Community banks (CBs) are champions of financial inclusion globally but their services in the country are grossly underutilised, according to an industrial expert.
Some 25 years down the lane since the country’s financial sector was liberalised, there are about 10 community banks with most of them undercapitalised, said Yetu Microfinance, Managing Director, Altemius Millinga (pictured).
“Community banks (with exception of DCB) have received little support from the government despite considerable support they provide,” Mr Millinga, who is also a consultant told the ‘Daily News’.
He said currently the banks have managed to reach 13.9 per cent of the country bankable population where 4.0 per cent accessed loans. “In reality banks penetration is still low especially if you exclude formal workers the level of exclusion is very high in the rural areas where over 70 per cent lives,” he said.
Community banks are close to smallholder farmers who dominate the agriculture sector and can easily constitute the population into formal financial stream.
Some 25 years down the lane since the country’s financial sector was liberalised, there are about 10 community banks with most of them undercapitalised, said Yetu Microfinance, Managing Director, Altemius Millinga (pictured).
“Community banks (with exception of DCB) have received little support from the government despite considerable support they provide,” Mr Millinga, who is also a consultant told the ‘Daily News’.
He said currently the banks have managed to reach 13.9 per cent of the country bankable population where 4.0 per cent accessed loans. “In reality banks penetration is still low especially if you exclude formal workers the level of exclusion is very high in the rural areas where over 70 per cent lives,” he said.
Community banks are close to smallholder farmers who dominate the agriculture sector and can easily constitute the population into formal financial stream.
“Exclusion of farmers in financial stream resulting into low productivity, low income and poverty as they need money to increase their productivity,” Mr Millinga said.
The Bank of Tanzania, Director of Banking Supervision, Mr Agapiti Kobelo, admitted that CBs are facing a number of challenges which limit their operations. “It is true community banks are facing a number of challenges including capital which restrict their expansion as well.
“We are engaging with them to see how to address these challenges facing CBs to enable them to maximise service delivery,” Mr Kobelo told ‘Daily News’.
He said the central bank was working on modality that includes sharing IT, auditing and the like to minimise expenditure. Once the modality is completed the central bank would work together with the banks to see how to implement the suggestions, he said.
Mr Kobelo said financial penetration was still a challenge but Tanzania was doing better compared to many countries. Another analyst who preferred anonymity said the main challenges to CBs was finance mobilisation which is crucial in the first three to five years since the establishment of banks.
Most CBs shareholders - Saccos, and local government councils - are able to raise the first working capital 250m/-, but find it tough to recapitalise the bank thereafter. She said however it was wrong to conclude that the government was not supporting the banks as there are examples of government, through the Central Bank involvement in the development of the banks.
The Central Bank has supported Tandahimba Community Bank to find strategic partner, CRDB Bank, which assisted them to increase human resources skills and service sustainability, she said.
The Bank of Tanzania, Director of Banking Supervision, Mr Agapiti Kobelo, admitted that CBs are facing a number of challenges which limit their operations. “It is true community banks are facing a number of challenges including capital which restrict their expansion as well.
“We are engaging with them to see how to address these challenges facing CBs to enable them to maximise service delivery,” Mr Kobelo told ‘Daily News’.
He said the central bank was working on modality that includes sharing IT, auditing and the like to minimise expenditure. Once the modality is completed the central bank would work together with the banks to see how to implement the suggestions, he said.
Mr Kobelo said financial penetration was still a challenge but Tanzania was doing better compared to many countries. Another analyst who preferred anonymity said the main challenges to CBs was finance mobilisation which is crucial in the first three to five years since the establishment of banks.
Most CBs shareholders - Saccos, and local government councils - are able to raise the first working capital 250m/-, but find it tough to recapitalise the bank thereafter. She said however it was wrong to conclude that the government was not supporting the banks as there are examples of government, through the Central Bank involvement in the development of the banks.
The Central Bank has supported Tandahimba Community Bank to find strategic partner, CRDB Bank, which assisted them to increase human resources skills and service sustainability, she said.
Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
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