How govt propelled new banking industry profitability bar

TANZANIA’S banking industry has demonstrated resilience by effectively fulfilling its role as a key liquidity provider for the economy, thanks to the government’s concerted efforts in creating a friendly business environment for building a robust sector.

Despite the unfavourable global circumstances brought by high inflation, the war in Ukraine and Covid-19, the country’s banking sector has continued to provide the needed boost to the economy.

The government’s move to make an impactful banking sector is witnessed by the high private sector credit that grew by 22.6 per cent in the year ending December last year, compared to 7.8 per cent in the previous year.

The latest Bank of Tanzania (BoT) monthly economic report for December attributes the high private sector lending to improved economic activity and the impact of monetary and fiscal policies executed to limit adverse spillover effects of the global supply shocks.

According to the central bank report, agriculture which employs over 70 per cent of the country’s workforce recorded the highest credit growth of 54.1 per cent, thanks to the monetary policy measures rolled out in July 2021 to support cost-effective credit intermediation to agriculture and agri-business activities.

One of the success stories of the government’s efforts in putting the enabling business environment in the banking sector is NMB Bank, the largest lender in the country that has managed to raise the banking industry profitability bar to a historic record.

The bank’s profit after tax rose by 47 per cent to 429bn/- last year, compared to 290bn/- recorded in the previous year.

The Bank’s Chief Executive Officer Ms Ruth Zaipuna said the profit increase is leading to the new biggest historic profit to have ever been made in Tanzania’s banking sector.

“The extraordinary performance was the outcome of several factors, including a business-friendly environment put in place by the government’s supportive policies,” she said.

From the new historic net profit, the bank has allocated a whopping 6.2bn/- for financing impactful social investments namely education, to better health services, address environmental issues and support the climate change agenda.

She said the record 6.2bn/- for social investments was an increase of over 114 per cent compared to the 2.9bn/- the bank shared with communities last year.

“Due to the impressive performance, together with the pivotal position of NMB in the national economy and the Tanzanian society, the bank continues to be the sectoral champion of addressing community challenges,” Ms Zaipuna said.

Also, the new profit records mean the dividend paid to the government shares as one of the banks’ shareholders with 31.8 per cent will increase as well as the taxes paid to the government.

For example, in line with the county’s sustainable growth, the bank’s tax payment to the government has consistently grown, and as a result, the Bank was recognised by the Tanzania Revenue Authority (TRA) as the overall winner of the 2022 taxpayers’ awards, having paid different taxes.

Ms Zaipuna said this milestone financial performance and social impact commitment, underscores the bank’s focus towards driving Tanzania’s socio-economic development agenda as well as cementing its market leadership position.

The NMB Board Chairman Dr Edwin Mhede said this time around the CSR budget has been allocated an additional 2bn/- because of the sensitivity NMB accords to environmental matters and its consciousness of climate change.

The policy of the bank is to spend one per cent of its net income to finance social programmes.

Speaking earlier, Chief Finance Officer Mr Juma Kimori said the financials of the bank have been mouthwatering since 2018 with the balance sheet posting tremendous growth during the period.

He said total assets have now peaked over 10tri/- from 5.5tri/- four years ago with the deposits base expanding to 7.5tri/- from 4.2tri/- in just three years.

Lending, which mostly benefited the corporate sector, individual borrowers and financed strategic sectors such as farming and general enterprises (SMEs), topped 6tri/- last year compared to the 3.2tri/- loans extended in 2018.

“Our balance sheet remains robust and the shareholders’ funds, which have now reached 1.6tri/- means a lot in terms of maintaining the superb performance we have had in recent years, boosting lending and sustaining profitability,” Mr Kimori emphasised.



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