29 November 2010

Tanzania: Tib Transformation to Add More Value On 'Kilimo Kwanza' Concept

After 40 years of service, the Tanzania Investment Bank (TIB) is transforming into a Development Finance Institution (DFI).

But before retiring from public service for good, the bank has surely left behind a profitable legacy.

The bank was established by the Act of Parliament in 1970 and was mandated to enhance the process of bringing about economic growth through development financing, particularly in the industrial, agriculture and services sectors.

Soon thereafter, the bank provided a credit that established companies such as the General Tyre, Bora Shoes, Mtibwa Sugar, and various tourist hotels.

The first ten years saw smooth operations and made profit. But things were worse in the 1980s when the country plunged into economic crisis after the war to oust Ugandan Dictator Idd Amin who invaded the country in 1978.

The bank started to post losses. TIB Managing Director, Mr Peter Noni said the 1980s and 1990s proved difficult periods for many financial institutions as the country was experiencing an economic downturn.

"Nonetheless TIB weathered the storm and remained steadfast in providing banking services to the Tanzanian people," Mr Noni said.

The proposed financial sector reforms by Charles Nyirabu (former governor) between 1990 and 2003 necessitated the transformation of the bank after operating for about 25 years.

"TIB was transformed into an investment-cum-development bank in order to enhance its capacity to meet the challenges of the marketplace," Mr Noni said.

The new objective was set as to provide finance and specialized investment banking services to corporate clients on a commercial basis- particularly in the industrial, agricultural and services sectors.

In August 2005, the bank was designed as a national development finance institution in recognition of the important role they played in economic development.

The other factors, Mr Noni said, were to acknowledge the growing gap for medium and long term lending within the economy.

Then, the bank transformation to become a full-fledged development bank began. The government injected in more money to lift its working capital from 7.6bn/- accumulated in 2005 to 100bn/- by October this year.

"The government has pledged to continue to inject more capital," Mr Noni said. He added, "the transformation chiefly evolves on proving additional capital and in retaining staff to keep them abreast with the changing development finance technique."

The bank understands that it has the obligation of looking for new customers but at the same time retaining the old ones.

That in mind, the bank will operate under a two-tier capital.

"We will operate two entities under the same roof - one dealing with development finance issues and another commercial bank," Mr Noni said.

Both entities will have separate management guided by laid down banking principals as stipulated by Bank of Tanzania,but under an umbrella of DFI.

The transformation, though deleting TIB, means that longterm payback development projects, especially on agriculture sector, will benefit by getting low lending interest rates.

Interest charged on lending rate is 15 per cent. Mr Thomas Samkyi, TIB's Head of development Financing, said that the plan is good as the main target of the bank is not to "maximize profit", rather drive economic development.

To match with its new business plan that was indorsed by the government last June, the bank is figuring to raise its capital to 400bn/- in the next coming years.

"We can obtain extra funds from other development banks or at DSE (Dar es Salaam Stock Exchange) through bond should the bank lending portfolio demand increases", he said, adding:

"We are confident that together with the government and (wananchi) we will continue to push the wheel of development for 40 more years to come," Mr Noni said.

Copyright © 2010 Tanzania Daily News. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.