Tanzania: Only Five Banks Dominate Mortgage Financing in Tanzania

Dar es Salaam — Tanzania's 32 mortgage lenders had issued Sh421.868 billion in loans as of June 30, 2019. But it was only five of those banks that accounted for close to three-quarters of the market share.

The five banks (with their outstanding mortgaged amounts as of June 30, 2019 shown in brackets) were CRDB Bank Plc (Sh173.744 billion); Azania Bank (Sh59.557 billion); Stanbic Bank (Sh35.852 billion); NMB Bank Plc (Sh18.021 billion), and the Commercial Bank of Africa (T) Ltd (Sh16.567 billion).

The amount represented 72 per cent of the Sh421.868 billion that the 32 lenders had issued in mortgages in total as of June 30, 2019, the Tanzania Mortgage Market Update released on June 30, 2019 states.

The Update - which is published by the Bank of Tanzania (BoT) and the Tanzania Mortgage Refinancing Company Limited (TMRCL) - shows that Tanzania registered a two percent rise in the value of mortgage loans during the second quarter of Year-2019, compared to the one-percent decline that was registered during the first quarter of 2019.

The outstanding mortgage loans by March 31, 2019 stood at Sh414.79 billion.

Analysts have expressed different views regarding what this means in a market where only five out of 32 lenders control the mortgage financing market.

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An economist at the University of Dar es Salaam (UDSM), Dr Abel Kinyondo, said the fact that only five lenders control close to three-quarters of the market means that consumers do not have enough options regarding where to go for mortgage financing.

"The ideal situation is for customers to have diverse products to choose from. That way, service providers would almost automatically lower their rates; but, with limited options, customers are in a disadvantaged position," he said.

According to the report, typical interest rates offered by mortgage lenders ranged between 15 and 19 percent.

On the other hand, Dr Kinyondo noted that it was considered safe to prevent financial institutions from competing for mortgage market as a way of avoiding a market bubble.

A real estate or property bubble refers to a rapid increase in the market price of real property such as housing until they reach unsustainable levels - and then collapse!

When banks compete for the market, said Dr Kinyondo, it means that they would be scrambling to provide mortgage facilities despite not having the capacity - and, therefore, in the eventuality of a crisis, the economy would be adversely impacted.

"When a majority of customers who have taken mortgage loans fail to pay back, and banks are forced to seize their properties - which most likely don't have the loan value - it would shake the financial sector and negatively affect the overall economy," he stressed.

Watumishi Housing Company (WHC) chief executive officer Dr Fred Msemwa said distribution of the mortgage market share shows that there was indeed competition in the market.

Under the existing scenarios, it is vivid that the super income earners were in a position to access mortgage loans than those in lower brackets, he explained.

On Tuesday the mortgage finance sub-sector received a boost after the International Finance Corporation of the World Bank Group (IFC) injected $5.75 million (Sh13 billion) into the TMRC - thereby making it the fourth largest investor out of the current 17, as of December 31 last year.

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