CRDB’s expansion marks milestone for Tanzanian banking

DAR ES SALAAM: CRDB Bank’s recent expansion into the regional and international financial markets marks a significant turning point for Tanzania’s banking sector.

The sector, traditionally dominated by Kenyan banks, shows the regional banking landscape has shifted with CRDB’s entry into Burundi and the Democratic Republic of Congo (DRC) and its plans to venture into Uganda, Comoros and Zambia, and now outside the continent.

This strategic move not only positions CRDB as a pioneer in East Africa but also highlights the country’s growing influence in the regional financial sector.

Alpha Capital Head of Research and Financial Analytics Mr Iman Muhingo underscores the importance of this expansion, noting that CRDB’s footprint in these new markets signifies a substantial Tanzanian presence in the regional banking industry.

“CRDB’s expansion beyond the continent is groundbreaking. As the first East African bank to achieve this milestone, CRDB’s move reflects the Tanzanian government’s efforts to foster investment and enhance the business environment,” Mr Muhingo told Business Standard.

He further emphasised that CRDB’s offshore presence not only attracts foreign investors but also boosts confidence in both the bank and the Tanzanian economy as a whole.

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“Most foreign investors, who prioritise familiarity when investing in developing economies, tend to prefer multinational organisations as their bankers and custodians,” he added.

“This expansion, therefore, positions Tanzanian banks to potentially dominate the regional financial landscape. Last week, the Bank of Tanzania (BoT) issued a No Objection Certificate (NOC) to CRDB for its plans to expand operations beyond Africa, citing the bank’s financial stability and performance.

“BoT gave the go-ahead to invest abroad based on CRDB’s capital and the financial strength reflected in their 2023 financials,” said BoT Governor Dr Emammuel Tutuba.

The central bank move makes the largest lender in the country CRDB to become the first in the history of the BoT but also in the East African region. Last year, CRDB listed on Dar es Salaam Stock Exchange (DSE) had a total assets of 13tri/-, deposits were 8.9tri/-, loans 8.5tri/- and profit after tax 424bn/-.

“This is CRDB’s strategy to seek new markets, deposits and capital from new stakeholders to invest in countries and facilitate financial transactions between Tanzania and trading partner countries,” the Governor said.

Dr Hildebrand Shayo, an economist-cum-investment banker, supports this view, highlighting the broader implications of CRDB’s expansion.

“With the BoT’s approval, CRDB will once more enter into the records of nations promoting banking without borders,” Dr Shayo said.

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He points out that banks operating beyond their home countries are often seen as important contributors to sustainable financial development.

According to Dr Shayo, CRDB’s expansion will facilitate faster economic growth and enhanced welfare in two significant ways, one by bringing much-needed capital, expertise, and new technology to the regions, and by enabling risksharing and diversification, which helps smooth out the effects of domestic economic shocks. However, the economist also cautions about potential risks.

“While risk-sharing can provide substantial benefits, it can also expose the host nations to systemic risks from time to time,” Dr Shayo warned.

Despite these potential challenges, the overall impact of CRDB’s expansion is expected to be positive, contributing to a more competitive banking system and supporting economic growth across the region. CRDB’s regional and international expansion represents a major milestone for the Tanzanian financial sector, enhancing its competitive edge and attracting foreign investment.

“As Tanzanian banks continue to explore opportunities for regional dominance, CRDB’s success sets a precedent for future growth and innovation in the industry,” Dr Shayo said.

CRDB Group CEO and Managing Director Abdulmajid Nsekela told the Business Standard that they hailed the central bank’s decision to trust the largest lender in the country to invest overseas based on their stellar performance over the years.

“We thank the regulator [BoT] for trusting us and granting the certificate based on our strong performance,” Mr Nsekela said.

“This is a preliminary strategy, and once the process is complete, we will inform the public of the country where we will establish the subsidiary”. While international investment is vital, President Samia Suluhu Hassan said that domestic efficiency must be prioritised. “Investment abroad will make more sense if Tanzanians have connections and efficiency in these institutions within the country; we should first show productivity at home,” President Samia said.