Tanzania: Bank Moves Beyond Conventional Services to Woo More Retail Investors

INVESTMENT in government securities and capital markets products for retail investors across the country has been simplified through use of NMB Bank custody services.

As a licensed Central Depository Participant (CDP), the bank is doing everything on behalf of its clients wishing to invest in government securities and in listed equities.

Having more than 3 million customers, the Dar es Salaam Stock Exchange (DSE) listed bank and largest lender, NMB now makes the task of one to invest in Treasury Bills and Bonds and all other listed securities easier in that it allows them to do right during the primary market stage.

The government through Bank of Tanzania (BoT) issues short term maturities namely treasury bills and long term debt instrument including two, five, seven, ten, 15 and 20 years bonds.

These investments are often considered a risk-free investment because the government comes with promise of full repayment of invested principal at maturity of the security.

With presence in almost all districts in the country through its 224 branches, which is equivalent to over 95 per cent coverage, NMB Bank is set to reach and woo more retail investors to grab investment opportunities in capital and financial markets.

The Dar es Salaam Stock Exchange (DSE) Chief Executive Officer, Moremi Marwa, commended the bank's initiative saying it will boost the number of investors taking part in the equity markets.

Currently, the Dar exchange has 550,000 investors actively taking part in the trading of equities in a country of over 45 million people, calling for more concerted efforts are needed to promote public awareness.

There is increased investors' appetite and participation in the primary and secondary markets, with most of the government papers ending the trading session oversubscribed.

The outstanding performance of the short and long term debt instrument is set to continue as the government continues to raise funds for the implementation of long term infrastructural projects.

The NMB Treasurer, Aziz Chacha said the bank's move to take its custody services to investors is intended to extend its footprint beyond conventional banking systems.

He said the positive performance of the three year NMB bond auctioned recently was an indication of the high retail investors' appetite and active participation in the bond instrument from all parts of the country.

The largest lender in the country managed to raise 83.34bn/- through a three-year Tranche 3 bond instrument, which is 333 per cent higher than the expected amount of 25bn/- sought to be raised.

"The subscription signifies that investors, from different walks of life, have cash which they want to invest in profitable ventures," he said, adding that it was high time that commercial banks come with long term investment opportunities to woo more investors and bank customers that would in the long run push up financial inclusion.

NMB has so far issued three tranches of bonds as Tranche one was issued in June 2016 to retailers (retail bond) during this period a total of 41.4bn/- was raised which is equivalent to 107 per cent oversubscription from 20bn/-initially approved, complete with a green shoe option of 5bn/-.

Tranche two, worth 23.3bn/- was issued in December 2017 as private placement to institution and it is expected to mature end of this year.

The Bank of Tanzania (BoT) Manager Financial Markets, Lameck Kakulu said the positive performance of the short and long term government papers is an indication the high liquidity in the market coupled with high yield rates offered on the instrument.

With yields in a 20-year T-Bond going for as high as 17 per cent, government securities offered one of the most lucrative investment avenues for investors.

After issuing government securities, individual and institutional investors will buy them to either hold until maturity or sell to other investors on the secondary bond market.

Investors buy and sell previously issued bonds in the market for a variety of reasons for which they may be looking to earn interest income from the bond's periodic coupon payments or to allocate a portion of their portfolio into conservative riskfree assets.

The NMB Senior Manager Custodian Services, Avith Massawe said in Dar es Salaam recently that high investors' appetite on government securities is an opportunity for the NMB to go beyond conventional banking services to woo more investors with custodial services.

"The NMB custody services provide investors with eased processes in accessing investment opportunities in government securities and equities," he said.

As a licensed CDP, NMB provides consolidated valuation reports, securities reconciliation, putting all equities and corporate bonds into single CDC accounts to investors in order to make informed investment decision.

Through its custodial services, NMB Bank provides the service of holding its clients' securities for safekeeping.

The bank, through its team of experts in treasury and securities operations, also conducts services as administering clients' accounts, transaction settlements, collection of dividends and interest payments as well as tax support.

The NMB Chief of Retail Banking, Filbert Mponzi said through the custody services, NMB is doing everything on behalf of its clients who have invested in government securities and in listed equities.

"After the NMB retail bond had posted outstanding performance, NMB has embarked on continued awareness creation to people in the rural areas to increase participation in the government papers," he said.

Through its custodial services, NMB provides the service of holding its clients' securities for safekeeping.

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