The Tanzania Finance and Economic Affairs ministry has recently confirmed that Kenya’s First Community Bank as well as two other Islamic banks, from Malaysia and the Sudan, have expressed interest in opening business in the Tanzania banking sector.
According to a report by The Guardian, Tanzania’s minister of Finance and Economic Affairs minister, Mustapha Mkulo, has announced that the government is willing provide these banks with operating licenses and has, in fact, already begun processing their applications.
First Community Bank, which first opened its operations in Kenya in the spring of 2008, is one of the country’s first Islamic banks and, according to its chief executive officer Nathif Adam, after exceeding its operating expectations in Kenya, it has expanded its goal to include the opening of new operations abroad.
“Within the next year to one-and-half,” said Mr. Adam, “we should be seeing our first branch outside Kenya.”
Mr. Adam went on to explain that the target group for the bank is set to include neighboring countries such as Uganda and Tanzania and, in fact, the bank has already held talks with regulators in these countries.
In addition, Mr. Adam announced plans to open six more branches within the country by the end of the year in order to accommodate the growing needs of the country’s Muslim community.
The Guardian has reported the opinion of economic experts, who have said that the establishment of these banks will likely bring relief to customers who have been complaining about the high interest rates that are charged by the country’s banking sector, which have made it difficult for the both the business community and the general population, who rely on loans from the banks in order to operate and run their respective ventures.
Currently, the borrowing interest rates in the local market stand at between 18 and 26 percent, with deposit rates standing at between 4 and 12 percent.
These same experts have said that the introduction of additional banks in the country would help to regulate competition in the banking sector, which would result in banks being forced to reduce their interest rates and give customers the opportunity to do direct investment business with the banks.
According to Mr. Adam, as a result of its success, rather than recovering its initial investment after three years of
operations, the bank is now anticipating that it will be able to break even during its second year of operations, especially following the openings of the new branches both within the country and abroad.