Tanzania: Banking Sector Showing Seen Picking Up Steadily

The Tanzanian banking sector is steadily picking up in all major facets of the intermediation business, a development industry players attribute to improvements in several aspects of the economy, including ongoing financial sector reforms.

According to key sectoral stakeholders, adoption of international best standard regulations has accelerated fundamental changes in the industry leading to the influx of foreign financial institutions over the past five years, among other positive developments.

"Tanzania's banking sector, measured by total assets, has almost tripled during the last five years," notes Serengeti Advisers, a consultancy firm based in Dar es Salaam, in its Tanzania Banking Survey 2011, which was launched in the city early this week.

In its latest banking sector report, the Bank of Tanzania (BoT) Directorate of Banking Supervision says that by early last year, 49.85 per cent of the sector's assets were held by foreign- owned banks. Its figures shows that the market share of foreign banks increased from 52.65 per cent in 2005 to 53.82 per cent in 2007, but has been declining since then.

"The market share of domestic banks decreased from 47.35 per cent in 2005 to 46.18 per cent in 2007. Local banks accounted for 50.15 per cent of the sector's assets (at the end of 2009), the survey noted.

The findings also show that between 2006 and 2010 the banking sector's total assets expanded 2.8 times-- from Sh5.5 trillion to Sh15.3 trillion-- while deposits also grew 2.8 times, from Sh4.4 trillion to Sh12.4 trillion over the same period.

Seven new entrants in the market injected Sh43 billion capital into the banking sector during the period under review. The survey, which ranks the institutions on size and performance, cover all the 41 regulated banks and non-bank financial institutions that were operating in the country by the last quarter of last year.

Presenting the findings, Serengeti Advisers director Aidan Eyakuze said that the country's banking sector is strong and has maintained a robust growth over the five-year period. He said despite the global financial crisis of 2008, local banks maintained steam and were able to weather the storm.

"The banks achieved their highest profits of Sh86 billion in the last quarter of 2008, at a time when the global financial industry was in deep trouble," he said.

The industry's loan-books more than tripled to Sh5.9 trillion during the five-year period, while the number of lenders in East Africa's second-biggest economy increased to 41 from 33, according to the survey.

"Loans expanded three times to Sh5.9 trillion from Sh1.7 trillion, while investment in government securities doubled from Sh1.2 trillion in 2006 to Sh2.37 trillion in 2010. Nevertheless, lending to business expanded to absorb 48 per cent of deposits, but government borrowing shrank from 28 per cent to 19per cent of deposits."

The survey shows that CRDB Bank Plc, NMB Bank Limited, Federal Bank of Middle East and National Bank of Commerce command the lion's share of the banking business in terms of deposits, loans, profits made, assets value, number of automated teller machines and employment.

While CRDB comfortably leads the pack in almost every field, NMB remains the most widely spread bank providing services to the most remote clients in the country. The survey identified Exim Bank Tanzania Limited as the fastest growing bank in terms of deposits and loans in the past five years. "Therefore, the strength of the Tanzanian banking system and its current level of stability was held firm by its limited integration into the global financial system," reads part of the report.

Despite all those positive developments and trends, banking penetration in the country is still low by international standards, with bank branches concentrated in the economic heartland of the country, mainly in the capital, Dar es Salaam.i