EDITORIAL: Banks doing well but vigilance needed

Tuesday May 21 2019

 

Tanzania liberalised banking beginning in June 1999 – and, 20 years later, the sector has been increasingly competitive, with a handful of the banks boasting minority shareholding by the State.

However, banks which cannot effectively compete are invariably ‘allowed’ to fall by the wayside.

Today, Tanzania is home to more than 50 banks countrywide, comprising commercial banks, community banks, microfinance banks, and other financial institutions that include leasing companies, forex and credit reference bureaux.

Indeed, the general consensus is that Tanzania has a well-developed and diverse financial services sector, with a number of large domestic and multinational lenders, and a rate of financial inclusion which exceeds that of most other large economies in Africa.

This is according to a study by the London-based Oxford Business Group (OBG) titled ‘The Report: Tanzania-2018.’

OBG is supported in its findings by the International Trade Administration of the US Department of Commerce, which states in its report on ‘Tanzania-Banking Systems’ published on January 28, 2019 that “Tanzania’s banking sector remained sound and stable, liquid and adequately capitalized.

The ratio of core capital and total capital-to-total risk-weighted assets and off-balance sheet items were 18.2 and 20.2 per cent – well above the minimum regulatory requirements of 10 and 12 per cent respectively, ITA says. Add to the foregoing Finance Minister Philip Mpango’s reiteration that Tanzania’s banking sector is stable, as a result of corrective measures by the Central Bank following a brief, shaky period a few years ago.

Fair enough...

However, this does not mean that the banks are out of the woods; far from it. Increased vigilance by the regulatory authorities remains crucial, with the sector being closely monitored for aberrations. Also, the government must continue to relentlessly improve and otherwise strengthen the business-friendly environment all-round for sustained exemplary performance.