Dar es Salaam experiences narrow financial intermediation

BoT HQ in Dar

The depth of financial intermediation, total assets over GDP, is quite low in the country at merely 44.5 per cent, financial report has shown.

Dhow Financial report released this month, shows further that the loans and deposits to Gross Domestic Product (GDP) ratios at 19.6 per cent and 35.2 per cent, respectively are below other peer emerging countries.

The report touches briefly on Tanzania Banking Industry Prospects, however, could not give figures of other emerging economies than mention names such as Kenya.

But, data from Kenya Central bank shows that by the end of 2000s banks’ total assets base as a ratio of GDP stood at 65 per cent while domestic credit was at 48 per cent.

Dhow Financial attributes the reasons to “low level of household savings and lending as well as low corporate lending.”

The corporate lending, the report said, was “much more developed in Tanzanian context but still underdeveloped compared to other peer emerging countries.”

The low ratio of household, saving and lending, and corporate lending is affected by the fact that the country still exhibit underdeveloped sales skills and marketing culture.

“Retail lending still lags behind other emerging countries but rapid convergence (seems to assist reversing the trend),” the report shows.

It added: “along with growing income and wealth, the saving rate will improve over time.” At the end of 2010, the banks total assets grew to 12.2trn/- from 9.82trn/- of previous year, showing the sector is significantly growing in the last five years when assets were only 5.3trn/-.

However, loans increased at a slower pace from 2.2trn/- to 5.38trn/- in the last five years that ended in December 2010. The total deposits also increased to 9.65trn/- from 4.24trn/- of five years ago, helping to increase retail lending, despite explosive growth in consumer credit.

“The sector growth accelerated in the last five years, but profitability is not keeping up,” the report indicates. Up to January this year, Bank of Tanzania has licensed 48 banks to push competition to the ceiling in the urban centres, leaving rural yawning for banking services.

Source: The Daily News,http://www.dailynews.co.tz, reported by Abduel Elinaza

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