-handling the grants as explained in this interview granted to The Baker Reporter by UBA Tanzania Managing Director, Usman Isiaka, excerpts:
How do you comment on the country’s banking industry considering that we have over 50 banks but only a few are dominant?
Banking industry in Tanzania remains stable and resilient in the current global economics arena because of the favourable and strong macro-economic performance of the economy but also sound and accommodative monetary policies implemented by Bank of Tanzania.
The country’s banking industry is very dynamic and vibrant with stiff competition given big number operating in the market currently although 57 percent of them are largely present in a few major cities including Arusha, Dares salaam, Kilimanjaro, Mbeya and Mwanza which provide growth opportunities for banking in the country.
According to Finscope Survey of Tanzania in 2017, only 37 percent of the population use banking services which indicates that a there is still significant opportunities for the banks to grow across the country if the appropriate solutions and technology are applied.
What is United Bank for Africa doing about this massive market opportunity available in Tanzania?
While appreciating the need for a wider geographical spread in banking in the country, UBA Tanzania believes that time for brick and mortar is over hence we are focusing on technology and innovation to reach customers in rural areas and grow with them by aligning to their constant change in tastes and trends.
For instance, UBA was the first bank across the African continent and in Tanzania to introduce chat banking through Leo, our artificial intelligence virtual banker which enables users to access banking services through their social media platforms like Facebook and WhatsApp. But we also have the USSD code mode of digital banking where any phone user can easily open an account, pay bills, buy airtime and perform other banking transactions.
What percentage of the domestic market is UBA Tanzania serving?
UBA Tanzania operates four branches in Dar es Salaam and Dodoma offering corporate commercial and retail banking services to customers across the country of which we currently control about a percent of deposits in the market as per published half year results of June 2019. We are taking various strategic initiatives to increase our share of the market to at least 5 percent by the end of 2020. UBA remains committed to the Tanzanian market and plans to extend the bank’s branch operations across the country with six more branches between now and first quarter of 2020.
Which segment of the market are you earmarking?
UBA is open to everyone in the market starting from the juniors, the college students, young entrepreneurs, Micro, Small and Medium Enterprise (MSME), the corporate clients and the government and its agencies. In addition to our existing tax revenue collection for government under the Tax-bank platform of Tanzania Revenue Authority, UBA Tanzania was recently approved as an authorized bank under the Government Electronic Payment Gateway (GePG) for the collection of non-tax government revenue. We are adopting a technology driven approach to the GePG revenue collection in a manner that will bring more convenience, comfort and security to payers and improved revenue collection to the government institutions.
Lending rates in Africa and Tanzania are said to be the highest in the world, how do comment on this?
Lending rates are determined by the cost of money, capital charges, operating expenses and margins. In Africa and Tanzania credit risk is very high with the increased cost of funds due to limited access to deposits and high operating expenses that are expected to be covered by the margins from the lending rates and other fee based income of banks.
Of late, the lending rates in Tanzania have been on the downward trend to due to improved liquidity measures and the implementation of various monetary policies by the central bank that have enabled banks to reduce interest rates and improve credit support to the economy. This accommodative monetary policy stance of Bank of Tanzania contributes to growth of credit amounts to the private sector.
What specifically monetary policy measures undertaken by BoT which are bringing down interest rates?
There are several but just to mention a few are: Downward revision of the Statutory Minimum Reserve) rate on non-central governmental deposit liabilities held by banks from 10 to 8 percent and now to 7 percent; Increase flexibility to banks in maintaining SMR averaging from 10 to 20 percent during the maintenance period of two weeks; Provide relief for SMR requirement for banks with wide spread branch network in order to support financial inclusion initiatives; 40 percent SMR requirement of domestic and foreign currency deposits liabilities of the central government, all held in domestic currency; and Exclusion of investment on computer software in the computation of core capital with positive impact on bank’s single obligor limit and abolishment of 1 percent general provision on performing credit facilities which should increase bank lending.
And how have such measures affected UBA Tanzania’s lending rates?
Based on the above measures, UBA is offering as low as 15 percent per annum as shilling lending rate to our cherished retail customers and 14 percent per annum to corporate customers depending on their risk rating.
What is the role of regional banks like UBA in ensuring that lending rates are friendly?
Regional banks come with the advantage of geographical diversity and large balance sheet size which can accommodate large transaction at low costs. UBA is a pan African bank that operates in 20 countries on the continent, the United States, United Kingdom and France. The diverse operations across the globe gives UBA a competitive advantage and opportunity to access funds on a lower rate which in turn enables the bank to have friendly lending rates.
How much of the Tony Elumelu Foundation grants which have come to Tanzania is UBA handling as overseer of the grants?
The Tony Elumelu Foundation-TEF, is a foundation created by the UBA Group's Chairman, with a capital fund of $100m under the Tony Elumelu Entrepreneurship Programme (TEEP) to assist young African entrepreneurs over a ten-year period from 2015 to 2025. The sum of $10m is allocated annually as training, mentoring and seed capital of $5,000 each to 1000 successful TEF entrepreneurs to advance their business interests. This entrepreneurship program is now being supported by other multilateral and donor institutions as partners across the globe.
Since establishment in 2010, the Tony Elumelu Foundation (TEF) is the leading philanthropy in Africa championing Entrepreneurship development for Entrepreneurs across the continent. For Tanzania,189 entrepreneurs have been selected and granted USD 10,000 each where by $5,000 is for training and mentorship, and another USD,5000 each as seed capital for direct investment in their businesses for growth. Since commencement of the TEEP in 2015 a total of $1.87m or about 4.3bn/- has been granted in support to Tanzania entrepreneurs.