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| NMB Bank Chief Executive Officer, Ms Ruth Zaipuna. |
19th March has become an incredibly special date for our nation, its people and its modern history. As a country we are united to wholeheartedly celebrate the achievements and milestones of a strong woman in office. This year, we commemorate two years of exemplary and transformative leadership under our President, H.E Samia Suluhu Hassan, since she took office.
The bold implementation of the economic diplomacy agenda, on-going efforts to improve the ease of doing business, and her noble efforts to usher in a new political era in Tanzania through the launch of 4Rs philosophy: Reconciliation, Resiliency, Reforms and Rebuilding are steering the country towards economic development and shared prosperity.
Indeed, the first two years of H.E President Samia Suluhu Hassan’s presidency can be termed as a period of:
- Economic Stabilization, Recovery and Laying the Groundwork for Long-Term Growth
- Renewed spirit of Economic diplomacy as an engine for growth and prosperity
- Swift Political reforms, with strong emphasis on - national unity; good governance; and democracy
- Deliberate and consented efforts towards gender equality and economic empowerment of women
- Historic performance of the banking sector
In 2021, at the wake of Global COVID-19 Pandemic, President Samia Suluhu Hassan took office. Her personal mission was in the medium-term, to cushion Tanzania’s economy against the adverse impact of the pandemic, whilst working on to rebuild the economy on a new foundation (Economic Diplomacy) for growth and prosperity, as a long-term priority.
With her pro-business and supportive policies, President Samia has steered the country towards a stable operating environment that’s geared at driving a broad based and private sector-led growth.
The measures that she has put in place to stimulate income-generating activities after the global Covid-19 pandemic have enthused various sectors and enhanced operations of commercial banks which play an intermediary role between depositors and borrowers in the economy.
Reflecting on the two years of President Samia Suluhu Hassan’s administration, the NMB Bank Chief Executive Officer, Ms Ruth Zaipuna, terms it a ‘period of massive achievements’ even as she looks at an even more exciting future.
Ms Zaipuna says during the period, Tanzania’s banking sector has remained stable, solid, sound and profitable.
The sector has emerged from the Covid-19 pandemic in a robust position, with its balance sheet growing at an annual rate of 19 percent to reach a record asset size Sh45.99 trillion.
The banking sector also recorded a record profit before tax of Sh1.7 Trillion.
With an improved business environment, NMB Bank cemented its leadership position in the market by posting an industry record profit after tax of Sh426 billion in 2022. This is the highest profit level to be recorded by the bank in its 25 year’s history. It represented an exponential 47 percent, year-on-year profitability growth. A historic growth compared to peer banks within the region.
“This performance has been attributed to supportive business environment and NMB’s focus on delivering the best financial solutions to customers and community at large,” said Ms Zaipuna.
Below is the discussion between The Citizen and Ms Zaipuna:
Since President Samia Suluhu Hassan took office, her administration has opted for a pro-business approach. In a nutshell, how would you describe the role of the President’s pro-business policies on operations of commercial banks and the economy as a whole?
The government’s pro-business policies continue to have a strong and positive impact on the performance of the economy as a whole.
Tanzania’s economy performed satisfactorily in 2022, with a GDP growth of 4.5 percent, driven by a broad-based growth across key economic activities.
The headline inflation rate remained within the single-digit levels, reaching 4.8 percent in December 2022, which was the lowest in East Africa. This was primarily due to the government’s interventions to lessen the impact of high prices of imported goods and increase in households’ consumption of non-tradeable goods.
With a conducive business environment, the banking sector continued to grow commendably. In 2022, the sector’s profitability crossed the Sh1 trillion mark for the first time in Tanzania’s history, closing the year with a net of Sh1.2 trillion.
Banks’ assets and customers’ deposits remained on the northward trajectory while overall asset quality also continued to improve, with the ratio of Non-Performing Loans (NPL) to total gross loans declining to 5.8 percent in December 2022, from 8.5 percent in the corresponding period in 2021. Access to financial services continued to widen, characterized by increased customer activity and interactions on alternative channels.
Credit to the private sector grew at an annual rate of 22.5 percent in December 2022, reflecting ongoing recovery of economic activities from the effects of Covid-19 pandemic and continued supportive monetary and fiscal policies. Growth was good across most key economic activity, with credit to agricultural activities registering the highest growth. Overall, the banking sector remained resilient to shocks, with banks remaining adequately capitalized. Banks have sufficient liquidity and profitable. The outlooks remains positive.
With the economy flourishing, the banking sector benefited through increased lending opportunities and a more stable economic climate. President Samia has put emphasis on the importance of sustainable economic growth that is environmentally friendly through the blue economy. NMB Bank, as a strategic partner in promoting the Environmental, Social, and Governance (ESG) agenda, has been offering unsecured guarantees to contractors in this sector. This approach has helped promote sustainable development while still offering financial services to clients.
Just four months into her Presidency (July, 2021), the government – through the Bank of Tanzania – undertook several measures, including introducing a Sh1 trillion special loan fund for banks and other financial institutions to access money for lending to the private sector – in an effort to boost liquidity and promote credit intermediation. In your view, what has been the impact of those measures in credit intermediation as far as NMB Bank Plc is concerned?
The special loan fund, made available through the BoT, has had a significant impact on the lending landscape for micro and small enterprises (MSEs) and small and medium-sized enterprises (SMEs). Businesses often face difficulties in accessing credit due to their small size and lack of collateral. However, with additional funding provided to banks and financial institutions, the special loan fund has helped increase the availability of credit for MSEs and SMEs, allowing them to expand their operations and create job opportunities.
This has been particularly crucial in the current economic climate, where many small businesses are struggling to recover from the effects of the Covid-19 pandemic. For NMB these funds were dedicated to our clients within the Agri-sector which is the largest sector in the country, with over 60 percent of the population employed in it.
During the past two years, NMB set aside a special agriculture fund (Sh100 billion) for lending in the agriculture value chain at an interest rate of 9 percent per annum. We then supplemented it with an additional Sh150 billion more to bring the total amount in low-interest lending to the agricultural sector to Sh250 billion. The utilization of the funds currently stands at 93 percent.
The bank has taken this initiative to further improve access to credit to bridge the financing gap, drive sustainable growth of the sector, boost productivity along the agriculture-value chains, and stimulate job creation.
Moreover, during the period, NMB has also played a great role as a partner in development by supporting the energy sector with over Sh300 billion. We also availed Sh100 billion for the Bus Rapid Transit project while over Sh50 billion went to construction of houses.
Overall, the special loan fund has significantly contributed to increased lending to MSEs and SMEs, which are critical drivers of economic growth and job creation in Tanzania. This boost in lending has the potential to positively impact the economy in the long term.
Apart from increase in profitability, a rise in loans and in customers’ deposits, the past two years have also experienced an encouraging drop in levels of NPLs. To what extent have President Samia’s policies helped in achieving that?
In general, President Samia’s policies have played a significant role in achieving the drop in NPLs at NMB Bank Plc over the past two years, alongside other factors such as sound management practices and an overall improvement in the business environment. President Samia's pro-business approach has helped stimulate economic activities, which in turn, has led to improved loan repayment rates and a reduction in NPLs. Additionally, the introduction of measures such as the special loan fund, has helped improve liquidity in the banking sector, making it easier for banks to further extend credit to the construction and the Agri related sectors.
President Samia's focus on promoting financial inclusion and expanding access to financial services has also helped in reducing NPLs. By increasing access to credit, particularly for SMEs, there has been an improvement in loan repayment rates and a reduction in NPLs. Additionally, the government's efforts to strengthen the legal and regulatory framework governing the banking sector have helped to address some of the underlying causes of NPLs, including the weak credit risk management practice.
Overall, President Samia's policies have been instrumental in creating an enabling environment for banks to operate, which has led to improved loan performance and a reduction in NPLs.
Looking forward, how do you see the sector and NMB Bank in particular (in terms of performance) two years from now?
From the achievements explained in my responses to the previous questions, commercial banks like NMB Bank have experienced growths in loans, deposits, and profitability, and a drop in NPLs. For instance, NMB’s NPL ratio stood at 3.3 percent as at December 2022, well below the 5 percent regulatory threshold.
Looking forward, if these positive economic trends continue and the government maintains its pro-business approach, the banking sector is likely to continue performing well. Additionally, recent funding from the World Bank – which targets water availability, the environment, and maternal health - will have a positive impact on the labor force, the business operating environment, and ultimately, the whole economy.
The execution of our Medium-Term Plan (MTP) is our key priority. We will also continue leveraging on our solid foundations, including a strong balance sheet, healthy capital levels, branch network and our digital capabilities to further sustain our business ambitions.
We will continue to drive financial inclusion agenda and provide first class financial solutions to our customers. We remain committed to delivering strong returns to our shareholders and we look forward to further serving our esteemed customers and supporting the communities we serve as we progress along the second half of the year 2023 and beyond.
What has NMB Bank Plc done (from the CSR point of view) in support of community projects during the past two years of President Samia’s presidency? How much has been spent on CSR projects during the two years.
We have continued to heavily invest in various social impact programmes by setting aside one percent of the bank’s profit after tax, every year. During the past two years of President Samia’s presidency, we have invested Sh5 billion towards supporting five key pillars that include education, health, environment, agriculture and disaster recovery to ensure maximum social impact.
In 2022 alone, we spent Sh2.9 billion towards various social impact initiatives in education where we disbursed 68,850 desks to 459 schools, impacting over 206,500 students. We also distributed 720 double-decker beds to support 1,440 boarding students. In the health sector, we supported 42 health facilities with hospital beds, delivery beds and bedsheets, impacting 210,000 people. On financial literacy, our Wajibu, Business clubs, GonaNMB programs provided platforms for financial literacy training which imparted key financial knowledge to over 147,630 youth and adults.
We have continued to contribute meaningfully towards supporting women to pursue their ambitions by raising over Sh1 billion in funds towards supporting Fistula treatment for women during the past two years of President Samia’s presidency through the “Mwendo wa Upendo” marathon.”
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