Dar Es Salaam — DESPITE the global financial crunch that left many financial institutions crumbling, the banking environment in Tanzania is reportedly to be doing well. Barclays Bank Tanzania Managing Director Kihara Maina granted our Staff Writer MASATO MASATO an interview.

Excerpts Question: How is Barclays Bank Tanzania fairing in the local market competition?

Answer: Barclays Bank Tanzania is part of the Barclays Bank Plc. Group, a leading global bank. This gives us the advantage of tapping into our global talent pool. We recently went through a rapid expansion and now with our strategic presence in different parts of the country, we are better positioned than ever to compete in this market. We currently have a total of 85 outlets (32 branches and 53 ATMs strategically located country-wide).

This coupled with innovative products and 300 years of heritage we can draw experience from amongst the top banks in Tanzania. The bank has been investing for growth; it has been growing steadily both in terms of income and customer deposits. Ours has been not growth for growths' sake but growth with prudence and our underlying performance is strong.

Q: What can you say of the central bank's move to increase the minimum capital requirement for commercial banks from 5bn/- to 15bn/-, allegedly to strengthen crisis preparedness?

A: I think this is a step in the right direction. Strong and well capitalised financial institutions are necessary for economic development. Higher capital requirements will bring in more serious investors ready to invest in innovation, technology and efficiency for the benefits of the market in general and consumers in particular.

Q: So, you mean the capital requirement is likely to curtail the number of banks in the market?

Whether or not the move will restrain the entry of new investors will all depend on how prospective investors perceive the business opportunities in the market because the 15bn/- capital requirement on its own is not prohibitively expensive. Serious investors, provided that they are convinced of the business potential, will definitely come.

In Tanzania where the banking penetration remains below 15 per cent, there remains the whole 85 per cent of the population yearning for the formal banking services- that is a potentially huge market.

Q: Publicly published financial statements of many banks in Tanzania, including Barclays', show huge customer deposits kept idle instead of being loaned out to productive sectors of the economy. Why?

A: If you critically look at our latest published financial statements, you will realise that we are doing relatively better than most of other commercial banks in the market at lending out the funds we raise. We at Barclays believe in lending to people as a generally good path to take because credit to the private sector go directly to the real productive sectors of the economy from where the government collects its taxes.

We support the small and medium enterprises (SMEs) because we believe that SMEs of today are the corporate companies of tomorrow. The central bank requires commercial banks to lend at most 80 per cent of customer deposits and we are slightly above 70 per cent and that is good.

Q: The chronic issue of widening spread (gap between interests charged on credit and that paid on deposits) is seemingly proving difficult to solve. Why?

A: Yes, there are always concerns raised over the interest spread. Resolving these concerns, however, requires understanding of a number of contributing factors. The cost of raising the money that is lent out, for instance, is critical but also issues like prevailing interest rates, costs of running the business and recovery costs are highly important.

Opportunity costs for the money lent out influence the spread as well; that is, what is the best alternative to lending money. Another contributory factor in managing the spread is the amount of surplus money available. But, of late there have been initiatives by the government (through the central bank) and commercial banks to have the margin brought down.

With the right monetary policies as well as administrative efficiency and justice delivery, the productive sectors of the economy will have easy access to affordable credit by the banking sector.

Q: Tanzania, like other developing countries, is prone to money laundering, with the blossoming banking industry allegedly facilitating the vice. What is Barclays bank doing to check the problem?

A: There is no commercial bank that is willingly facilitating or in any way supporting money launderers. Tanzania is very strict about money laundering and the legal framework is already in place to counter the vice. The government, commercial banks and the country's security organs remain united towards a common cause-fighting financial crimes.

Barclays bank in particular is in the forefront in combating money laundering-we have invested heavily in technology and staff training. The bank strictly vets its customers through the KYC "know your customer" process to satisfy ourselves about people or organisations we trade with.

Q: How good or bad, in your view, is the banking environment in Tanzania?

A: The banking sector in Tanzania is thriving, thanks to positive monetary policies, regulatory framework and fast technological adoption-there are a lot of things about the banking industry in Tanzania that I see moving on the right direction.

The speed at which the banking sector in Tanzania adapts to advanced banking technologies, for instance, is good. My concern, however, is the pace at which justice is delivered on banking related cases. I highly appreciate the way the government, judiciary, security forces and banking players are starting to work closely against financial crime that is a growing threat in the banking sector not only in Tanzania but world-wide.

Q: Does Barclays bank expect one day to trade its shares on the Dar es Salaam Stock Exchange (DSE) as some few commercial banks have recently done?

A: It's good for a corporate firm to have public ownership to enable the communities within which it operates to actively participate in its business. Barclays Bank Tanzania is presently 100% owned by Barclays Bank Plc. Listing is not presently under discussion.