TanzaniaInvest interviewed Obedi Laiser, Chief Executive Officer and Managing Director 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.
Obedi shares the bank’s strategy to expand its role in the socio-economic development of Tanzania and its ambition to be among the top five banks in Tanzania by 2025.
He also shares some of the bank’s initiatives to ease access to capital and increase financial inclusion.
TanzaniaInvest: What is the relevance of the Tanzanian operation within the group’s operation in Africa?
Obedi Laiser: ABSA Bank has launched a new purpose statement, “Empowering Africa’s tomorrow, together – one story at a time.” We exist because of Africa, and Tanzania is a key player in the East African and African economies. Tanzania’s socio and macroeconomic growth indicators, such as GDP growth, national debt resilience, FX reserve, inflation levels and recovery from COVID, are among the best in the region and continent.
“Tanzania’s socio and macroeconomic growth indicators, such as GDP growth, national debt resilience, FX reserve, inflation levels and recovery from COVID, are among the best in the region and continent.”
The government has taken measures to improve the business environment, and ABSA Bank Tanzania has seen significant growth, with revenue increasing by 40% last year and 30% in Q1 this year. So Tanzania as a country and market is very relevant to Absa Group operations and will be doing all we can to continue to contribute more effectively to the continued socio-economic progress of the country.
TanzaniaInvest: What are the drivers of ABSA Bank Tanzania’s strong growth?
Obedi Laiser: The growth is primarily driven by the improvement in the economic environment. There is increased demand for credit facilities, particularly in sectors like imports, services (tourism and transportation), and mining. The government’s support for sectors such as agriculture has also contributed to the positive business environment. ABSA Bank Tanzania has witnessed growth in its balance sheet, deposits, and liquidity, which enables them to meet the financing needs of businesses and individuals.
At the bank level we have recently ventured into new products/service lines such as mobile lending, bancassurance, non-spot FX transactions and other risk management products, SMEs segment solutions both on the lending and deposit and enhanced our digital offerings. Through our best-in-class customer experience, we have tapped into our Pan-African franchise capabilities to solutions to our regional and global clients through our entire network which has provided another competitive edge against other players and enabled us to grow faster than the competition.
TanzaniaInvest: With 33 commercial banks in Tanzania, what are the competitive advantages that allow ABSA Bank Tanzania to attract increasing deposits?
Obedi Laiser: ABSA Bank Tanzania operates in diverse sectors, such as oil and gas, transportation, agriculture, telecom and others. We have established relationships with key customers in these sectors and provide banking services to support their operations. Additionally, ABSA Bank Tanzania focuses on customer experience and has a strategy that caters for corporate, business, commercial, and affluent retail clients.
Our corporate clients often have suppliers and vendors, which creates a network of customers who use ABSA Bank’s services through the value chain. We also emphasize digital banking and fintech partnerships to expand our reach and cater to different customer segments. We have significantly improved our capabilities in the trade products, payments space and FX trading by upgrading our platforms to enable customers to make payments and trade FX seamlessly making Absa Bank the preferred primary banking partner for clients.
“We also emphasize digital banking and fintech partnerships to expand our reach and cater to different customer segments.”
TanzaniaInvest: The lending rates in Tanzania have been decreasing, but are still relatively high compared to global average rates. Is it possible to lower these rates?
Obedi Laiser: ABSA Bank Tanzania acknowledges that interest rates have been decreasing over the years. Factors contributing to the decrease include improvements in the policy environment set by the central bank, the cost of funding, and banks’ efforts to offer more affordable rates. ABSA Bank Tanzania has also introduced partnerships with institutions like AGF Africa Guarantee Fund to mitigate credit risks for SMEs and offer lower rates. While rates are gradually coming down, ABSA Bank Tanzania continues to explore ways to make financing more accessible and affordable.
“ABSA Bank Tanzania has also introduced partnerships with institutions like AGF Africa Guarantee Fund to mitigate credit risks for SMEs and offer lower rates.”
TanzaniaInvest: How does ABSA Bank Tanzania manage the risk associated with lending to SMEs while ensuring credit access for this important segment?
Obedi Laiser: ABSA Bank Tanzania has implemented measures to mitigate credit risks while supporting SMEs. We have developed a robust credit scoring system that utilizes data to assess the creditworthiness of customers. Additionally, the partnerships with AGF and others allow us to share the risk between our bank and the fund. We have also built a team of experts and deployed them across our branch network to be closer to these customers with the aim of understanding customer business dynamics and being able to tailor-make credit solutions that suit their needs and circumstances. These efforts enable ABSA Bank Tanzania to provide credit facilities to SMEs at affordable pricing while managing the potential risk of non-performing loans.
TanzaniaInvest: How do technology, fintech, and partnerships with telcos contribute to ABSA Bank Tanzania’s growth and customer reach?
Obedi Laiser: ABSA Bank Tanzania has embraced technology and fintech partnerships to expand its customer base and reach. For example, we have partnered with the e-commerce firm JUMO and Tigo mobile operator to increase the availability of the existing short-term credit with a product dubbed Tigo Nivushe. This is a mobile lending product positioned as a short-term loan option available to Tigo Pesa’s customers and funded by Absa Bank. We continue to explore partnership opportunities as we believe that the partnership model provides the best way to continue to innovate with the best products/services and deploy them faster and at affordable pricing to our customers. In the long term, we are looking at a virtual bank solution that will enable customers to do banking as a lifestyle and not as a product as we believe this is the future of banking.
TanzaniaInvest: What are your objectives for ABSA Bank Tanzania in the next 5 years?
Obedi Laiser: We will pursue growth and return maximisation as our key strategic ambition. In terms of growth, we aim to increase our market share and be among the top five banks in Tanzania by 2025. Currently, we are ranked number seven in terms of revenue and profitability.
“We aim to increase our market share and be among the top five banks in Tanzania by 2025. Currently, we are ranked number seven in terms of revenue and profitability.”
We are optimistic about this goal because of the significant growth we have experienced recently and trust in the strategy that we have developed and are executing. As long as we continue to outpace others in terms of growth, we believe we can catch up and achieve our objective. We are also focusing on expanding our presence in the SME sector, leveraging our branch network, and offering innovative solutions to cater to their needs. We also implement measures to ensure we maintain a clean loan portfolio and avoid non-performing loans through robust credit underwriting practices and adopt efficiency measures through technology and innovation to optimise cost and deliver improved returns to shareholders. All these will be delivered in a manner that lives up to our purpose while adopting environmental, social, and governance (ESG) practices for sustainability.
TanzaniaInvest: How would you describe the current state of Tanzania and its direction?
Obedi Laiser: Tanzania is currently experiencing a progressive phase in its political, economic, and business landscape. The current president has shown a strong commitment to supporting the economy and creating a favourable business environment. The government has implemented policies and incentives to attract investors, ensuring predictability and engagement with both local and foreign stakeholders. There are promising sectors such as the LPG/LNG industry, mining, agriculture, and tourism that present significant investment opportunities.
“There are promising sectors such as the LPG/LNG industry, mining, agriculture, and tourism that present significant investment opportunities. “
The government’s focus on infrastructure development, such as transportation and energy, further enhances the business environment. The new governor of the central bank of Tanzania has also shown a positive and collaborative approach, engaging with the banking sector. Overall, there is a sense of optimism for the future, with expectations of sustained growth and continued support for businesses in Tanzania.
TanzaniaInvest: What role do you see foreign investors and companies playing in Tanzania’s development, and is ABSA Bank targeting them?
Obedi Laiser: Foreign investors and companies have a crucial role to play in Tanzania’s development. We anticipate that Tanzania will continue to receive investments from various industries, especially considering the country’s positive economic outlook and ongoing reforms.
ABSA Bank is definitely targeting foreign investors and companies coming to Tanzania. As a pan-African bank, we have a presence in 12 African countries and representative offices in the United States, Europe (London), and China. Our international network allows us to engage with investors and pitch Tanzania as an attractive investment destination. We have colleagues on the ground who engage with investors and ensure that when they come to Tanzania, we can provide them with the banking services and support they need. Our goal is to establish ABSA as a trusted banking partner for both local and foreign businesses operating in Tanzania.