Banking growth raises questions over the cost of financial services

The banks, including CRDB Bank, NMB Bank, NBC, Stanbic Bank, Exim Bank, Absa Bank Tanzania, Standard Chartered Bank Tanzania, I&M Bank Tanzania, Equity Bank Tanzania, Azania Bank, DTB Bank Tanzania, Bank of Africa Tanzania, NCBA Bank Tanzania, People’s Bank of Zanzibar and TCB Bank represent the largest commercial lenders in Tanzania by market presence, lending activity and financial significance, providing a broad picture of the direction of the banking sector.

Combined interest income of these banks increased by 23.1 percent to Sh3.62 trillion, compared with Sh2.94 trillion a year earlier, while non-interest income grew by 12.4 percent to Sh1.67 trillion from Sh1.49 trillion.

Speaking to The Citizen, analysts say the strong earnings highlight the need for a balance between bank profitability and customer affordability, particularly as households and businesses continue to depend on banks for credit and daily transactions.

Independent financial analyst Christopher Makombe said strong profitability could reflect a resilient banking sector with sufficient capital to withstand economic shocks, invest in technology, and expand lending.

“However, if the profits are driven primarily by high lending rates, wide interest margins, or increasing transaction charges, customers may feel the burden,” Mr Makombe said.

He said sustainable profitability should come from operational efficiency, prudent risk management, innovation and growth in financial services rather than excessive costs imposed on customers.

“Regulators and policymakers have an important role in ensuring a balance between by ensuring effective competition, transparency, and consumer protection,” he said.

Seasoned banker and analyst Kelvin Mkwawa said profitable banks were important for economic growth because they are better positioned to support businesses, households, and investment.

“Strong bank profitability is generally a positive sign for the economy and an indicator of a healthy, resilient banking sector,” Mr Mkwawa said. However, he noted that bank earnings are also influenced by lending rates, transaction fees and commissions, which directly affect customers.

“Although bank profits are driven by multiple income streams, high transaction fees and lending rates contribute to the profitability of banks in Tanzania,” he said.

Mr Mkwawa said sustainable growth should go together with greater financial inclusion, competitive pricing, innovation and customer-focused products.

 The affordability debate comes as borrowing costs remain a key consideration for customers. The overall lending rate in Tanzania stood at 15.32 percent.

Loans remain the biggest profit driver

The country’s largest lenders dominated interest earnings, reflecting their bigger loan portfolios and market presence.

CRDB generated the highest interest income at Sh1.17 trillion, followed by NMB with Sh886.7 billion, NBC at Sh263.4 billion and Azania Bank at Sh230.8 billion.

Azania Bank posted the strongest increase, rising 62.6 percent year-on-year. It was followed by Equity Bank, whose interest income grew by 44.2 percent, CRDB at 29.4 percent, TCB at 25.5 percent and Exim Bank at 19.4 percent.

The increase in lending income translated into higher profits, with CRDB reporting the highest net profit at Sh416.9 billion, followed by NMB at Sh405.8 billion and NBC at Sh87.3 billion.

CRDB Group chief executive officer and managing director Dr Abdulmajid Nsekela said the bank’s results reflected continued investment in digital innovation, customer confidence and a diversified business strategy.

“Our performance reflects balanced and diversified growth across the business. Interest income increased by more than 30 percent to Sh1.18 trillion, while non-interest income rose to Sh401 billion, driven by higher transaction volumes, continued growth in fees and commissions and increasing adoption of our digital banking solutions,” Dr Nsekela said.

NMB recorded the highest non-interest income at Sh662.2 billion, followed by CRDB at Sh400.7 billion, NBC at Sh87.3 billion and Stanbic at Sh74.3 billion.

Equity Bank recorded the strongest growth in non-interest income, which surged by 93.2 percent, followed by DTB at 66 percent and I&M Bank at 63.6 percent.

NBC Bank managing director Mr Theobald Sabi said the bank’s growth was supported by lending to productive sectors including small businesses, agriculture and salaried customers.

“Our lending growth was broad-based, led by SMEs, MSMEs, agriculture, personal banking, and salaried customers—segments that are central to Tanzania’s economic growth,” Mr Sabi said.

He said the bank’s approach focused on expanding access rather than increasing customer costs. “At NBC, we believe sustainable growth comes from serving more customers, not charging them more,” he said.

Mr Sabi said NBC does not charge monthly account maintenance fees, while customers pay only for services they use.

He added that the bank continues investing in digital platforms, and network of banking agents. “As digital adoption grows, our focus is to deepen customer relationships and increase customer activity across our ecosystem. That is how we deliver sustainable growth while keeping banking accessible and affordable,” he said.

Big banks continue to dominate

Despite stronger growth among smaller lenders, Tanzania’s banking industry remains concentrated among a few major players. CRDB and NMB alone accounted for about 62 percent of combined profits, generating more than Sh822 billion between them. Including NBC, the top three banks controlled nearly 69 percent of total profits, while the top five lenders—CRDB, NMB, NBC, Stanbic and Exim—accounted for about 76 percent of earnings among the sampled banks.

Equity Bank’s net profit more than doubled to Sh43.3 billion, while DTB, Azania Bank and People’s Bank of Zanzibar also recorded strong earnings growth.