BoT advises banks on raising capital

Prof. Ndulu

The  Bank of Tanzania (BoT) has directed newly formed community banks that want to mobilise funds from people to obtain a permit from the Capital Markets and Securities Authority (CMSA) prior to securing a licence.

The BoT Governor, Prof Benno Ndulu, said the move was aimed at protecting shareholders who expect returns on investment and an easy exit mechanism. 

"We have agreed with CMSA that such banks should first get a nod from the authority and we'll issue the licence," Prof Ndulu said at the sidelines of the launching of the Financial Stability Forum.

On her part, the Capital Market and Securities Authority Chief Executive Officer, Ms Nasama Massinda said already two community banks have forwarded their applications for the approval. 

"The banks have a prospectus which will clearly show the exit mechanism of the shareholders," Ms Massinda said, "the best exit is through listing."

She told the 'Daily News' that it was not proper for community banks to raise capital using people's money without a clear prospectus that demonstrate how to join and leave. 

"I can't name the two banks as their prospectus are in the process, but the way forward for any such banks and we have agreed with BoT, should first be to obtain our approval," Ms Massinda said.

The move does not only want to safeguard shareholders rights but also deepening capital markets by attracting more players at the equity market - the Dar es Salaam Stock Exchange (DSE). 

In another development, the CEO also said a number of oil and gas resource firm - exploration - have shown interest on listing on the DSE's second market, Enterprise Growth Market (EGM).

"Nothing tangible has developed so far, but we have a number of enquiries from resource firms. The market (EGM) is ready to receive products," the CEO said. "But, we haven't received any application so far for main nor second market yet," she said.

However, the Tanzania Securities CEO, Moremi Marwa, said Swala Oil and Gas is considering going public through EGM after a successful 1.2 million US dollars private placement last year.

"Swala at the moment are preparing to offer documents before seeking shareholders approval," Mr Marwa said, adding "thereafter they will file an application for public offering to CMSA and DSE." Tanzania Securities is the issue's stock brokerage agent.

Source: The Daily News, www.dailynews.co.tz, reported by Abduel Elinaza in Dar es Salaam

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