by your side. You need to be working with a broker who can assess your experience and then provide you with the effective educational tools to learn to trade properly.

Trading comes with high levels of risk, so we wouldn’t recommend a specific instrument to start out with. What we would recommend first is to assess who you’re going to trade with. The best way to begin is with a Demo account. You can learn without the risk while also testing out the conditions that the broker has to offer.

Tickmill for example prefers to ensure that out clients will have a sustainable trading career. So, we ensure that new traders can use our demo account to check out our spreads while also learning from the educational material that we provide. From there the person can asses if trading is for them and then develop their strategy over time and choose their preferred financial instruments with effective support.

Africa

What is the relevance and growth potential of this market in the world of forex and in online trading general?

Forex trading has seen huge growth across Africa in recent years especially growing rapidly in popularity amongst young people. Some of the main reasons for this growth include:

• Increased internet use in people’s lives,
• High rate of unemployment, leading people (especially young people) to alternative options such as online trading,
• Publicity for hundreds of forex brokers across the globe by using social media platforms.
• Online trading can be accessed and executed via mobile. This gives millions of people the opportunity to have access to online trading.
• The low costs associated with entering the forex market. The minimum deposit required to start forex trading is usually quite low at around 100 USD. However, this varies depending on the broker.

What are the African countries that present the greatest opportunities?

The countries that present the biggest growth opportunities are Nigeria, South Africa and more recently Kenya, Tanzania, Namibia, Botswana, Rwanda, Ghana, Uganda.

Nigeria and South Africa are the biggest forex markets but over the last 2 years, Tanzania and Kenya (East Africa Countries) have experienced huge increases in trading activity, especially by young people.

Tanzania

What are your ambitions and challenges in this country?

Our main ambition in the Tanzanian market, is to offer the best trading conditions and services to our clients allowing us to become the forex broker of choice in Tanzania.

The main challenges we face are the restrictions regards how clients are able to fund their trading accounts. Currently, clients have almost no option for depositing and withdrawing funds, making it very difficult for them to start trading. This has become more prominent after the Bank of Tanzania restricted the use of Mobile Payment options, made it more difficult for people to have access to trading.

In an effort to make this process easier, Tickmill is currently working on implementing new efficient methods for depositing and withdrawing.

Another challenge we face is the lack of regulatory body in Tanzania – for forex trading or any online trading activity. This gives unregulated brokers the opportunity to offer services without any client protection in place, creating higher risks for client’s investments overall.

Finally, one other challenge we face is the lack of experience and knowledge about forex trading among new Tanzanian traders. To combat this issue and provide our clients with a truly comprehensive trading solution. We’re offering educational material like tutorials, webinars, eBooks and videos for both beginners and more experienced traders online. We’re also looking into offline events where traders will be able to attend seminars and learning experiences with experts in the field.

What would you like our readers to understand about TICKMILL?

What we want our clients in Tanzania to understand is that trading is a career where you must ensure that you’re working with a broker that has your best interests at its core.

As a fully regulated broker, we have licenses with some of the most prestigious regulatory bodies in the world, including the FCA in the UK, CySEC in Cyprus and the FSA in the Seychelles. Regulation is so important when you’re selecting a broker because they employ a huge range of measures to ensure that your investment is safe. It also ensures that clients receive the best possible treatment as set out by international requirements.

As standard we ensure the safety of client’s funds by using segregated accounts with top-tier banks while also offering Negative Balance protection.

Trading conditions are another fundamental factor that new and seasoned traders alike should be considering when they choose their broker. We offer 80+ instruments across 4 asset classes, with spreads as low as 0.0 pips and some of the lowest commissions in the market. As best practise we also provide ultra-fast execution with no requotes and enable all strategies to be employed as we understand that our clients are extremely diverse.

Another main factor is the seamless way that we operate. We enable fast and simple deposit and withdrawal methods with a zero-commission policy to give our clients the best possible service all round. Which is why we’re an industry awarded broker. You can check out some of our awards here.

Overall, we aim to have the highest level of transparency possible. Our stable growth and excellent financial results are key indicators that Tickmill has established itself as a leading global forex broker.

We want to offer an exceptional trading environment that helps clients to reach their full potential… Why? Because We Want Traders to Succeed.

To start trading with TICKMILL, it’s simple and fast. Just click on the link: http://bit.ly/3b0A2VX

Risk Warning: Trading Contracts for Difference (CFDs) on margin carries a high level of risk and may not be suitable for all investors. Before deciding to trade Contracts for Difference (CFDs), you should carefully consider your trading objectives, level of experience and risk appetite. It is possible for you to sustain losses that exceed your invested capital and therefore you should not deposit money that you cannot afford to lose. Please ensure you fully understand the risks and take appropriate care to manage your risk.

TanzaniaInvest had the pleasure of interviewing Kevin Wingfield, the new Chief Executive (CE) of Stanbic Bank Tanzania since April 2020. Wingfield discusses the bank’s strategy during the Covid-19 pandemic and its long-term commitment to the development of Tanzania.

Before joining Stanbic Tanzania, you held various positions within the Stanbic Group, in South Africa, Ghana, and Uganda. What is the importance of the Tanzania market for the group, and what are the idiosyncrasies that you are witnessing here?

The Tanzania market is a key regional and economic participant in both the South African Development Community and the East African Community. For Standard Bank as an African based and focused Bank, having a presence in Tanzania is critical.

This allows us to support our global, African and Regional clients doing business in Tanzania. We have a footprint in Uganda and Kenya which, given Tanzania’s role as a key trade entry point into the Region allows us to link our customers across the EAC.

Tanzania is also a large economy, rich in natural resources, which fits in well with our over 150 years of experience. We believe we have an important role to play in working with all stakeholders to continue to support and build Tanzania.

We are approaching the end of Tanzania’s ambitious National Five Year Development Plan 2016/17 – 2020/21, which aimed at a GDP growth of 10% by 2021, from 7% in 2015, mostly on the account of industrial and infrastructure development. However, the AfDB revealed a growth of 6.8% in 2019, and forecasted (before to the COVID-19 pandemic) a 6.4% growth in 2020. How is Stanbic adapting its strategy to the current economic environment? On which sectors will you focus from now on?

Obviously the current environment is challenging and no one knows exactly how long this pandemic will last and how it will impact our environment into the future.

What we do know is that what we knew as “normal” before will not be the “normal” in the future. The health and safety of our customers and staff are clearly our first priority.

As an organization we are constantly monitoring the situation and adapting our strategy and modus operandi to meet both the challenges but also the opportunities that are evolving. We will continue to focus on those sectors that are a priority for growth and development in Tanzania.

At present the likes of tourism, transport, oil and gas, local and cross border traders are all finding the environment challenging. However there are some sectors that are thriving like medical and consumer, which present opportunities.

As a leading and responsible corporate citizen in the market we also have an obligation to do what we can to support the efforts of Government and other organizations to fight the pandemic and support the economy through this time.

Have you already developed a contingency plan to take into account the current COVID-19 pandemic?

We are constantly monitoring the developments and implications of the pandemic and are adjusting our plans and operational focus in real time.

More than ever as organizations we need to be agile and adaptable. We have invoked our Business Continuity Plan which ensures we are able to remain ready and able to support our customers.

We have also aggressively supported our customers to transition their banking to our digital services and capabilities.

We are also fast-tracking our digital journey to ensure we can provide our customers with even more seamless and accessible banking services that deliver real value.

We have already provided many of our customers who are struggling to meet loan obligations with repayment holidays and other forms of loan restructures.

There are 40 banks operating in Tanzania, from over 50 a few years ago, and web-based financial services and payment providers have entered the market. Do you expect more consolidation to take place?

I think consolidation in any industry is natural as there will always be winners and losers. I think given the current COVID – 19 crises this is going to be accentuated, as those organizations that act swiftly and adapt to ensure they remain relevant to their customers will grow and those that are slower or unable to adapt will disappear or be taken over.

How do you see at the increasing convergence of mobile-based technology and finance in a market with very limited banking penetration?

Mobile technology and finance are intertwined. There is no doubt that the future of finance is digital. Technology lowers the cost of delivering financial services and this allows for much greater access to financial services and financial inclusion.

Collaboration and partnerships will be critical between traditional financial services and the emerging Fintech world in order to ensure we all stay relevant to our customers.

Technology is also revolutionizing more complex banking products and services which enhances the customer experience but also gives rise to new and emerging risks that need to be managed.

What are Stanbic USP and competitive advantages?

As a member of the Standard Bank Group we are part of the largest bank on the continent that has a presence in 21 countries on the continent, a strong balance sheet and over 40,000 people.

We have access to proven expertise in Tanzania and from the Group to support all the key sectors that are and will drive growth in Tanzania. Our largest single shareholder Industrial Commercial Bank of China also provides us with a unique value proposition and access into China and the linkages back to Africa. We have built a strong brand in Tanzania and believe we are well-positioned to deliver our local and Group capabilities to meet our customer needs as we fulfill our Group vision of “Africa is our home, we drive her growth.”

Notwithstanding the current head winds, Tanzania is expected to remain among the fastest-growing countries in terms of economic and population growth. Which role do you aim to play in the socio-economic development of Tanzania over the next few years?

This year as Stanbic Bank we celebrate our 25^th year in Tanzania. We have played a meaningful role in the growth of the country, the industry and our customers over these years.

We look forward to playing an even greater role in supporting the growth and economic success of the country.

We are also focused on supporting education and medical sector upliftment in the societies we operate.

Against the backdrop of the extraordinary circumstances faced by the global community as a result of the Coronavirus pandemic, Stanbic Bank unveiled its new tag line, ‘It Can Be’ and new brand promise ‘finding new ways to make dreams possible,’ inspiring hope and a brighter future for Tanzanians to realize their dreams.

This new brand promise comes at an opportune time with over TZS 37 billion debt relief having been extended in the form of payment holidays to the bank’s customers to help them cope with the business challenges resulting from the COVID-19 pandemic.

In this interview Stanbic Bank Chief Executive, Kevin Wingfield discusses the new campaign and what is in store for its clients and stakeholders.

Can you elaborate on what customers can expect from the bank with this new brand promise?

At a national level, this is an exciting and pivotal moment for Tanzania having recently attained lower middle-income economic status and as the government continues to invest in large infrastructure in priority sectors such as power, transport and water to enable industrialization and improved livelihoods for our people.

With over 150 years’ experience on the continent, Stanbic Bank has the pedigree, expertise and a unique understanding of what it takes to empower economic growth. “It Can Be” reinforces what we stand for as a bank.

We consider ourselves partners with our clients by providing financial advisory and tailored solutions, inspiring and supporting them to take new uncharted paths to realise their dreams by being bold and innovative, more curious and responsive in their business as well as addressing the challenges surrounding their communities.

By way of example, earlier this year, Stanbic Bank rolled out an entrepreneur challenge to empower and support the bold dreams held by entrepreneurs.

What role can entrepreneurs play in economic development and how is the bank helping them?

Currently, 95% of businesses in Tanzania are Small and Medium Enterprises (SMEs), and they represent approximately 35% of the country’s GDP. Entrepreneurs are more agile than many traditional businesses, therefore, they can deliver relevant solutions to the challenges facing their
communities.

Additionally, with about two-thirds of the population being under 35, the youth segment is an opportunity to nurture the entrepreneurial spirit.

I am delighted that our entrepreneur campaign provided us with a lot of insights in this area. We received over 600 high-quality applications and shortlisted 5 social enterprises that are providing solutions in education, technology, environment, food & manufacturing and health and wellness.

As a Bank, we will continue to address the specific needs of entrepreneurs through our responsive, innovative, convenient and secure solutions that aim to improve the efficiency of their operations.

We are invested in empowering the financial success of our customers and want to be the anchor that uplifts SMEs helping them achieve their dreams and goals.

How does Stanbic Bank continue to contribute to the development of the Tanzanian economy?

Through our corporate banking offerings, we are keen to continue partnering with corporations, and the government to raise their desired financial capital required for achieving their various strategic objectives.

We also strongly believe that through technology and innovation we can provide sustainable access to financial services for all economic activities, a move that is critical for economic development and growth.

SME’s are and will continue to be a core driver of growth in the economy. We will look to continue and increase our focus on and support of SME growth and development.

In the spirit of ‘It Can Be’, what future do you envision for Tanzania and how does Stanbic plan to support it?

Africa is endowed with vast natural resources and abundant human capital. In spite of the current global health crisis and forecasted contraction in global and regional economic growth, I am optimistic about the future of the continent and in particular Tanzania.

We can utilize the learning from the pandemic to establish Africa focused trade policies through the African Continental Free Trade Area (AFcTa) as well as regional blocs leveraging on the competitive advantages in respective countries.

The presence of effective trade finance is pivotal in achieving trade development and Stanbic can combine its in-depth knowledge of commodity sectors with our regional and in-country expertise to develop innovative and integrated financial solutions tailored to customer needs.

As a Bank we will work collaboratively across all our markets in Africa to create an environment that allows people in Africa to do business within and between countries – as well as for people across the world to do business with Africa. Africa is our home, we drive her growth.

TanzaniaInvest interviewed Charles Asiedu, the newly appointed Managing Director of Ecobank Tanzania, subsidiary of the leading independent pan-African banking group Ecobank.

In this interview, he shares the group’s strategy in Tanzania and the way forward to accompany the socio-economic development of the country, in particular the initiatives in trade and commodity finance, forex services, and corporate social responsibility.

You were recently appointed Managing Director for Ecobank Tanzania after being in charge of Ecobank Malawi and holding several positions within the group during the past 20 years. What is the importance of the Tanzanian market within the Group’s strategy?

As stated in our vision and mission statement, we bring world class banking platform to help integrate and grow African economies. Bordered by eight countries, Tanzania’s unique location is very consistent with our African agenda.   

There were 51 licensed banks in 2019 and by mid-2020, the number has decreased to 49 after the latest merger. Is this number in line with the market, characterized by a large population and a very low banking penetration? 

Given that Tanzania has a liberalized economy, the issue of the number of banks is neither here nor there. Higher number of banks improves banking penetration and gives more option to the customer which is good for business. However, under such circumstances margins for banks become thinner and thinner which eventually leads to the falling away of the less competitive ones.  

Do you expect more consolidation to take place or new players to enter?

Both are very much possible. Some players will exit for obvious reasons while others see opportunities they can tap into. For us Ecobank, we belong to the latter group. The future of banking is exciting for us in Tanzania.

You are a full-service bank providing a wide array of products and services for multinationals, local corporations and businesses, and retail customers. What are your priority sectors and clientele for the years ahead?

As a full-service bank, we should be interested in all the relevant sectors of the economy. Specifically in Tanzania, our expertise in commodities financing will come to play strongly given that Ecobank is present in all the eight countries bordering Tanzania.

We believe we have very competitive products to help promote the country’s objective of making Tanzania a cashless economy. We have a strong support system to help grow the agricultural value chain, manufacturing, and construction sectors. We believe the micro, small and medium enterprises (MSME) represent the future of the country.

We will tap into our global partnership platforms to help support this segment of the market leveraging our world-class electronic solutions. We have a strong role to play in providing every Tanzanian access to best-in-class banking services and we are keen to pursue this role vigorously.  

The closure of bureaux de change operations in Tanzania redirected foreign exchange services to the banking sector which saw the profits from foreign exchange dealings up by 70% in Q1 2019. However, earnings from forex fell heavily in Q1 2020 due to the impact of the Covid-19 pandemic on international trade. How important is forex in your portfolio and what are your ambitions?

Forex will become increasingly important when the African Continental Free Trade Area comes into force and exponentially increases intra-African trade given the volume of different currencies across our continent.

Intra-African trade will also be driven sharply upwards by one of the learnings from Covid-19, which is seeing larger corporates–particularly–seeking to diversify their supply chains, rather than risk having just one main supplier, which as we’ve seen can dry up overnight as has happened to some due to the disruptions caused by the pandemic. Africa looks set to benefit as local and regional value chains will gain market share from global value chains.

Our cross-border remittance solution, Rapidtransfer, is a game changer for remittances being sent by the diaspora and others for remittances to Tanzania. The World Bank reported that the average transaction cost for USD 200 remittance to sub-Saharan Africa was 8.9% in Q1 2020. Rapidtransfer does this for 3% or less and also provides transparency, certainty, and convenience.

Group-wide, forex is big business for Ecobank. Our international network has helped create linkages for growth in our African economies, facilitating innovative trade products for ease of settlement across all markets.

As a key hub in supporting and attracting investments into Africa, Ecobank’s International Business in Paris (EBI SA) recorded USD 6.5bn of FX transactions in 2019, 27% up from 2018 in African currencies. In 2019, EBI SA transacted in 53 currencies, for a total of USD 20.5bn in FX volume.

How do you see the Covid-19 pandemic influencing your development strategy in Tanzania? Have you already developed a contingency plan?

At Ecobank Tanzania we quickly implemented our business continuity plan when the Covid-19 pandemic became apparent and our heavy investments in technology over recent years has enabled us to offer seamless continuity of service to customers through our digital channels and via our call centre.

We’re seeking to help our customers’ businesses to survive the challenges of the coronavirus and have accommodated legitimate request for moratoriums.

Our approach to lending is obviously cautious given the economic environment and we are growing customer deposits, particularly via our digital channels.

At the moment our primary focus is on making sure that we can meet the needs of our customers despite the pandemic, but expanding our trade finance operations will become an increasing focus once Covid-19 is consigned to the rearview mirror.

Meanwhile, we are continuing to extend our marketing and distribution reach through partnerships with telcos and others, in addition to expanding our Xpress Point agency network to better serve the varied needs and demands in local communities throughout Tanzania.

The bank is seeking more partnerships with fintechs, especially through its annual Ecobank Fintech Challenge to notch up its digital strategy and invest more in order to level up its technology.

In line with our purpose, we keep making banking more inclusive, convenient and accessible for our customers. This has always been our focus in Tanzania.

Notwithstanding the current headwinds, Tanzania is expected to remain among the fastest-growing economies. Which role do you aim to play in the socio-economic development of Tanzania over the next few years?

Ecobank is happy to be here to contribute to the success story of Tanzania. We aim at fulfilling our objective of being a bank to help Tanzania grow through integration with the rest of African economies on the back of commodities financing and collection solutions.

We will leverage our global partnerships to participate in large infrastructure project financing.

We are aware of how important the agricultural sector is to Tanzania’s economy. We will therefore continue to be a key player in the agricultural value chain.

We will help accelerate financial services accessibility to all Tanzanians leveraging our electronic channels and partnerships with telcos and wakalas.

We believe in giving back to the society which has accommodated us and given us human capital. We will therefore implement key corporate social responsibility initiatives in the areas of education, health, women and children. 

Thus we will continue to implement a range of Group-wide measures to deliver beneficial socio-economic impact and these include strengthening micro, small and medium-sized businesses through our significant support for AUDA-NEPAD, fundraising for the likes of IFRC (Red Cross) and Africa CDC.

In addition, we are boosting our lending to women-led businesses and have implemented a 3-year campaign to raise awareness about Non-Communicable Diseases and educate Tanzanians about the lifestyle behavioral changes that will help prevent NCDs.

TanzaniaInvest interviewed Abdulmajid Nsekela CEO & MD of CRDB Bank Tanzania, the largest bank in the country in terms of assets, loans & advances and customer deposits.

In this interview, he comments on the current state of the Tanzanian banking sector and its capacity to accompany the economy during the Covid-19 pandemic, and shares the bank’s strategy and its emphasis on supporting SMEs, manufacturing, trade, agriculture, and other key sectors that drive the economy forward, while investing in digital innovation.

There were 51 licensed banks in 2019 and by mid-2020, the number has decreased to 49 after the latest merger. Is this number in line with the market, characterized by a large population and a very low banking penetration? Do you expect more consolidation to take place or new players to enter the market?

Banking is not about the number of banking institutions, but their capability to serve the market.  I believe that 49 banks are adequate for the population size simply because financial services have evolved and physical presence is no longer a determinant of adoption. With improved technologies and connectivity, banks are increasingly providing services via cellular networks and the internet, which then provides an opportunity for inclusion beyond the traditional brick-and-mortar models. 

For a rapidly growing industry like banking in Tanzania, consolidation is expected to happen and may occur from time to time. I am happy that the regulator has remained steadfast in ensuring liquidity, which shows a healthy trend for the industry. It is also indicative of a brighter future for the financial services sector. 

However, with the COVID-19 disruptions, we expect that due to the reduced international business, especially during the second and third quarters of 2020, there will be resultant challenges that may impact capital, especially for smaller players. The disruption has obviously had an impact on specific portfolios, especially the hospitality and service sectors, imports and exports. If non-performing loans (NPLs) increase (mainly because of the inability by affected businesses to meet their loan obligations), we are likely to see declining liquidities, which of course would prompt the regulator to institute measures to protect investments. 

But as an industry, we are lucky to have a switched-on regulator, who–alongside close surveillance–instituted timely measures aimed at relieving the customer of the pressure brought about by the COVID-19 pandemic. The measures included lowering the Statutory Minimum Reserves (SMR) from 7% to 6%, which has created liquidity in the economy. With this, Banks have additional ability to continue lending to customers and support priority demands linked to COVID-19 despite the economic slowdown.

A reduction of interest rates from 7% to 5% created more room for banks to borrow funds from the central bank for onward lending if required. A reduction on the value of collaterals used against government securities, mainly Treasury Bills and Bonds from 10% to 5 % and 40% to 20% respectively enhanced the ability of Banks to borrow from the Central Bank with less collateral. 

But perhaps the most instrumental intervention was the approval of loan restructuring, which has helped banks accommodate borrowers who are adversely affected by the COVID-19 pandemic. It has cushioned customers directly affected by the health crisis and also reduced the risks of non-performing loans.

2019 is the first year that CRDB made significant profit which grew by over 87% to TZS 120 billion with deposits surpassed TZS 5 Trillion. Which were the drivers of this performance? What is your competitive advantage?

In 2019, we made a deliberate decision to transform our operations with a focus on building internal efficiencies. We also invested in the right technologies, including upgrading our ICT systems to deliver a more robust service to our customers. These efforts paid off and, we continue to see improvements in our revenue streams across the entire operations.

A major transformation, which has yielded positive results, was the change of the operating model. We adopted an agile model and removed structural inefficiencies that were impeding growth. We went further and reviewed our branch operating model and decentralized services hence creating a more responsive network management system.

Essentially, we made some considerable investments towards improving our technology capabilities including upgrading our ICT infrastructure and accelerating digitization, which we see as cost effective. In addition, we re-engineered our internal processes, effectively aligning our procedures with customer journeys and embarked on successive automations that have delivered a better experience for our customers. This has resulted in improved turnaround time, increased revenues and enhanced experiences for our customers.   

We also leveraged key sectors of the economy to drive growth focusing on the vibrant SME and trade sectors, which have been instrumental in driving the economy. We focused on providing solutions that address capital challenges for customers, which resulted in sustained incomes.  

As a market leader, we understand that we ought to show the way in service provision and, this requires that we stay ahead of the pack. We have invested in a robust digital innovation and, reinforced our transformation capability to innovate for the future.  

Our subsidiaries also played a significant role in driving growth with good performance in almost all key metrics. CRDB Bank Burundi SA net profit rose 146 %  to TZS 6.1 billion, up from TZS 2.4 billion reported in 2018. It is the highest ever profit for the subsidiary since its establishment in 2012. The subsidiary also recovered all its accumulated losses, while building healthy reserves for the first time since inception. 

CRDB Insurance Brokers Limited posted a 23% growth in net profit to TZS 1.6 billion at the end of the 2019 financial year, up from TZS 1.3 billion reported in 2018. The total income generated by the subsidiary stood at TZS 7.82 billion, representing 26% growth compared TZS 6.22 billion reported in 2018. The growth was driven by a rise in the uptake of insurance products predominantly in medical care, education, and tourism.

CRDB supports the Government of Tanzania’s drive towards industrialization and the creation of a middle-income economy. Which sub-sectors of the industrial sector, and which other sectors of the Tanzanian economy are your priority? What will be your focus going forward?  

Our approach to business is inclusive. We focus on the key sectors that drive the economy forward while enabling citizens to make decent livelihoods from their day to day activities. Traditionally, we have had a long-standing commitment to financing the agriculture value chain, which we believe provides the raw material required to bring agro-processing. It, therefore, goes without saying that agro-processing is our focus because we understand its net impact on the economy, seeing that agriculture contributes to nearly a quarter of the country’s GDP.  

But as a business, we have diversified our client portfolio and are currently supporting almost all sectors. When you look at our 2019 financial year, you will realize that CRDB Bank extended support to all sectors of the economy with agriculture, manufacturing, and trade taking a combined share of 27% of our total funding portfolio. 

We place considerable focus on trade because this is where most SMEs fall. For us, SMEs play an integral role in terms of production, employment generation, contribution to exports & facilitating equitable distribution of income.

You mentioned that CRDB Bank remains at the forefront of innovations, making significant progress in designing products and services that are more inclusive. Can you give us some examples and how they can benefit Tanzanians?

At CRDB Bank, we see innovation as a continuous process of creating new things and, therefore, we are entrenching it as a culture. Our products consider the diverse needs of our customers and are primarily consumer-driven. We believe that our ability to respond to the diverse and fast-evolving needs of our customers will determine our differentiation. 

For instance, we have a specially designed product for micro-entrepreneurs best-known as machinga. The product is a mobile-based loan aimed at addressing capital challenges among this group, who rely on selling their wares to make a living. As you may appreciate, the Machingas have a small cash cycle that starts with acquiring merchandise in the morning and hawking it all day to take a profit. Often, they run out of capital which then means they won’t be productive on that day. Machinga Loan takes care of this challenge by giving them instant access to cash to acquire their wares. We developed this product, taking advantage of a government program to enumerate the micro-entrepreneurs, which we see as an opportunity to financially include them. The long-term plan is to build their capacity to be able to grow their businesses. 

We also launched a specialized product for university students, christened as Boom Advance. The product targets to empower students to allow them to focus on their academic endeavours, irrespective of the delays in disbursement of their loans. 

But more importantly, we have expanded our scope of inclusion to target other underserved groups such as women through a Women Access to Finance Initiative (WAFI). The initiative seeks to empower women to make financial choices that suit their capabilities and opportunities available to them. 

We plan to leverage both technology and our extensive distribution network to drive inclusion. 

Notwithstanding some current headwinds, and the ongoing Covid-19 pandemic, Tanzania is expected to remain among the fastest-growing economies. How are you adapting to this environment? Which role do you aim to play in the socio-economic development of Tanzania over the next few years? 

Despite the COVID-19 pandemic occasioning far-reaching disruptions in the global economy, it has heralded new opportunities for businesses. Our instinctive response as a business was to, first of all, help our customers navigate the tumultuous period by working closely with them to anticipate immediate and long-term challenges. We did not shy away from helping our customers, especially those in sectors most affected by the pandemic such as tourism. In line with the regulator’s measures, we reached out to all our borrowing customers in the sector and assessed their individual situations and made interventions that were best suited for them including loan restructuring and in extreme cases giving moratoriums.     

In responding to the guidelines provided by the authorities to mitigate the spread of the virus, we created a compelling digital banking proposition for our customers thereby enabling them to do most of their banking transactions through digital channels.  

Internally, we have accelerated digital projects that focus on improving the customer experience, seeing that the pandemic has opened a fresh set of social needs never anticipated in the concept of banking. More importantly, we are working with enterprises to help them identify new opportunities resulting from the pandemic.

As a homegrown brand in Tanzania, we want to be at the forefront of the socio-economic transformation of our country. Our strategic plan has considered the national economic blueprint in which has steered Tanzania to become a middle-income economy. 

We will continue focusing on supporting the agriculture value chain, trade and manufacturing sectors, which play a central role in the country’s economic development.  

We also continue playing an active role in ensuring the achievement of a robust infrastructural capacity because it will have an impact on the economy in the long term. This is why we have been keen on supporting the country’s infrastructure projects such as the Nyerere Hydropower Project, the Standard Gauge Railway (SGR), and the expansion of the Julius Nyerere International airport. 

TanzaniaInvest interviewed Warren Deats, Chief Operating Office of Obtala (LON:OBT), a vertically integrated group focused on sustainable agriculture and forestry in Tanzania and Mozambique.

Warren is based in Tanzania where he oversees the Group’s operations in Africa. In this interview, he discusses the company’s focus and operations in Tanzania and the ambitions for further expansion.

TanzaniaInvest: Obtala has 2 primary focuses, agriculture in Tanzania and forestry in Mozambique. Why Tanzania?

Warren Deats: We looked at the successes of Kenya as an agricultural producer and questioned why Tanzania hasn’t had the same results.

Tanzania has many of the qualities Kenya does, such as a great climate, access to a workforce, arable land, improving ports and support from the government.

Where it is lacking is in experience and a legacy of years of agricultural production.

We see this as a huge opportunity to be part of the growth and development of Tanzania

TI: In Tanzania, Obtala has 1,735 hectares of farmland. How conducive has been the investment framework to your project?

WD: Tanzania is definitely moving in the right direction as far as business friendliness but there are still quite a few challenges and delays in starting businesses.

I feel the government is very motivated to help us. They do sometimes lack the resources but not the motivation.

TI: Your focus is on short‐term revenues on fresh and dried produce. How much is destined to local, regional and international markets?

WD: Our focus isn’t on short-term revenues. It’s on long-term development while still offering short-term returns to our investors.

We are balancing short-term crops to create revenues now, with long-term orchard development to create sustainable assets for the future.

Our goal is to supply as much as we can locally and regionally with the balance going to the Far East, Middle East and Europe.

As it stands there is significantly more demand for produce in the export market, however, with the demographics of Dar es Salaam and the rest of the region, we expect that to change over the coming years

TI: You intend to move into large-scale orchards in the medium‐term. Which other agricultural products yield the great opportunities?

WD: We are currently analyzing the best crops to produce. This involves assessing the climate, soil, water, export markets and various other factors.

Mangoes and avocados are at the top of our list for the moment but that could change before we plant.

TI: What are you overall ambitions in Tanzania in term of crop production and turnover?

WD: I think our mission statement says it best: “To take the lead in the sustainable commercialization in Sub-Saharan Africa of two of the world’s most in demand and diminishing natural resources, arable land and forestry. To pursue every opportunity to move up the agriculture and forestry value chain, in partnership with key stakeholders, contributing to long-term economic and social development in the markets we operate in.”

TI: What are the greatest opportunities and challenged ahead?

WD: The two main challenges in Tanzania are logistics and global recognition.

Tanzania still needs additional development and investment in cold chain and port handling.

This will be key to becoming a world class producer and exporter.

Secondly, we hope to play a role in putting Tanzania on the map as being recognized as a high-quality producer.

We are already seeing this in coffee and chocolate, we just need to develop this for other produce.

This is one of our major focuses when we are at trade shows. Not just marketing our products, but marketing Tanzania as a whole.

As I mentioned before, the greatest opportunity is to harness all the agricultural qualities that Tanzania has and develop the industry.

TanzaniaInvest interviewed Julius Ruwaichi CEO of Access Microfinance Bank Tanzania, a commercial bank focused on the lower and middle-income strata of the Tanzanian society and on the growing segment of micro and small enterprises.

In this interview, Ruwaichi provides a detailed insight on the issues affecting the vibrant Tanzanian baking sector, namely high-interest rates and non-performing loans, and shares his bank’s development strategy to become a leading provider of financial services in Tanzania with its large population, limited banking penetration, and plenty of opportunities to serve the unbanked.

Access Microfinance Bank Tanzania Limited is one of the six Access Group subsidiaries in Sub-Saharan Africa. How does it rank in terms of size and relevance?  

Access Microfinance Bank Tanzania Limited (formerly AccessBank Tanzania Limited), was established in November 2007. We currently operate with a good network of branches in the Dar es Salaam, Mwanza, Mbeya, Tabora Iringa, and Kahama (Shinyanga).

As part of Access Group, our operation was the second next to Madagascar in the African space. The Bank managed to grow very fast and became the largest subsidiary of Access Group by 2017.        

We attained good growth rates compared to other related players due to our active approach towards product development and market penetration rates in the segment where many local players had less experience and appetite to dwell in.

With subsequent internal and external challenges, together with the increase in the growth rate of other AccessGroup subsidiaries in markets, we are now the third in Africa in terms of total assets size, however, slowly regaining the growth to claim our leading position in the region.

As of August 2021, the Tanzanian market is crowded with 35 commercial banks, 4 microfinance banks, and 575 tier 2 microfinance service providers. What are Access’ competitive advantages? 

Access Microfinance Bank Tanzania is privileged with a well-crafted business model, which best fits the micro-segment in Tanzania. Our business model has been well tested for over 14 years across the wider geography of the country and hence forms part of DNA to a bigger slice of our workforce.

Access Microfinance Bank Tanzania is privileged with a well-crafted business model, which best fits the micro-segment in Tanzania.

We are excellent at servicing this segment in a manner that assures our customers a true meaning of progressive rewarding banking experience with business success. We are fast at understanding our customers’ business cycles, serving them with passion and recommendable turnaround time.

What new markets or initiatives are you pursuing? 

Access Microfinance Bank Tanzania continues to walk its mission, intensify its presence where we are operating, while extending our services into new markets, with a focus of truly delivering on being a one-stop bank of choice for micro, agro, and small enterprises.

We have a special focus to widen the market share in serving the lower and middle-income strata of Tanzanian society.

We have a special focus to widen the market share in serving the lower and middle-income strata of Tanzanian society.

The bank continues to extend its presence in new rural areas, by reopening its historical and accessing new lending corridors, hand in hand with availing some of its banking services through agency banking and mobile banking services.

We have plans to embrace digital platforms to enhance our delivery as well as regain our market share from deep-rooted old clients and attract new clients.  

Access to credit remains a challenge for Tanzanians, with historically high interest rates averaging 16% for commercial banks and 42% (3.5% per month) for microfinance institutions (from tier 2 to 4). What is your view on the Bank of Tanzania (BOT)’s cap on interest rates of a maximum of 3.5% monthly?

BOT, being the regulator of the banking industry in Tanzania, certainly had taken that measure with a wider view to achieving a certain regulatory objective, either on a short-term or medium-term basis.

It was a necessary measure taken at a particular time to achieve a certain governance framework. However, as a well-known engaging regulator, BOT has a number of channels for engaging the players in the sector to avail their ideas, which are rooted in operational dynamics.

As a matter of principle, interest rates are derived from a cumulative number of driving parameters. Hence, when all stakeholders are engaged to review and gain an understanding, reasonable rates can be justified.

It is our expectation that the position taken by the regulator has opened a wider room for more engaging discussions and submissions to give a wider scope on what needs to be addressed (drivers/parameters) to deliver market expected rates. Hence this might eventually lead to revisiting the initial position taken.

What does it take to lower the interest rates applied by banks?

As narrated above, lowering of interest rates applied by banks is a process-oriented result that has to be derived from engaging discussions of all stakeholders and players towards addressing the pricing drivers (that leads to the buildup of existing rates).

Currently, the Tanzania Bankers Association (TBA) is handling this diligently, engaging relevant players and stakeholders to get a clear understanding of the drivers and put sustainable measures that will enable players to comfortably allow market forces to dictate gradually reduced rates.

Which other measures would help unlock credit to Tanzanians? 

In order to unlock credits to Tanzanians, it is important to look at wider and long-term views on the barriers that lead to limitations to credits:

• Borrowers’ creditworthiness information. It is high time for small to medium borrowers to institute mechanism of keeping financial records that are of credibility and reliability. This comes from education on the importance of keeping such information as well as discipline for them stand and deliver this. Having reliable financial reports helps banks to do a valuable assessment on borrower’s capacity, advising the best product/financial solution needed.

• Cost of funds. The majority of small and medium size borrowers do qualify for credit solutions offered by business models of Micro Finance Institutions (MFI) and Tier 1 Microfinance Banks, complemented by credits offered by commercial banks. However, most of these MFI have limitations in mobilizing financing, hence end up borrowing from financiers, commercial banks at relatively higher rates. This build up in the pricing equation, which might end up accommodating less borrowers. The preferable solution will be a coordinated joint effort for the MFI to borrow/access financing at relatively reasonable price, hence be able to extend relatively affordable credits to many more small and medium size Tanzanian businesses.

• Limited use of technologies. Many Tanzanians have got access to mobile phones and internet. However there are limited credit products developed and tailored to be made available to many players in Tanzania under the digital platform. More work need to be done on the data collection/sharing and developing digital credit scoring algorithms. With the evolution of Fintechs and innovations, this can help in unlocking credits to many Tanzanians especially for small and short-tenured loans. This needs to go hand in hand with cultural change, trust and financial discipline to the borrowers.

• Non-Performing Loans. The current level of non-performing loans at banking sector levels is close to 9%, with different bank at different levels of the ratio. However, it should also be highlighted that many banks have a significant amount of cumulative written-off loans based on statutory requirements. Therefore, the delays in recovering those overdue loans and collections from the written-off portfolio lowers the appetite for more credits due to the capital implication (huge capital impact due to overdue).

After years of high non-performing loans ratios and the more recent impact of the Covid-19 pandemic, the banking sector has shown record profits in 2021 so far. How do you explain it?

Certainly, Covid-19 and the sticky trend of Non-Performing Loans (NPLs) have had a double sword impact on banks, as they led to a drop in revenues (fewer credit needs) and impairment charges. With many banks having extended the grace periods to their customers on repayment of loans installments, the impact has always been substantial.

The so-referred record in profits is contextual. In the recent past, banks had challenges on relatively higher impairments and declining credit growth or shrinkages for the majority of players. In 2021, the trend has relatively been contained, with the majority showing contained shrinkage, or small credit growth of their loan portfolio, hence stead growth in interest income and relatively lower impairment charges.

Therefore on a comparative basis, there has been growth. Furthermore, it is also worth noting that during the Covid-19 crisis, players were also poaching good clients from one another, hence record profits for an institution could also imply at the expense of other players who had to lose their good credit clients to other bigger players who could avail better terms at the difficult times. 

Is this growth applicable to Access Microfinance Bank too?

Yes, for Access Microfinance Bank, there has been a positive trend as well, with the first nine months of 2021 closing with a loss before tax of TZS 0.3B, compared to last year for the same basis with TZS 9.2B. It is evident that we managed to grow our net interest income as well as contain our operating expenses, with an increase in recoveries of written-off loans for 2021.

We are determined to return back into profitability levels in 2022 as we cement our strategic focus in diligently serving the micro, agro, small and medium-size business segments.

We are determined to return back into profitability levels in 2022 as we cement our strategic focus in diligently serving the micro, agro, small and medium-size business segments.

According to your vision you “strive to be the leading provider of financial services in Tanzania.” How do you intend to do that, and what are the challenges ahead?

The journey is live and on its implementation. The banked population in Tanzania is just below 20%. Hence the banking opportunity is so immense here in Tanzania, and the micro-segment forms a bigger part of this.

Access Microfinance Bank is having a very robust business model to serve this clientele, as we have developed a very strong experience and DNA for over 14 years in this segment. We aim to continue partnering with players and engaging our clients to know their needs and tailor our products to best fit their needs as we always do.

The banked population in Tanzania is just below 20%. Hence the banking opportunity is so immense here in Tanzania

With the modern digital world, we will strive to keep pace by slowly transitioning with our clients into the digital space, while addressing the related risks with appropriate mitigations. This being a journal, we remain focused, less disrupted by the deliberate uproars.

We are aware of the challenges ahead, including dynamics of technologies, competitions, funding long-term funding needs, potential economic challenges,  potential reoccurrence of the pandemic, etc. All these might be of impact to our journey, hence the continuous review of our strategies and adaptations remains key to us.

TanzaniaInvest interviewed Ravneet Chowdhury CEO of Diamond Trust Bank (DTB) Tanzania, a fast-growing commercial bank focused on SMEs and corporate clients, with a regional presence in Kenya, Uganda, and Burundi.

Chowdhury comments on the improving business environment and crowded banking sector, highlighting shortcomings and potential for credit growth, and DTS’s ambitions and strategy to become one of the top 5 lenders in Tanzania.

You joined DTB Tanzania one year ago, after a long experience in banking in Asia, the Middle East, and Africa. What is your feedback on the business environment in Tanzania so far? Do you perceive tangible improvements since the new administration of President Samia Suluhu Hassan?

We see the business environment in Tanzania as very positive. A lot of effort is being made to smoothen out processes and to attract foreign capital.

A lot of effort is being made to smoothen out processes and to attract foreign capital.

We will however need to do more to ensure that Tanzania captures a fair share of global capital for Investment.

Investors are looking for clarity and stability in rules, an efficient and enabling operating environment that works with speed and minimal bureaucracy.

Tanzanian largest banks experienced improvements in profitability in 2021. DTB cumulative net income after tax has reached TZS 8.4 billion in Q3 2021, against TZS 8 billion for the whole of 2020. What are the drivers of these positive performances? What do you expect from now onward?

DTB has indeed seen an improved performance for 2021. This is due to an improving business climate and some recovery from the initial Covid shock.

We have also continued to invest in our digital platforms to provide more convenience to customers.

We have an excellent team that is very energized and is a key competitive advantage for us.

We are focusing on operational efficiency and process improvements to ensure that we continue to provide superior customer service.  

We are focusing on operational efficiency and process improvements to ensure that we continue to provide superior customer service.

Access to credit remains a challenge for Tanzanian businesses and individuals, with interest rates averaging 16% and NPLs affecting many banks thus keeping the credit risk high. What does it take to unlock credit to Tanzania’s productive sectors? Which improvements are needed from the regulatory point of view, and what is DTB’s strategy in this regard?

It is important to mention that interest rates have seen a good reduction in the last two years and we continue to see pressure to the downside.

Banks are in the business of lending and we all look for viable projects to lend to whether they are small-scale SME businesses or large corporates.

From a regulatory point of view, we would look forward to a legal system that allows us quick relief and the ability to enforce our rights.

We would look forward to a legal system that allows us quick relief and the ability to enforce our rights.  

Our strategy is to continue to support good businesses in the SME and corporate segments and we are committed to playing our part in the growth of the Tanzanian economy.

The Tanzanian market is crowded with 48 licensed banks, though the number is decreasing with the late mergers. Do you foresee further consolidation on new players entering the market? What are DTB’s core markets and competitive advantages and what new markets or initiatives are you pursuing?

Given the size of our economy and the banking revenue pool, we do seem to have many banks in Tanzania.

Further consolidation is inevitable and we see banks merging and possibly some newer players entering the market.

Further consolidation is inevitable and we see banks merging and possibly some newer players entering the market.

DTB Is an East Africa-focused bank with operations in Kenya, Tanzania, Uganda, and Burundi.

We have a competitive advantage in that we are a strong bank with a very clean reputation.

We would like to use our regional presence to provide a more regional solution to our key clients.

For now, we would like to deepen our presence in our existing markets and become more relevant in each one of them.

Enhancing the customer experience through technology, digitization, and innovative product offerings would be our core focus.

In October 2021, President Samia launched the Government’s Economic Recovery Plan worth TZS 3.62 trillion, and the IMF has reviewed upwards its economic forecast for Tanzania for 2022 and 2023. What are your ambitions in terms of growth and what are the main challenges? Which role do you aim to play in the socio-economic development of Tanzania?

We are a top 10 bank in Tanzania today and have an ambition in becoming a top 5 bank.

The key driver for this would be economic growth and stability in policy.

Along with that, we need to become more efficient, digitize our processes and continue to deliver superior services, and provide good value to our customers.

We are a top 10 bank in Tanzania today and have an ambition in becoming a top 5 bank.

DTB is primarily an SME and a Corporate Bank. We also bank individual customers across the country.

Through lending to small customers and large corporates, we play a significant role in the socio-economic development of Tanzania.

We also help facilitate transactions for our retail customers especially through our mobile app.

There is a move to also help with financial inclusion through a digital lending offering.

We are also active in CSR and fund a number of projects in schools and in our local communities.

TanzaniaInvest interviewed Robert Kiboti CEO & MD of EQUITY Bank Tanzania, the local subsidiary of the EQUITY group with presence in Kenya, Uganda, Rwanda, DR Congo, and South Sudan.

Kiboti shares EQUITY’s promising results in 2021 and the expansion strategy for 2022, based on the bank’s increasing support to regional trade and small and medium enterprises, and overall increased financial inclusion of the Tanzanian population to accompany its economic growth in the years ahead.

Since the new administration of President Mama Samia, there is a new impetus in promoting investments in the country via a more conducive business environment. What is your sentiment on that so far? Do you already see tangible improvements? 

So far so good. We can see tangible improvements and a heavy dose of political goodwill to improve cross-border trade relations and improve the business environment to raise Tanzania’s global competitiveness.

The biggest opportunity at the moment that every African nation needs to pursue is the recent launch of the African Continental Free Trade Area (AFCTA).

The biggest opportunity at the moment [for Tanzania] is the recent launch of the African Continental Free Trade Area (AFCTA).

Tanzania like all other African nations has to make its contribution in helping Africa lift the share of intra-Africa trade from 15% of total trade by Africa to the level of EU and USMCA (United States, Canada, and Mexico – formerly NAFTA- North American Free Trade Area) at over 60%.

President Mama Samia Suluhu Hassan has traveled and reached out to other countries to let them know that Tanzania is open for business and generally seeking to reset trade relations.

In May this year, she traveled for a 2-days state visit to Kenya aimed at improving trade relations between the two East African neighbors; she met and engaged President Uhuru Kenyatta and also addressed Kenya’s before signing an agreement to eliminate tariff and non-tariff trade barriers including Covid-19 containment protocols at the border points. 

Kenya is the biggest investor in Tanzania and Tanzanian exports to Kenya have been rising over the last 10 years. 

But the Covid-19 pandemic is hampering FDI (Foreign Direct Investment) and GDP growth. The panacea or solution to this is vaccination. No one is safe in the world unless everyone is vaccinated. 

Accelerating the speed and magnitude of access to vaccines and vaccination will be accompanied by higher investors’ confidence and hence higher levels of investments. 

President Mama Samia has struck the right tone on Covid-19’s management and vaccination and this will pay dividends in increasing the number of foreign tourists; expanding the tourism and hospitality industries, and boosting FDI.

After years of high ratios of NPLs (non-performing loans) and the more recent impact of the Covid-19 pandemic, the banking sector has shown record profits in 2021 so far. How do you explain it? Is this applicable to EQUITY too? 

Headwinds leading to the underperformance of some economic sectors, the impact of the Covid-19 pandemic on the general economy and in particular tourism industry coupled with a decline in underwriting and loan recovery standards could be some of the reasons leading to the rise in NPLs.

These, however, declined to around 7.5% in December 2020 but it’s still above the maximum threshold set by the Bank of Tanzania (BOT) of 5% and the industry is thus not out of the woods.

NPLs require banks to increase provisions for bad loans expense which eats on bank profitability and so reduction of NPLs helps reduce provisions and thus boost profitability. 

EQUITY Bank Tanzania has suffered NPLs but we have instituted a raft of measures to contain the problem and we are now seeing green shoots of recovery during the Year on Year (YOY) results to June 2021 with NPLs dropping by 12% and PAT (Profit After Tax) rising by a whopping 176%. 

During the Year on Year (YOY) results to June 2021 NPLs dropped by 12% and PAT (Profit After Tax) rised by a whopping 176%. 

The Tanzanian market is crowded with 48 licensed banks, though the number is decreasing with the late mergers. What is EQUITY’s core market in terms of clientele and sectors of the economy? What are your competitive advantages? How do you leverage your presence in six other countries in East Africa? What new markets or initiatives are you pursuing? 

It is true Tanzania has many banks and we have also seen mergers in the industry. However, we believe that the market is large enough for everyone and that what matters is the development of the financial sector. 

There is still room to increase the percentage of Tanzanians who are financially included formally and informally, whereby this stood at 72% in 2017 (Finscope Survey by FSDT– Financial Sector Deepening trust Tanzania).

There is still room to grow Tanzania’s domestic credit to the private sector as % of GDP, whereby this was 13.14% in Tanzania as opposed to 129% in South Africa at 149.6% globally in 2020.

There is still room to grow Tanzania’s domestic credit to the private sector as % of GDP, whereby this was 13.14% in Tanzania as opposed to 129% in South Africa at 149.6% globally in 2020.

Equity Bank champions a financially inclusive business model that serves all individuals from low income to medium, up to high-net-worth individuals, and businesses from micro to small, medium, large, up to corporates and multinationals.

Our competitive advantage and unique selling proposition-USP is creating a unique, emotional bond with our customers.

Our customers can benefit from our presence in Eastern and Central Africa because we can support them to seamlessly do business across all of those countries in terms of cross-border loans, payment solutions, trade finance, treasury forex products as well as advisory services. 

Medium enterprises need a champion who is prepared to connect them to the national and regional economies, and EQUITY can help them take their business to the next level: “Equity is ready to walk with me side by side as a family member.”

Corporates need a trusted advisor to support their growth into Africa and the world. For these customers, EQUITY will provide comfort that we are a true business partner: “As a fellow African, Equity understands what it takes to do business in Africa.”

In addition, we are investing heavily in digital payments solutions for MSMEs; deepening our distribution footprint via agents and other payments channels; extending loans for MSMEs and retail customers, and facilitating Tanzanian businesses to take advantage of ACFTA and most recently the DR Congo market. 

In October 2021, Mama Samia launched the Government’s Economic Recovery Plan and Response to the Covid-19 pandemic worth TZS 3.62 trillion, and the IMF has recently reviewed upwards its economic forecast for Tanzania for 2022 and 2023. Which role do you aim to play in the socio-economic development of Tanzania over the next few years? 

Covid-19 indeed reversed gains the world achieved since 2015 towards the realization of the 17 United Nations Sustainable Development Goals and also compromised the probability of achieving them by 2030.

It is therefore imperative and a responsibility of EQUITY Bank Tanzania to join hands with the Government, households, and the private sector to finance the building of a better economy-more inclusive and sustainable-creating jobs, reducing poverty and inequalities, and ensuring that no one is left behind.

The future looks very bright for Tanzania and EQUITY Bank Tanzania.

Better days lie ahead as the GDP growth rate is forecasted to be robust driven by strong performance in agriculture, services, mining, the Government’s investments in mega infrastructure projects, and increasing regional trade with the East African Community (EAC) and DR Congo. 

GDP growth rate is forecasted to be robust driven by strong performance in agriculture, services, mining, the Government’s investments in mega infrastructure projects, and increasing regional trade

EQUITY Bank Tanzania intends to remain true to its corporate purpose and the reason we exist: “Transforming lives, giving dignity and expanding opportunities for wealth creation”, with always in mind our vision “To be the champion of the socio-economic prosperity of the people of Africa” and our mission: “Offer integrated financial services that socially and economically empower consumers, businesses, enterprises, and communities.”

In the next few years, EQUITY Bank Tanzania is committed to playing a key role in accelerating financial inclusion in the country, providing access to finance to MSMEs and individuals, driving innovations, especially in payments, digitizing businesses and governments, and becoming an essential lubricant to driving the implementation of ACFTA to grow intra-Africa trade in EAC and the Great Lakes Region.

EQUITY Group Holdings Plc recently announced a USD 5 billion post-Covid-19 Economic Recovery and Resilience “Marshall” Plan to work with governments and like-minded development partners to drive financing and capacity building of 5 Million MSMEs in EAC and the Great Lakes Region to create 25 million direct jobs especially for the youths who are unemployed. 

EQUITY Group Hrecently announced a USD 5 billion post-Covid-19 Economic Recovery and Resilience Plan to create 25 million direct jobs especially for the youths who are unemployed. 

EQUITY Bank Tanzania will play its role here in Tanzania to support the recovery of the economy and transform many lives, and socially and economically empower consumers, businesses, enterprises, and communities.

TanzaniaInvest interviewed Theobald Sabi, Managing Director of the National Bank of Commerce (NBC)-Tanzania’s third-largest bank-that offers a wide range of banking products and services namely personal, retail, business, corporate, investment, and Islamic.

Sabi shares its strategy to scale up the provision of credit to corporates, MSMEs, agriculture and retail sectors as a way to promote commerce and industrialization, and heavily invest in fintechs and banking agents as a way to reduce the financial inclusion gap.

NBC’s main focus is on corporate finance, but you also serve businesses, SMEs, and retail, and also expanded into Islamic banking. What are your competitive advantages in a market crowded with so many banks? Which new markets and segments are you pursuing?

We have invested heavily in research for the past two years and we have managed to come up with a value proposition that is closely aligned to the needs of the retail and micro, small & medium enterprises (MSMEs) segments.

We came up with a value proposition that is closely aligned to the needs of MSMEs. We also support farmers with short-term loans and agriculture insurance.

We also support farmers by giving them short-term loans. Recently we launched agriculture insurance which covers against the loss of crops due to natural disasters, such as hail, drought, and floods.

We have now embarked on a journey that will eventually increase access to finance to micro-entrepreneurs who employ eight million Tanzanians and contribute 35% of GDP.

This has come after our offering of financial skills development through the NBC Business Club. The Club offers an opportunity for entrepreneurs to network, and through partnerships, we have been offering professional and specialized training in areas of international business, tax, and good business standards.

We also support MSMEs. This year, we launched NBC Kua Nasi, a product that is doing very well in the market and is the most affordable solution.

As part of our support to the Government on local content, we have launched unsecured lending products for MSMEs who are working with government entities as well large corporates and multinationals. These tailor-made solutions are helping MSMEs who have good business proposals but they lack collateral to access funding.

We have launched unsecured lending products for MSMEs who are working with government.

We have re-engineered the process of accessing finance, and it’s now simple and easy for small entrepreneurs to access loan services at any of our branches.

To ensure entrepreneurs get financial service conveniently, we have increased our footprint using bank agents. We now have close to 4,000 agents across the country, and we will be adding more in order to cover each and every ward in Tanzania.

We have also seen momentum on digital services and a big drift is on Government tax and non-payments whereas our customers are paying through the link that we have with the Government e-Payment Gateway (GePG).

As one of the lead banks for corporates, we aim to ensure we facilitate tax collection for the government in a manner that our clients will find convenient.

Strategically, we will scale up through partnering with fintechs to develop products that will attract the unbanked population to start using banking services and a result to reduce the financial inclusion gap.

We will scale up through partnering with fintechs to develop products that will attract the unbanked population and reduce the financial inclusion gap. We have 4,000 banking agents across the country and we will be adding more.

We will continue providing investment banking and trade finance solutions to corporates in Tanzania as we have done so over the last five decades.

Talking of financial inclusion, access to credit remains a challenge with interest rates averaging 16% in Tanzania. What does it take to unlock credit to Tanzania’s productive sectors? What is NBC’s strategy in this regard and which products and services are you developing to scale up financial inclusion?

NBC is pioneering interest rate reduction in Tanzania. For example, NBC is now offering agricultural loans at a maximum of 10% interest rate as long as the loan exposure is not exceeding TZS 1 billion for a single client.

This is to support MSME’s who are dealing with agriculture the agricultural value chain. Salaried employees are given loans at up to 13% interest rate. Most of these loans are going to support their small businesses outside work.

On the other hand, as Credit Reference Bureau in Tanzania is building more robust records, it is now becoming easy to profile borrowers as per their risk grade, and eventually, low-risk customers will enjoy lower interest rates.

NBC Shambani and Kua Nasi were designed specifically to scale up financial inclusion. These products were implemented following extensive research that was conducted in collaboration with the Financial Services Deepening Trust (FSDT).

NBC has also partnered with the Private Agricultural Sector Support (PASS), the Tanzania Agricultural Development Bank (TADB), and the African Guarantee Fund (AGF) to support the extension of credit to SMEs.

NBC continues to hold various Business Club forums to educate customers on NBC offerings and how to run sustainable businesses.

NBC is investing in the digital space massively. We are investing in digital financial services solutions to provide our customers with convenience and also efficiencies. Our digital solutions include Mobile Banking Platforms, Internet Banking for Corporates and individuals.

In October 2021, President Samia launched the Government’s Economic Recovery Plan worth TZS 3.62 trillion, and the IMF has reviewed upwards its economic forecast for Tanzania for 2022 and 2023. Which role do you aim to play in the socio-economic development of Tanzania? What are your ambitions in terms of growth and market share, and what are the main challenges?

NBC has been a key partner of the Government on socio-economic development not only by supporting tax and non-tax revenue collections but also by funding the Government on key strategic projects.

NBC is one of the top three banks on tax and non-tax revenue collections and our ambition is to be the key Government partner in driving revenue collections.

The Government has set out a blueprint for economic growth, and as the bank in the country, we understand the importance of financial institutions to propel economic growth.

We will scale up our provision of credit to the corporates, MSMEs, and the retail sectors as a way to promote commerce and industrialization.

We will scale up our provision of credit to the corporates, MSMEs, and the retail sectors as a way to promote commerce and industrialization.

Our focus on Agriculture continues on the back of our Kua Nasi, Shambani, and BancAssurance services

We are a bank that is local but internationally connected through our pan African banking Group-Absa-so we will play a significant role to promote investment flows into Tanzania’s mining sector, blue economy, tourism, and manufacturing.

We continue to invest in digital platforms that support the Government to achieve Electronic Government (eGovernment). Such investment includes GePG collections gateway enhancement, MUSE platform (Government Accounting System), and other Government digitization projects.

We will play a significant role to promote investment flows into Tanzania’s mining sector, blue economy, tourism, and manufacturing.

The challenges that we foresee on economic recovery are not peculiar to Tanzania but rather global, and to be specific they are connected to the uncertainties around the Covid-19 pandemic.

Our economy does not operate in isolation and as the world continues to navigate through this challenge our economic plans will be subjected to some impacts that will come from this pandemic.

The business community’s belief is that the measures and approaches taken by the Government toward this challenge are in the right direction to foster economic recovery.

TanzaniaInvest interviewed Abdi Mohamed, Managing Director of ABSA Bank Tanzania, among the 10 largest banks in the country and part of South African financial services group ABSA Group with a direct presence in East Africa and in 10 African countries.

Abdi shares the bank’s strategy to expand its role in the socio-economic development of Tanzania and shares some of the latest digital initiatives to ease access to capital and increase financial inclusion.

ABSA is present in several countries in Africa. What is the relevance of Tanzania within the ABSA group’s operations in the continent?

Tanzania is one the fastest growing economies today and with a very young population and a promising good future. ABSA, as a large pan African banking group, sees Tanzania as one of the strategic operations to grow.

We have been in this market since 2000 and we have played a crucial role in this economy, having extended financing to entities in both the public and private sectors.

What is your overall strategy in Tanzania?

Based on our overall mission to “bring possibilities to life” we have continued to partner with our key stakeholders to play an important role in the Tanzania market.

We see great potential in the market both in retail and wholesale banking and have a clear growth strategy in both.

We see great potential in the market both in retail and wholesale banking and have a clear growth strategy in both.

Our strategy is underpinned by customer centricity, digital innovation, great products, and strong relationship management. We pride ourselves on understanding the market deeply and addressing market needs with appropriate solutions.

After a challenging 2020 when the Covid-19 pandemic severely affected the Tanzanian economy and its banking sector that experienced losses, in 2021 many banks-among which ABSA-have showed record profits. How do you explain such a fast recovery?

The Covid-19 response in Tanzania has been a multi-sectoral effort led by the government of Tanzania.

In addition to the health sector response to the pandemic, the Bank of Tanzania (BOT), working closely with the financial sector participants, developed a Covid-19 response that ensured stability and recovery of the economy.

Globally the fast economic recovery from the pandemic has largely been fuelled by the vaccination which opened the door for many economic activities and for the global supply chain to open up. Tourism has started to pick albeit at a slow pace.

Additionally, some important sectors in the economy such as food production and agriculture continued to grow during this period.

What were the drivers of ABSA’s significant growth in profit before tax (PBT)?

PBT grew significantly by +210% year on year, from TZS 4 bln in 2020 to TZS 13 bln in 2021, demonstrating recovery from the effect of the Covid-19 pandemic in 2020.

ABSA Tanzania profit before tax grew significantly by +210% year on year, from TZS 4 bln in 2020 to TZS 13 bln in 2021,

The increase in profits is mainly attributed to the growth in Net Interest Income (NII) and Net Fees and commission income from a revenue perspective coupled with decreased loan impairment charges and decreased operating expenses.

ABSA Tanzania focuses on corporate and investment banking and private banking to individuals. However, you are expanding into microfinance as part of your commitment to financial inclusion. What are your competitive advantages in a market crowded with 48 banks?

Firstly, we view financial inclusion as an area in which we should all participate as the overall economic impact of greater inclusion is well understood.

Indeed, ABSA is actively participating in the SME sector as well as micro-businesses which form a very important part of the Tanzania economy.

We pride ourselves on fast, superior, and high-quality service, enabled by technology and competitive products and services.

As we increase our effort in greater financial inclusion, we have leveraged strategic partnerships with telecom companies and fintech players to deliver a superior proposition.

We have leveraged strategic partnerships with telecom companies and fintech players to deliver a superior proposition.

President Samia Suluhu Hassan made it clear that unlocking credit to the private sector-particularly to SMEs-is key to strong economic growth. However, access to credit remains a challenge with interest rates averaging 16%. Simultaneously, high ratios of NPLs affect most banks thus keeping credit risk high. What is your view of the above?

ABSA has played a leading role as a member of the Tanzania Bankers Association (TBA) to ensure that the objective of expanding credit to the private sector is achieved.

With the recent measures announced by BOT, we have seen efforts in the industry to address the cost of credit, especially to key market sectors such as the SME and agri-sectors. ABSA on its part has taken important steps in this regard.

What does it take to unlock credit to Tanzania’s productive sectors?

It requires a full multi-sectoral effort to address the various factors that drive the cost of credit. Great progress has been made in some key areas such as addressing the cost of funds and we believe that the journey will continue through positive collaboration among stakeholders as we continue to drive the rates down.

What is ABSA’s strategy in this regard?

ABSA has a unique customer preposition of the sectors that we play. We have finalized our SME strategy and we have started rolling out some of the exciting products such as unsecured bid bonds for clients who have won tenders but have no funds to execute.

We have finalized our SME strategy and we have started rolling out some of the exciting products.

We are also working with BOT to ensure that we also tap into the financing available to extend credit to our agriculture customers at lower rates.

What are your ambitions in terms of growth and market share, and what are the main challenges ahead?

We are currently one of the top 10 banks in Tanzania in terms of balance sheet size. Our medium-term plan aims to double our market share in four years. We believe that focus on customer experience and digital transformation will give us the necessary edge.

The expectation of our key stakeholders is to deliver growth with quality and ensure the quality of our asset book remains within expected parameters and that non-performing loans remain within expectation.

A few of the exciting things we have launched recently are the interactive voice response system (IVR), the deployment of customer experience executives in all our branches, instant customer feedback via QR code, ABSA virtual assistant (chatbot), digital/innovation lab to spearhead innovation, and Whatsapp-based automated branch engagement system.

We have also revamped the service guarantee for DR card Issuance–all DR cards are issued within 20 minutes, and revamped the account opening process.

Which role do you aim to play in the socio-economic development of Tanzania?

ABSA at the core is an active force for good. Apart from extending financing to our clients, we play a crucial role in financial inclusion by reaching the millions using technology such as our recent Mobile Lending Partnership with JUMO and Tigo Tanzania, and we are looking to increase such partnerships.

Apart from extending financing to our clients, we play a crucial role in financial inclusion.

And recently, through a partnership with Startup Reseau, we supported 10 young entrepreneurs (18–30 years old) who have a business idea to solve a local and/or a social problem using technology. We awarded the first winner with a prize of startup capital worth USD 5,000.

We have also undergone a number of initiatives to support the efforts coordinated by the government to tackle the impact of Covid-19.