Six banks control 60 per cent of the industry market share in Tanzania and this partly explains why lending rates remain high despite falling inflation and deposit interest rates, economists say.
CRDB, National Bank of Commerce (NBC), National Microfinance Bank (NMB), Standard Chartered, Stanbic and Exim are controlling 60 per cent of industry deposits, assets, loans and advances.
And each with a balance sheet in excess of 1.0tri/- based on last year figures. The situation is not healthy to the economy as their dominance leads to low competition seen in lending rates, which remain high despite falling inflation and deposit interest rates. The situation might create monopoly phenomenal since the largest banks are leading others into their decisions.
But worse, the banking industry lacks business segment specialisation. University of Dar es Salaam (UDSM) Senior Economist, Prof Humphrey Moshi, said the tendency was not good as these six tend to determine lending and deposit interest rates movements.
“It is not surprising that the inflation is around five per cent, but lending rates are still hovering around 12 and 17 per cent … while deposit rate are well below ten per cent, thus discoursing savings culture,” said Prof Moshi in an interview.
He said the country lacked a strong public bank that would have competed in the market with the dominant players and this was a result of accepting in wholesale prescriptions on the economy by the Bretton Wood Institutions in the early 1990's.
According to him the institutions advised the government to stifle the public sector in favour of the private sector as the engine of growth. The former had steadily weakened and failed to play the role of regulator for the benefit of the public. He said time had come to revisit the prescriptions by the Bretton Wood institutions - World Bank and International Monetary Fund - on the economy.
“If private sector is the engine of the economy growth then public sector is the wheels of that engine,” Prof Moshi said. “Mistakes were made in 1980s when liberalising financial sector and we sold our banks … imagine NBC was a leading bank and decided to lower lending rate … the rest would follow.
At its peak, NBC controlled 80 per cent of total country deposits. “A strong private sector needs a strong public sector to regulate it, otherwise we will end up like what we are seeing now in mining sector – stealing.”
An economist with TIB Development Bank, Dr Hildebrand Shayo, said he believed banks should embark on business specialisation otherwise the economy is walking toward a dangerous path. “Six banks to control banking sector? This has negative impact on the economy.
The market share should spread out,” Dr Shayo said. He said lack of financial sector business segment specialisations and letting almost all involving into wholesale banking is not a health issue.
“Yes, some banks will do general banking, but specialisation is equally important. He said in the absence of specialisation the market now observed largest banks also doing community, microfinance institutions services. “Large banks are supposed to venture into more specialised value addition medium term financing to stimulate economic growth,” Dr Shayo said.
Other economies have specialised banks deal in construction, infrastructure, real estate, tourism, agriculture, corporate and the like since are empowered to have financial muscles and it is easier give then incentives thus lend at low interest rates.
The specialisation, according to Dr Shayo does not mean to have a single bank doing a certain function but several financial institutions competing for the same niche.
Tanzania has a handful of banks that have specialised in certain fields such as TIB Development Bank, and Tanzania Agriculture Bank, which is at nascent stage.
Tanzania had several specialised banks such as Tanzania Housing Bank (THB), Cooperative and Rural Development Bank now CRDB and Tanzania Investment Bank (TIB) now divided into commercial and development.
According to him the institutions advised the government to stifle the public sector in favour of the private sector as the engine of growth. The former had steadily weakened and failed to play the role of regulator for the benefit of the public. He said time had come to revisit the prescriptions by the Bretton Wood institutions - World Bank and International Monetary Fund - on the economy.
“If private sector is the engine of the economy growth then public sector is the wheels of that engine,” Prof Moshi said. “Mistakes were made in 1980s when liberalising financial sector and we sold our banks … imagine NBC was a leading bank and decided to lower lending rate … the rest would follow.
At its peak, NBC controlled 80 per cent of total country deposits. “A strong private sector needs a strong public sector to regulate it, otherwise we will end up like what we are seeing now in mining sector – stealing.”
An economist with TIB Development Bank, Dr Hildebrand Shayo, said he believed banks should embark on business specialisation otherwise the economy is walking toward a dangerous path. “Six banks to control banking sector? This has negative impact on the economy.
The market share should spread out,” Dr Shayo said. He said lack of financial sector business segment specialisations and letting almost all involving into wholesale banking is not a health issue.
“Yes, some banks will do general banking, but specialisation is equally important. He said in the absence of specialisation the market now observed largest banks also doing community, microfinance institutions services. “Large banks are supposed to venture into more specialised value addition medium term financing to stimulate economic growth,” Dr Shayo said.
Other economies have specialised banks deal in construction, infrastructure, real estate, tourism, agriculture, corporate and the like since are empowered to have financial muscles and it is easier give then incentives thus lend at low interest rates.
The specialisation, according to Dr Shayo does not mean to have a single bank doing a certain function but several financial institutions competing for the same niche.
Tanzania has a handful of banks that have specialised in certain fields such as TIB Development Bank, and Tanzania Agriculture Bank, which is at nascent stage.
Tanzania had several specialised banks such as Tanzania Housing Bank (THB), Cooperative and Rural Development Bank now CRDB and Tanzania Investment Bank (TIB) now divided into commercial and development.
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