MICROCAPITAL BRIEF: Government Policy Moves BancABC, CRDB, NMB to Cut Interest Rates on Loans in Tanzania

Tanzania’s government recently implemented the following measures with the goal of reducing customer borrowing costs: (1) cutting the Bank of Tanzania’s short-term rates on loans to banks to 6.89 percent; (2) lowering the longer-term discount rate to 9 percent; (3) reducing banks’ minimum deposit reserve requirement to 8 percent; (4) creating a credit reference system; and (5) “paying…audited debts to reduce non-performing loans.” In a recent speech, the country’s Deputy Minister for Finance and Planning, Dr Ashatu Kijaji, reportedly stated that the Cooperative Rural Development Bank (CRDB), the National Microfinance Bank (NMB) and Botswana-based BancABC have lowered their interest rates in response. For example, CRDB has cut the interest rate for salaried workers’ personal loans from 22 to 16 percent. NMB has reduced its interest rate for salaried workers from 21 to 17 percent. NMB also dropped the rate on its loans to entrepreneurs from 23 percent to 21 percent.

Established in 1996, CRDB is a commercial bank in Tanzania that serves individuals as well as small, medium-sized and corporate entities via 181 branches and online. As of March 2018, it reported total assets of TZS 5.9 trillion (USD 2.6 billion), customer deposits of TZS 4.3 trillion (USD 1.9 billion) and outstanding loans of TZS 2.3 trillion (USD 1.2 billion). For the year 2017, the company reported return on equity (ROE) of 4.9 percent and return on assets (ROA) of 0.9 percent.

NMB, which was created by government decree in 1997, provides payment, savings and lending services to 2.5 million customers via 200 branches covering 98 percent of Tanzania’s districts as of December 2017. As of the same month, NMB reported total assets of TZS 5.5 trillion (USD 2.4 billion), customer deposits of TZS 4.2 trillion (USD 1.8 billion) and gross loans to customers of TZS 2.9 trillion (USD 1.3 billion). For the calendar year, the company reported ROE of 12 percent and ROA of 2 percent.

BancABC is a Botswana-based bank that was formed by the 1997 merger of First Merchant Bank and Heritage Investment Bank. As of 2018, it operates in six southern African countries and is owned by ABC Holdings Limited of Botswana. Atlas Mara Limited, a British Virgin Island-based holding company that holds equity positions in several banks in southern Africa, acquired ABC Holdings in 2014 for USD 131 million. As of December 2017, Atlas Mara’s banks report aggregate total assets of USD 3.1 billion, customer deposits of USD 1.9 billion and loans outstanding of USD 1.3 billion. They serve approximately 2.4 million customers and report ROE of 5.6 percent and ROA of 1.4 percent for the year 2017.

Created in 1992, the Bank of Tanzania is the country’s central bank. It seeks to wield monetary policy to create price stability through instruments such as refinancing policy, minimum reserve policy, open market policy and foreign exchange interventions.

By Nicholas Galimberti, Research Associate

Sources and Additional Resources

The Citizen article
http://www.thecitizen.co.tz/News/1840340-4588466-24cdjsz/index.html

CRDB annual report
https://crdbbank.co.tz/wp-content/uploads/2018/06/CRDB-2017-Annual-Report.pdf

CRDB financials
https://crdbbank.co.tz/wp-content/uploads/2018/05/Financials-Report-as-at-31st-March-2018.pdf

NMB background
https://www.nmbbank.co.tz/about-us/nmb-at-a-glance/history

NMB financials
https://www.nmbbank.co.tz/investor-relations-nmb/financial-and-regulatory-reports/annual-reports

Atlas Mara annual report
http://atlasmara.com/media/1334/2017-afs.pdf

MicroCapital article; November 24, 2014; European Investment Bank (EIB) Loans $24.8m to Cooperative Rural Development Bank (CRDB) of Tanzania, Announces $6.2m for Technical Assistance Programmes in East Africa
https://www.microcapital.org/microcapital-brief-european-investment-bank-eib-loans-24-8m-to-cooperative-rural-development-bank-crdb-of-tanzania-announces-6-2m-for-technical-assistance-programmes-in-east-africa/

MicroCapital article; September 13, 2016; Tanzania’s National Microfinance Bank (NMB) Launches AgriBiashara to Bolster Agricultural Value Chains; Wajibu to Increase Financial Literacy, Youth Savings
https://www.microcapital.org/microcapital-brief-tanzanias-national-microfinance-bank-nmb-launches-agribiashara-to-bolster-agricultural-value-chains-wajibu-to-increase-financial-literacy-youth-savings/

MicroCapital article; April 9, 2012; BancABC Zimbabwe to Launch Microfinance, ABC Holdings Plans to Raise $50m in Capital
https://www.microcapital.org/microcapital-brief-bancabc-zimbabwe-to-launch-microfinance-abc-holdings-plans-to-raise-50m-in-capital/

MicroCapital article; March 21, 2013; Bank of Tanzania (BOT) Licenses Dunn & Bradstreet, CreditInfo Tanzania as Credit Bureaus
https://www.microcapital.org/microcapital-brief-bank-of-tanzania-bot-licenses-dunn-bradstreet-creditinfo-tanzania-as-credit-bureaus/