Why own credit rating agency matters for Tanzania


What you need to know:

  • ICRA Rating Agency Limited is Tanzania’s first credit rating agency, opening up a new chapter for the country’s financial markets.  The Citizen’s Josephine Christopher sat down with the ICRA-Tanzania director Mr Hassan Mansur to delve into the significance of this milestone, the agency’s strategic partnerships, and the exciting opportunities it presents for Tanzania’s economic growth.  Read on:

Question: In September 2023, you were accredited as the first credit rating agency in Tanzania. How does this milestone benefit Tanzania’s financial sector, and what opportunities does it unlock for local businesses and investors?

Answer: Before ICRA there wasn’t any single Credit Rating agency based inside the country with its own office and permanent staff.

Now Tanzanian microfinances, insurance companies, and very important banks are having this service within the country.

At present only two banks are rated by credit rating agencies.

Since credit ratings play a pivotal role in the financial sector, now Tanzanian entities can reach out to international markets with the help of ICRA services.

ICRA has forged partnerships with key entities in Tanzania, How do these collaborations enhance ICRA’s ability to support the Tanzanian market, and what specific initiatives are planned to foster financial growth and stability in the country?

As a Tanzanian entity, ICRA has partnered with key local entities such as the Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA), Tanzania Association of Microfinance Institutions (TAMFI), Credit Info, and Tanzania Institute of Bankers (TIOB).

Through TCCIA and TAMFI, potential corporations and microfinance institutions can reach out to ICRA through their respective platforms.

By utilizing ICRA credit ratings and reports, these organisations can approach both domestic and international banks and investors to receive fair evaluations for debt and equity financing.

ICRA, in collaboration with TIOB, aims to educate and provide technical knowledge through physical events and webinars on various topics related to the financial sector.

Additionally, the events cover other important topics such as the syndicated loan market, environmental, social, and governance (ESG) rating and its impact, and how it can help lenders and borrowers access low-cost green funding.

A fair, independent credit rating can also help financial institutions reach out to international financial institutions in establishing Relationship Management Application (RMA) keys, trade advising, and credit lines to facilitate their asset clients.

ICRA has also partnered with Credit Info, a reputable and well-known credit bureau.

ICRA does not base its credit reports and ratings on unverified publicly available information.

Instead, ICRA requires information directly from the issuer or reliable sources like credit bureau reports and other government-issued information.

This is one of ICRA’s key practices that adds value to its reports and earns the trust of lenders and international financial institutions when making their decisions.

With the growing interest from international investors, can you elaborate on the specific investment opportunities that ICRA sees in Tanzania?

Investors from both international and regional markets have expressed interest in investing in African businesses, especially Tanzanian financial and non-financial institutions.

ICRA Credit has developed credible methodologies that have been well-received by investors and financial institutions based in Europe and the Gulf Cooperation Council (GCC) countries.

These investors are open to receiving ICRA credit rating reports to facilitate their initial assessment and prompt decision-making.

How does ICRA intend to attract and facilitate investment into the Tanzanian market while ensuring transparency and risk management?

Investors are keen to invest in Tanzanian institutions.

However, due to the lack of proper information and understanding of local risks, they are not able to evaluate the credit risk and local markets effectively.

ICRA, being a rating agency with a local presence, has unique advantages in terms of data collection practices, collaborations with associations and bureaus to obtain authentic information, and credit assessment and rating methodologies that are widely accepted globally.

This sets ICRA apart from other rating agencies in similar categories.

Mr Hassan Mansur, ICRA- Tanzania Director. PHOTO | COURTESY

How does ICRA tailor its credit rating methodologies to the unique characteristics of the Tanzanian market, and what measures are in place to ensure the reliability and relevance of ratings for Tanzanian businesses and investors?

ICRA has a local presence with skilled staff who understand the local market practices, risks, and opportunities.

Combining local expertise with the centralized credit department’s international experience provides investors with the comfort they need to make their decisions.

ICRA issues country-level credit ratings, meaning that Tanzanian entities are compared within the Tanzanian market.

This means that Tanzanian banks are assessed and reviewed within the Tanzanian banking sector.

Thus, investors get to know the standing of the bank within the Tanzanian market.

Looking ahead, what are the key trends and opportunities that ICRA anticipates in Tanzania’s financial landscape, and how does the agency plan to leverage its expertise to support the country’s growth agenda?

Credit rating plays a pivotal role in the financial sector.

 It reduces the turnaround time of decision-making and provides authentic information to decision-makers.

Credit rating reports of Tanzanian institutions, which are not available for investors and international financial institutions, will help them understand the risks and opportunities.

Credit rating reports will also help Tanzanian entities assess themselves in the eyes of investors.

 They can rectify their weaknesses and utilise their strengths to provide timely services to corporations and other non-financial institutions.

Banks are the backbone of the country’s ecosystem, and corporations are the main drivers of the economy.

 As credit ratings are not alternatives to internal risk assessments, they work as supplements and help make decisions with reduced TAT, which can bring foreign investments into the country and also give a positive image of Tanzanian entities in the international markets.