TanzaniaInvest interviewed Abdi Mohamed, Chief Executive Officer and Managing Director until April 2023 of ABSA Bank Tanzania, among the 10 largest banks in the country and part of the South African financial services group ABSA Group with a direct presence in East Africa and in 10 African countries.
Abdi shares the bank’s strategy to expand its role in the socio-economic development of Tanzania and shares some of the latest digital initiatives to ease access to capital and increase financial inclusion.
ABSA is present in several countries in Africa. What is the relevance of Tanzania within the ABSA group’s operations in the continent?
Tanzania is one the fastest growing economies today and with a very young population and a promising good future. ABSA, as a large pan African banking group, sees Tanzania as one of the strategic operations to grow.
We have been in this market since 2000 and we have played a crucial role in this economy, having extended financing to entities in both the public and private sectors.
What is your overall strategy in Tanzania?
Based on our overall mission to “bring possibilities to life” we have continued to partner with our key stakeholders to play an important role in the Tanzania market.
We see great potential in the market both in retail and wholesale banking and have a clear growth strategy in both.
We see great potential in the market both in retail and wholesale banking and have a clear growth strategy in both.
Our strategy is underpinned by customer centricity, digital innovation, great products, and strong relationship management. We pride ourselves on understanding the market deeply and addressing market needs with appropriate solutions.
After a challenging 2020 when the Covid-19 pandemic severely affected the Tanzanian economy and its banking sector experienced losses, in 2021 many banks-among which ABSA-have shown record profits. How do you explain such a fast recovery?
The Covid-19 response in Tanzania has been a multi-sectoral effort led by the government of Tanzania.
In addition to the health sector response to the pandemic, the Bank of Tanzania (BOT), working closely with the financial sector participants, developed a Covid-19 response that ensured stability and recovery of the economy.
Globally the fast economic recovery from the pandemic has largely been fuelled by the vaccination which opened the door for many economic activities and for the global supply chain to open up. Tourism has started to pick albeit at a slow pace.
Additionally, some important sectors in the economy such as food production and agriculture continued to grow during this period.
What were the drivers of ABSA’s significant growth in profit before tax (PBT)?
PBT grew significantly by +210% year on year, from TZS 4 bln in 2020 to TZS 13 bln in 2021, demonstrating recovery from the effect of the Covid-19 pandemic in 2020.
ABSA Tanzania profit before tax grew significantly by +210% year on year, from TZS 4 bln in 2020 to TZS 13 bln in 2021,
The increase in profits is mainly attributed to the growth in Net Interest Income (NII) and Net Fees and commission income from a revenue perspective coupled with decreased loan impairment charges and decreased operating expenses.
ABSA Tanzania focuses on corporate and investment banking and private banking to individuals. However, you are expanding into microfinance as part of your commitment to financial inclusion. What are your competitive advantages in a market crowded with 48 banks?
Firstly, we view financial inclusion as an area in which we should all participate as the overall economic impact of greater inclusion is well understood.
Indeed, ABSA is actively participating in the SME sector as well as micro-businesses which form a very important part of the Tanzania economy.
We pride ourselves on fast, superior, and high-quality service, enabled by technology and competitive products and services.
As we increase our effort in greater financial inclusion, we have leveraged strategic partnerships with telecom companies and fintech players to deliver a superior proposition.
We have leveraged strategic partnerships with telecom companies and fintech players to deliver a superior proposition.
President Samia Suluhu Hassan made it clear that unlocking credit to the private sector-particularly to SMEs-is key to strong economic growth. However, access to credit remains a challenge with interest rates averaging 16%. Simultaneously, high ratios of NPLs affect most banks thus keeping credit risk high. What is your view of the above?
ABSA has played a leading role as a member of the Tanzania Bankers Association (TBA) to ensure that the objective of expanding credit to the private sector is achieved.
With the recent measures announced by BOT, we have seen efforts in the industry to address the cost of credit, especially to key market sectors such as the SME and agri-sectors. ABSA on its part has taken important steps in this regard.
What does it take to unlock credit to Tanzania’s productive sectors?
It requires a full multi-sectoral effort to address the various factors that drive the cost of credit. Great progress has been made in some key areas such as addressing the cost of funds and we believe that the journey will continue through positive collaboration among stakeholders as we continue to drive the rates down.
What is ABSA’s strategy in this regard?
ABSA has a unique customer proposition of the sectors that we play. We have finalized our SME strategy and we have started rolling out some of the exciting products such as unsecured bid bonds for clients who have won tenders but have no funds to execute.
We have finalized our SME strategy and we have started rolling out some of the exciting products.
We are also working with BOT to ensure that we also tap into the financing available to extend credit to our agriculture customers at lower rates.
What are your ambitions in terms of growth and market share, and what are the main challenges ahead?
We are currently one of the top 10 banks in Tanzania in terms of balance sheet size. Our medium-term plan aims to double our market share in four years. We believe that focusing on customer experience and digital transformation will give us the necessary edge.
The expectation of our key stakeholders is to deliver growth with quality and ensure the quality of our asset book remains within expected parameters and that non-performing loans remain within expectation.
A few of the exciting things we have launched recently are the interactive voice response system (IVR), the deployment of customer experience executives in all our branches, instant customer feedback via QR code, ABSA virtual assistant (chatbot), digital/innovation lab to spearhead innovation, and Whatsapp-based automated branch engagement system.
We have also revamped the service guarantee for DR card Issuance–all DR cards are issued within 20 minutes, and revamped the account opening process.
Which role do you aim to play in the socio-economic development of Tanzania?
ABSA at the core is an active force for good. Apart from extending financing to our clients, we play a crucial role in financial inclusion by reaching the millions using technology such as our recent Mobile Lending Partnership with JUMO and Tigo Tanzania, and we are looking to increase such partnerships.
Apart from extending financing to our clients, we play a crucial role in financial inclusion.
And recently, through a partnership with Startup Reseau, we supported 10 young entrepreneurs (18–30 years old) who have a business idea to solve a local and/or a social problem using technology. We awarded the first winner with a prize of startup capital worth USD 5,000.
We have also undergone a number of initiatives to support the efforts coordinated by the government to tackle the impact of Covid-19.
