Friday, May 14, 2021

Tanzania’s NMB ready to participate in banking sector consolidation

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NAIROBI (Reuters) – National Microfinance Bank (NMB), Tanzania’s biggest bank by market capitalisation, is ready to participate in a needed consolidation of Tanzania’s fragmented banking sector, its chief executive said on Thursday.

Tanzania’s banking sector, hit by bad loans and low lending, would be healthier if smaller banks were taken over by larger ones, Ineke Bussemaker told Reuters.

The East African nation has about 40 licensed banks, but the sector is dominated by a handful of big lenders.

“If there is a coordinated effort to do a consolidation in the banking sector, of course NMB will play a role,” Bussemaker said in a phone interview from Dar es Salaam.

Netherlands-based Rabobank Group is NMB’s biggest shareholder with a 34.9 percent stake, while the Tanzanian government owns 31.9 percent.

A spike in non-performing loans over the past two years has hit local bank profits and choked off new lending to the private sector.

“There are a number of small banks that are struggling with a relatively small capital base. I can foresee some consolidation in the sector,” Bussemaker said.

Bad debts as a proportion of total bank loans rose to nearly 12 percent in December, central bank data showed.

The International Monetary Fund (IMF) has urged the government to tackle bad loans to reduce financial sector vulnerabilities and revive credit growth.

Five Tanzanian banks had their licences revoked in January due to under-capitalisation.

Tanzanian President John Magufuli said last month his government will not bail out struggling banks and that it was better to have a few viable banks than dozens of struggling ones.

NMB posted a 37 percent decline in profits after tax in 2017. Bussemaker attributed this almost entirely to a much larger provision for loan losses, of 131 billion shillings compared with 31 billion the previous year.

She said the government’s decision to fire almost 10,000 civil servants in 2017, some of whom had “unsecured personal facilities with NMB” and a declining economic environment contributed to the rise in bad loans.

Magufuli took office in 2015 pledging to reform an economy hobbled by red tape and corruption and boost infrastructure.

The president, nicknamed “the Bulldozer”, is criticised by investors for what they see as arbitrary new policies and regulations that have slowed foreign direct investment.

The IMF says that although the government’s official data shows strong macroeconomic performance, other data “suggests much weaker economic activity”. The government said this month that Tanzania’s economy grew by around 7.1 percent last year.

($1 = 2,261.0000 Tanzanian shillings)

Reporting by Omar Mohammed; Editing by Maggie Fick and Adrian Croft

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