Tanzania’s banking sector remain resilient amid COVID-19 crisis

Tanzania's banking sector continued to show resilience in the face of the challenges brought about by the COVID-19 crisis in 2020, with profits increasing for the top 10 banks that dominate the market. Ivan Tarimo, Partner at Bankable Tanzania, highlighted the strong performance of the major banks in the country during a recent interview with CNBC Africa. Tarimo pointed out that nearly 80% of the market share in terms of assets, deposits, capital, and profits is concentrated within the top 10 banks, with the top 2 banks alone holding around 45-40% of this share. This unequal distribution in the sector has led to a scenario where the top 10 banks have reaped the majority of the profits, with a significant growth of 59% in 2020. Banks like CRIDB and NMB have spearheaded this growth, leveraging their extensive networks and focusing on personal lending. The adoption of digital platforms and non-fund-based services has also contributed to their success. The sector as a whole experienced around 2% growth up to the third quarter of 2020, signaling a rebound from previous years. The top banks recorded an 11.5% increase in loans and advances, while the rest of the sector saw a contraction, highlighting the dichotomy in the market evolution. The competitive landscape in the banking sector is characterized by the ability to scale quickly, establish strong distribution channels, and secure government and institutional partnerships for enhanced liquidity and business activity. The sector is also seeing pressures for consolidation, with banks considering mergers to strengthen their position in the market. Despite the impressive growth in profits, the risk appetite for banks remains subdued, with credit to the private sector dropping by 2.5% in 2020 compared to the previous year's 8% growth. This cautious approach to lending, influenced by the uncertainties of the COVID-19 pandemic, has impacted credit growth rates. However, the personal lending segment has shown consistent growth over the past five years, indicating a sustained appetite for such loans. The resilience and adaptability of Tanzania's top banks have enabled them to navigate the challenges brought about by the pandemic and position themselves for future growth and success.