MICROCAPITAL STORY: Tanzanian Government Will Bar Kenya and Uganda from Participating in National Microfinance Bank Initial Public Offering Worth USD 55m

The Government of Tanzania will sell a 21 percent stake in National Microfinance Bank (NMB), valued at USD 55m, starting August 18th. The Tanzanian Government will bar members of other countries, including Kenya and Uganda, from participating in the initial public offering (IPO), apparently violating the East African Customs Management Act.

Laws such as the East African Customs Management Act, which says that residents of three countries must be treated as locals in investment opportunities, are designed to increase financial integration in the region. According to Business Daily Africa, the restrictions set by the Tanzanian Government are seen as a form of currency control to limit the country’s foreign exchange risks. The Tanzanian Government, unlike Kenya and Uganda, still limits movements of currencies across borders to protect the value of their currency, limiting possible financial integration.

Despite the fact that these restrictions appear to violate regional laws and differ significantly from the practices of neighboring countries, local investment bankers do believe that the limitations may be in the best interest of Tanzania. Suntra Investment Bank chief executive James Murigu, said “When you are small, you need to keep all the wealth in the country. That is why Tanzania must have decided to lock out foreigners.”

The decision to exclude foreigners from the NMB IPO comes after Tanzania individuals and corporations participated in the Stanbic Uganda IPO, a record breaking IPO in Uganda where USD 39m was offered. The Tanzania Government also recently declined an offer to allow its citizens and companies to participate in the Safricom IPO in Kenya, which raised USD 801m. The discrepancies between the policies of the East African countries could exacerbate already the “uneasy” customs union relationship.

In the IPO, which has been delayed for over a year, the Government of Tanzania will sell 21 percent of its 51 percent stake in NMB. The 105 million shares will be sold at TZS 600 (USD .52) each and are expected to bring in TZS 63b (USD 55m). 5 percent of the total bank shares will be sold to bank employees and the remaining 16 percent of the available equity will be divided between Ugandan individuals and companies owned by locals, with 80 percent of those available shares going directly to individuals.

According to Mrs Edwina Lupembe, a government official, the IPO is an “important opportunity” for Tanzanians. Some argue, however, that the initial share price violates the policies of the Dar es Salaam Stock Exchange because the price should have been capped at TZS 500 (USD .43) to allow more individuals to participate. George Fumbuka, chief executive officer of Core Securities, believes that the NMB, which will be the eleventh listed company, will have the largest IPO in the history of the Tanzanian stock market.

National Microfinance Bank, which has over 100 branches, offers a wide array of financial services to the government, corporations and people on all levels of the economic ladder. NMB microfinance products include loans, savings, and ATM access. The microfinance loans range from TZS 50,000 (USD 43.7) to TZS 5,000,000 (USD 4,370) and repayments are made on a monthly basis for one year.

According to its website, National Microfinance Bank is currently owned by the Government of Tanzania (51 percent), Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (RABO Bank) (34.9 percent), National Investment Corporation LTD (NICO) (6.6 percent), Exim Bank Tanzania (5.8 percent), and the Tanzania Chambers of Commerce Industries and Agriculture (TCCIA) (1.7 percent). Privatization of the bank began in 2005 when the Government sold a 49 percent stake to RABO Bank. An annual report was not available on the NMB website, nor is NMB listed on MIX Market, the Microfinance Information eXchange. Please refer to these previous MicroCapital stories to learn more about the privatization of NMB and the delay in the IPO.

By Greg Casey, Research Assistant

Additional Resources:

Microfinance Gateway: “Tanzania Bars Kenya, Uganda from Participating in MFI IPO”

Business Daily: “Tanzania bars foreigners from its hottest public share sale”

National Microfinance Bank: Home

NMB: Shareholder Information

NMB: History

National Investments Company Ltd: Home

Daily News: Sale of NMB shares start Aug. 18

Reuters: “UPDATE 2-Tanzania to float 21 pct in NMBank for $54 mln”

The Citizen: “NMB’s Initial Public Offer set for August“

Oanda.com: FX Converter