The banking sector is developing despite the impact of Covid-19

By Gadiosa Lamtey

Dar es Salaam. The banking sector in Tanzania continued to grow last year, with key indicators showing positive trends despite the Covid-19 epidemic disrupting economic activities across the world.

As the economy of sub-Saharan Africa entered recession in 2020, Tanzania’s gross domestic product (GDP) grew by 4.8%. However, that was lower than the 7.0% the East African nation enjoyed in 2019 and over the past decade.

A report by brokerage firm Tanzania Securities indicates that the banking sector has grown in terms of profitability, private sector lending, assets and customer deposits. The report also showed an improvement in the quality of assets, with the level of non-performing loans (NPLs) or bad debts rising from 8.04% in 2019 to 7.73% in 2020.

Total banking sector assets increased 5.54 percent to 34.21 trillion shillings while total after-tax profit rose to 414.74 billion shillings from 351.11 billion shillings in 2019.

The loan portfolio also increased 9.17% to 17.97 trillion shillings, according to the report.

“We anticipate lending growth in the year 2021 thanks to government policies on fiscal and monetary policies to stimulate business activities,” the report’s authors said, noting that sectors such as manufacturing, agriculture and personal loans will support the growth of the banking sector. industry. “It is also expected that the bank’s assets will consist of quality assets through improved business activities which will reduce the NPL ratio,” the report adds.

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Recently, the Bank of Tanzania introduced some measures intended to stimulate the provision of credit to the private sector.

The policy measures, which include the creation of a trillion shillings special loan fund for banks and other financial institutions to access money, have established a solid framework for increasing liquidity and reducing the cost of lending. ‘loan.

The central bank also removed the 18-month professional experience requirement for a person to be registered for agent banking, making the national ID card the only requirement.

This should help to increase the funds that can be loaned to banks through the mobilization of deposits.

Growing assets

Tanzania is home to more than 40 banks, but the sector is dominated by nine major lenders who account for 75 percent of assets.

Medium-sized banks control around 16.72 percent and small banks around 4.96 percent, according to the report.

NMB Bank was the market leader with a total of 7.09 trillion shillings in assets, followed by CRDB Bank with 6.94 trillion shillings.

The two major lenders represent a total of 14.03 trillion shillings and control about 41 percent of total banking sector assets.

Customer deposits

In 2020, banking sector deposits increased five percent to 23.444 billion shillings, but this was largely contributed by the big banks. The report says deposits from major bank customers rose 7.82 percent to 18 trillion shillings while other segments saw their deposits decline. Medium-sized banks decreased their deposits to Sh3.9 trillion from Sh4 trillion previously and small banks decreased to Sh871 billion from Sh881 billion.

“Good times to come”

Speaking of the positive trend in the banking sector, experts are confident about the future.

“This was because the government took concrete steps to control the effects of Covid-19 by allowing economic activities to continue by rejecting complete lockdowns,” said Theobald Sabi, chief executive of the National Bank of Commerce (NBC). “Covid-19 has affected a large part of the tourism industry, but other sectors of the economy such as the construction of rail infrastructure, roads, bridges, expansion of ports, agriculture, transport, health and water continued to grow. Universities and schools were also not closed for a long time. So the banks continued to do business by lending and collecting deposits in these areas, ”he said.

“We expect the banking industry to continue to grow this year. This is due to the dramatic changes the government has undertaken to improve and ease the conditions for doing business. The government continued to work on all of the “master plan” proposals. The central bank has changed banking regulations and granted significant relief to stimulate credit growth for the private sector, ”he added.

Professor Honest Ngowi of the University of Mzumbe was surprised by the growth which he said was contrary to expectations.

According to him, the measures taken by the central bank and certain innovations of the banks themselves are among the factors that have contributed to the protection of the industry against the effects of Covid-19.

“The ongoing economic recovery is good news for the banking sector. The roll-out of vaccination also raises hopes, ”said Professor Ngowi. “I see good times ahead,” he added.

Tanzania Commercial Bank (TCB) Managing Director Sabasaba Moshingi said he expected more growth in the industry this year.

“What has helped our country not to suffer from the effect of Covid-19 is the decision taken by the government not to introduce full containment,” he said.

About Alexander Estrada

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