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Tanzania Investment Bank Interview

TANZANIAINVEST has been interviewing Mr. William A. Mlaki, Managing Director of the Tanzania Investment Bank (TIB), to learn about the Tanzania banking sector and about the role of this bank within such framework.

William Mlaki, Managing Director of the Tanzania Investment Bank

The Tanzania banking sector has a wide range of banks (28), each one with a specific target market to serve. What is the purpose of the Tanzania Investment Bank (TIB)?

William Mlaki – Tanzania Investment Bank: Tanzania Investment Bank’s core objective is to provide finance at the long-term end of the market.

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Such loans assist enterprises in setting up new and expansion projects to increase the productive capacity.

Our main focus is, therefore, to assist in catalyzing economic growth by providing debt finance for investment in corporate and Small and Medium Enterprises (SMEs).

TIB’s financing covers many sectors including manufacturing, agriculture, tourism, construction, etc.

We place special emphasis on projects that are export oriented and on those which utilize local resources.

For example, in agriculture we are supporting the floriculture industry for production of roses for export.

Apart from being an export crop, the plantations in which these roses are produced employ many men and women.

This gives a double advantage, namely employment generation for the local inhabitants and foreign exchange earnings for the country.

Although the bank operates on a commercially sustainable basis, TIB does, at the same time, have a responsibility of contributing to the development of the country in terms of empowering SMEs, increasing employment, and other important socio-economic considerations.

TI: How does the Tanzania Investment Bank’s social responsibility influence its financial performances and long term viability?

WM: We make sure that we operate at a profit, but at the same time make a contribution to development.

{xtypo_quote_right}We make sure that we operate at a profit, but at the same time make a contribution to development.{/xtypo_quote_right}In playing its role TIB selects projects on a viability basis.

The bank carries out risk analysis carefully on each project to which it extends credit, and the pricing of its services is market determined.

TIB does not provide subsidized loans from its ordinary resources but can manage funds on an agency basis for special and specific considerations.

Therefore, its developmental intervention is in the focus of its activities rather than in the risk indexing and pricing.

The bank operates on modern development banking principles by combining the following: development function, financial function, and technological development function.

Capacity of the Tanzania banking sector to finance economic growth

TI: With such a wide array of banks, is the Tanzanian banking sector ready and able to cater to any type of credit required or does the banking sector still have some holes to be filled in?

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WM: There are still some gaps to be filled, especially in rural finance.

One could argue that there is reasonable financial intermediation depth in the urban areas, especially in the country’s major cities.

This is because of the presence of many banks, big and small, in these areas.

The corporate borrowers are normally located in the urban areas and they are adequately serviced by the mainstream banks.

The rural areas, where, in fact, the majority of the population in this country lives, are still highly un-banked.

Part of the problem is the lack of economic infrastructure and education.

The other is the underdeveloped agricultural sector, which is unfortunate because agriculture is the mainstay of the rural population.

Due to these reasons, most commercial banks discern undue risk in financing projects in the rural areas.

Furthermore, the financial requirements for projects in the rural areas are in small amounts which would not attract the intervention of the big, especially multinational, commercial banks.

Seen this way, it is my view that the solution to increased financial intermediation in the rural areas does not lie in trying to convince mainstream commercial banks to take up major stakes there.

This will take time to take root.

Yet the rural population is in dire and urgent need for financing, especially in the sectors of agriculture and SMEs.{xtypo_quote_right}the rural population is in dire and urgent need for financing, especially in the sectors of agriculture and SMEs.{/xtypo_quote_right}

Therefore, we must think about financial intermediation initiatives which are readily appropriate to such special circumstances.

Some of the institutions appropriate for this purpose include community banks, Savings and Credit Cooperative Societies (SACCOS) and various Non-Governmental Organizations (NGOs).

Such institutions find themselves at home in the countryside.

The community banks especially, but SACCOS as well, are local based per excellence in that the stakeholders, who are also the beneficiaries of such banks’ services, are the communities that live around the bank or the SACCOS.

These communities have all the motivation to make their own institutions successful.

In fact, already in the country there are several successful Community banks, SACCOS, and NGOs.

Such institutions operate under set rules and regulations.

They mobilize savings and lend to members.

Development banks are another important factor in the rural transformation and rural development agenda.

In the first, place development banks act as a source of wholesale funding for the rural finance institutions discussed above.

Development banks can, in fact, increase their outreach, not necessarily by opening branches in each and every district in the country, but by providing funding to community banks, SACCOS and NGOs – the specialists of the rural SMEs and micro-finance enterprises.

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In the second place, development banks are able to provide term loans for agricultural development, especially in transforming agriculture by financing irrigation schemes, technological improvements, etc.

TIB has played a role in providing funding to SACCOS and loans to corporate agriculture.

TIB Financial assistance to foreign investors in Tanzania

TI: Does the Tanzania Investment Bank provide financial assistance to foreign investors that may require additional capital to invest in Tanzania?

WB: We hardly provide financial assistance to foreign investors, rather we are ready to provide complementary debt funding.

Apart from the funding component, sometimes foreign investors request our opinion regarding the viability of their project proposals.

{xtypo_quote_right}The benefit foreign investors get by making use of the advice of the Tanzania Investment Bank is that we are a local bank with over 30 years experience in this country.{/xtypo_quote_right}The benefit foreign investors get by making use of the advice of the Tanzania Investment Bank is that we are a local bank with over 30 years experience in this country.

Hence the Tanzania Investment Bank has an added advantage because the bank has intimate knowledge of the Tanzanian market.

TI: To conclude, what is your personal message to international prospective investors looking at Tanzania?

WB: Tanzania is one of the fastest growing countries in Africa in terms of GDP growth.

{xtypo_quote_right}Tanzania is one of the fastest growing countries in Africa in terms of GDP growth.{/xtypo_quote_right}The growth is anchored on a sound macro-economic regime, which the Government has worked so hard over the last decade to build and sustain.

Moreover, Tanzania is a country that is blessed with a lot of natural resources, which are available for tapping into by way of investments.

These include fertile arable land, unmatched tourism endowment, mineral resources and many more.

To cap it off, there is a democratically elected government and a stable political platform.

Tanzania Investment Bank Limited is one of the important players within this social-economic system, with the role of acting as one of the catalysts of a sustainable economic growth regime with attendant social development.

We achieve our objective through development banking.

Our development banking mandate entails the provision of medium and long-term finance to all commercially operated sectors of the Tanzanian economy.

We also extend technical support services to SMEs.

International organizations are welcome to augment this role by joining TIB in its efforts to expand its loan-able capital for this noble purpose.

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