How cooperative bank sets to transform agriculture

THE imminent launch of the National Cooperative Bank marks a significant turning point in Tanzania’s rural financial landscape, offering a long-awaited solution to structural barriers that have prevented smallholder farmers from achieving their full economic potential.

Set to commence official operations on 28 April, the bank is being introduced not as a rival to existing financial institutions but as a complementary player focusing on a persistently underserved group—farmers and cooperatives located in remote and often neglected regions.

With initial branches in Dodoma, Mtwara, Kilimanjaro and Tabora, the bank will utilise all registered cooperatives as agents, capitalising on the country’s long-established cooperative network.

This decentralised model is expected to significantly expand financial inclusion across rural Tanzania.

Agriculture Minister Hussein Bashe described the creation of the bank as a deliberate intervention aimed at addressing systemic inefficiencies in rural finance.

Commercial banks have traditionally refrained from lending to smallholder farmers, citing reasons such as high credit risk and lack of collateral.

In contrast, the National Cooperative Bank is tailored specifically to the unique needs of rural communities, with a strong focus on affordable credit and improved governance within cooperatives, enabled by digital solutions.

With an initial capital base of 55bn/- the bank is built upon a dual objective: achieving financial sustainability while delivering social impact.

Its ownership structure—51 per cent held by cooperative unions and 49 per cent by individual investors—highlights its grassroots orientation while also allowing room for strategic investment and expansion.

The integration of digital banking platforms is a particularly noteworthy element of the bank’s governance strategy.

For years, inefficiencies and irregularities plagued cooperatives due to reliance on manual bookkeeping. Through digitisation, the bank aims to enhance transparency, minimise corruption and restore confidence in the cooperative system.

According to Mr Collins Nyakunga, Deputy Registrar of the Tanzania Cooperative Development Commission, the use of technology goes beyond operational efficiency; it also serves as a reputational safeguard.

By streamlining processes and enforcing accountability, the bank seeks to enhance the credibility of cooperatives in the eyes of potential financial partners and regulators. Initial reactions from the farming community have been encouraging.

Since its soft launch in October 2023, the bank has issued loans exceeding 18bn/-, maintaining a non-performing loan ratio of less than three per cent.

This performance metric, while early, suggests cautious optimism about the institution’s long-term sustainability.

Interim Board Chair, Associate Professor Gervas Machimu, emphasised that the bank’s purpose extends far beyond the provision of credit.

“This is about more than just loans,” he said.

“It’s about educating members, building trust and promoting development that is driven by communities themselves.”

The bank’s formation represents the culmination of experience gained through regional cooperative banking initiatives, particularly those in Kilimanjaro and Tandahimba.

By merging these local models into a cohesive national institution and establishing its headquarters in Dodoma, the National Cooperative Bank embodies both continuity and innovation.

It symbolises a strategic consolidation of knowledge, infrastructure and cooperative ideals.

As the official inauguration approaches, there is mounting consensus among government officials, cooperative experts and civil society actors that the bank could act as a linchpin in agricultural development.

Its emphasis on locally driven governance, technological integration and financial inclusion could help tackle some of the most persistent challenges in rural Tanzania, including lack of access to reliable credit, inadequate financial literacy and weak market linkages.

However, much of the bank’s potential hinges on its ability to stay grounded in the communities it serves.

This means listening to farmers, adapting financial products to seasonal realities and continuing to improve governance at the cooperative level.

As the institution grows, it will also need to build partnerships with other development actors—including NGOs, government programmes and the private sector—to maximise its outreach and impact.

Moreover, sustaining the bank’s momentum will require ongoing policy support, investment in digital infrastructure and continued efforts to strengthen cooperative societies themselves.

Capacity building, especially for cooperative leaders and staff, will be essential in ensuring that the institution does not replicate the inefficiencies of past cooperative ventures.

If successful, the bank could become a model for inclusive rural finance, not only in Tanzania but across the region.

Its blend of community ownership, technological advancement and social purpose offers a compelling blueprint for how finance can be structured to serve the needs of the many rather than the few.

As Tanzania continues to prioritise agricultural development within its broader economic agenda, the National Cooperative Bank could prove to be one of its most transformative innovations—anchoring a new era of financial empowerment for the country’s farmers.