Tanzania: Stable Banking Sector Vital for Economic Growth

By Business Standard Reporter

A WELL-FUNCTIONING financial system is fundamental to the economy as it ensures that funds are allocated efficiently towards promoting economic growth.

Tanzania financial sector has remained stable and resilient to shocks, underpinned by a stable

macroeconomic environment, despite the existence of internal and external shocks, the Bank of Tanzania (BoT) said in its 2018/19 Annual Report.

The Financial System Stability Index (FSSI), which measures the stability of the financial system, indicates that the financial sector remained stable and resilient to short-term internal and external shocks.

The banking system helps channel funds from savers to borrowers in an efficient manner through the process of taking deposits, making loans and responding to interest rate signals.

Banks are vital institutions in any society as they significantly contribute to the development of an economy through facilitation of business.

They facilitate the development of saving plans and are the instruments of the government's monetary strategy among others.

It is from this backdrop that NMB Bank recently reiterated its commitment to support the government's priority projects as it endeavours to play an increasingly important role in Tanzania's development efforts.

At the meeting with the Parliament's Public Investment Committee (PIC), the Bank's Acting Managing Director, Ms Ruth Zaipuna said so far, the bank has been active in supporting projects like ongoing construction of the Standard Gauge Railway (SGR), the Kinyerezi Gas-powered electricity generation and some projects under the Rural Energy Agency (Rea) among others. For example, she noted: "We provided guarantees worth 140bn/-for the SGR project and we will continue to support strategic projects."

To comply with project requirements of using local Tanzanian banks in executing the SGR project, Yapı Merkezi, Marsh's Global Bank Surety Syndication team, headed by Manuel López, structured an innovative solution that guarantees Yapı Merkezi's contractual performance- related obligations and the repayment of advance payments.

Yapı Merkezi was awarded the contract to design and build the new 1.25 billion US dollars, 300km (including 95km sidings/passing loops), and high-speed electric railway line by Tanzanian state-run railway firm, Tanzania Railways Corporation (TRC).

The solution was structured in collaboration with the African Trade Insurance Agency (ATI), a multilateral pan-African investment insurer and is backed by ATI's treaty reinsurers and a consortium of facultative reinsurers Trust Re (lead facultative reinsurer).

In this juncture, ATI supported NMB Bank, to issue guarantees for this infrastructure project.

In a related development, Ms Zaipuna said NMB also provided letter of credit (LC) transaction facilitation for the 550bn/-Tabora, Igunga and Nzega Water Pipeline and LC transaction facilitation for the 35bn/-rehabilitation of water treatment plant for Dar es Salaam Water and Sewerage Authority.

Other institutions that received and benefitted in various financing models, worth billions of shillings from NMB Bank are namely the Dar es Salaam's Bus Rapid Transit, contractors building roads under the Tanzania Rural and Urban Roads Agency, the Medical Stores Department and Tanzania Ports Authority (TPA).

The PIC chairman, Mr Raphael Chegeni commended the bank for supporting the government's strategic projects.

"As Parliament, we are happy that you are investing in the government's strategic projects and we remain confident that the bank's management will do more," said Mr Chegeni.

In a bid to support growth of businesses, NMB bank launched business centre underlines few years back as part of the bank's commitment to Micro, Small and Medium Enterprises (MSME) business that signals stronger interaction between the bank and its largest SME customers.

The economy as a whole depends on the success of SMEs.

Recently, the bank set aside at least 500bn/- for supporting development of small -scale industries from across the country.

NMB is very determined to continue rolling-out different friendly loans with an eye of supporting small and medium scale entrepreneurs in the country to venture into numerous projects, targeting to fuel the pace of industries in the country.

On the bank's stability, Ms Zaipuna said NMB Bank was stable, exuding confidence that 2019 financial figures will show a better picture than those of 2018.

"Being an entity that is trading on the Dar es Salaam Stock Exchange, we are currently on the closed period so we cannot reveal the numbers until the end of this month but we remain confident that they will be better than those of 2018," she said.

NMB Bank has continued to register outstanding performance in terms of profit including the 156bn/-, 150bn/-, 154bn/-, 93bn/- and 98bn/- in net profits in 2014, 2015, 2016, 2017 and 2018 calendar years, respectively.

The bank has come up with a number of tailor-made products to spearhead massive support in agribusiness. This initiative aimed at commercializing farming to support industrialisation drive.

The bank has since gave agri-related advances to the tune of 450bn/- and facilitated over 300 farmer organisations countrywide with tailor made products ranging from farm inputs to machine and food industrial operations.