Can you give us some historical background of the Investment Bank, and its structure today?
The TIB started operations in November 1970 as a development finance institution, modeled in the traditional style of a development finance institution. These are institutions which used to raise lines of credit from various multi-lateral organizations and extend credits to projects within their respective countries. What we have been doing over the past 30 years or so of our existence is that we have been providing project finance to various sectors of the economy. The shareholders of TIB were the Government of Tanzania, the National Bank of Commerce and the National Insurance Corporation. The latter two were also government owned; so if you like TIB is a government owned bank. Because of the ongoing restructure of the bank whereby the government's stake in TIB has been raised, the joint ownership of the latter two has been diluted to less than 1%. So that's one source of the funding. The second source of funding was credits from multi-lateral organizations is including the World Bank and the African Development Bank. But credits to TIB from multi-lateral sources were available only up to the mid 1980s. As you know, in the 1990s it has not been easy to raise lines of credits from multi-lateral organizations by development finance institutions, due to various reasons. Today TIB, like many other DFIS in Africa, depends mainly on funds from its own cash flow to finance projects. This makes the contribution of DFIS to the development of the economies of their countries less meaningful compared to the important role they played in the past. For example, in the past TIB was responsible for providing most of the project finance in the country, a role which it can boast to be able to do at the same level currently, essentially because of the reluctance of multi-lateral institutions to provide credits to DFIs.
Because of the change of heart by the traditional moulders and supporters of DFIS, it has become imperative that these institution must change their structure and mandate. That is why TIB is currently undergoing a fundamental transformation. The bank has broadened its scope of operations. In additional to its core activity of term lending, TIB will also carry out short term lending, trade financing, treasury operations and will do broking and dealing business in the Dar es Salaam Stock Exchange. TIB plans to start taking deposits from customers within the next two months. These new activities are expected to enhance the bank's cash flow and reinstate TIB to its original position as an important financial player in the economy of Tanzania which is currently on a growth path.
You are a public, government owned bank. Are there any privatization plans which are in process?.
It is the government policy to privatize most of the businesses in the country, to disengage from running commercial activities and concentrate on the portfolios that are normally within the jurisdiction of governments. So TIB is also lined up for eventual privatization. The transformation that were going through right now is partly preparation for the privatization. This is because we want to be fully commercialized before we are privatized, so that we are better equipped for the privatization process. We envision that within the next three years, we should have private participation in TIB.
You are about to restructure the Bank, to launch new services, to give the bank basically a new role in the financial sector. How do you want to position TIB within the very competitive and dynamic environment of the Tanzania financial sector?.
That is a good question; that is a question everyone around asks us, that is, how are we going to fit in within the current competitive environment in the financial sector in the country. Before the 1990s there were very few banks. We had the National Bank of Commerce as the only commercial bank. We had a few specialized financial institutions: that was ourselves - the TIB - for developing financing. TDFL was another one for the same purpose. We had the Tanzania Housing Bank giving housing mortgage finance. Then we had the Cooperative and Rural Development Bank before it was transformed into a commercial bank. They used to provide credit for agriculture, mainly farm inputs. But right now, we have over 30 banks and non-bank financial institutions. The market is quite competitive. But this is not new at all. If you walk down Wall Street in New York, there are so many banks, but each bank has its own role to play and has a customer base. So we are encouraged by that kind of phenomenon, that is, competition is part of modern business. However, that is not sufficient to encourage us to broaden our scope. We are also encouraged by the fact that in over the 30 years of our existence, we have accumulated a lot of experience in banking. We have a labour force with a lot of experience that we shall depend upon. That's our biggest strength, a well trained and experienced team of women and men. The second strength is that we have been operating in the country, across the country for that matter, for nearly thirty good years, and we have financed many projects creating fixed capital for them, and so we know most of the companies in the country today. We know the market better than anyone else in the field. That knowledge of the market will assist us a lot. The third aspect is that we have picked a market segment we want to cater for. The scenario in the country, in the banking sector, is that you have big banks in the likes of our colleagues - Standard Chartered, Citibank, Stanbic, which cater for big companies. They sometimes also cater for the medium size enterprises. There are those giving micro credits, like the National Microfinance Bank. We also have other non bank organizations catering for very small credits, like the Small Industries Development Organization (SIDO). A lot of financing is also being provided by the NGOs for very small businesses. So that is the other end of the spectrum. You then have got the middle stage the small and medium sized corporates; and what they call high networth individuals. The small and medium size corporates are a potential market, but they are not sufficiently catered for. They are quite a large market. So that market segment that we are aiming at, according to our strategy and vision is the small and medium corporates and the high network individuals. That's our target market. We would like to believe that given our size this should be our natural target market. You may want to ask us why we do not want to help the micro-enterprises. The answer is simple, we do not, at least for the time being, have the competence of reaching out to Micro enterprises. With this clarity of purpose and vision I have just described we do believe that we can make it, the high competitive environment within the financial services market not withstanding. We have been operating satisfactorily even now; in fact for the past four years we have been making profits, despite the fact that we are in a restructuring mode.
Who are your main competitors within this segment?
Almost all the banks and financial institutions are our competitors, but to a greater extent those banks of our size. We consider the large banks as competitors as well because, as I said before, they do not limit their operations to big corporates only. They also lend to medium sized companies. But we are well aware that how one will win a business account will depend on the efficiency and effectiveness of one's service. That is our prime objective - to provide efficient and timely service, so that we acquire business where others fail. But again, if one looks at it from the supply point of view, one immediately finds out that Tanzania has a lot of potential in almost all sectors, especially in mining and tourism which are growing fast. Manufacturing has been in a lull but this is because of the ongoing privatization; many companies have been put up for sale. Most of the large firms were government owned, and now they are being sold. After privatization the manufacturing sector will grow fast again. If you look at capital formation between 1992 and 1996 you will find that there was very little additional value created in terms of capital formation. The shallowing in lending to the productive sectors during this period provides an interesting correlation with the stagnation in fixed capital formation. Investment in the manufacturing and in other business will most likely grow meaningfully in the new decade. There should be good opportunities for providers of finance. | What type of projects have you been investing in? Can you name one of the major projects you are investing in at the moment?
At the moment we are financing the business of cut flowers, for export. That is one very interesting businesses we have financed. But I want to tell you that we did participate in the financing of most of the companies operating in Tanzania today. Major companies like the General Tyre Factory and TANELEX in Arusha; the three cement plants in the country - Dar, Tanga and Mbeya; a steel plant by the name of Aluminium Africa in Dar es Salaam; etc were all financed by us. In Agriculture some major corporate farms like wheat production in Arusha, paddy production down South in Mbeya and the like. In the past we also financed mining operations such as the Buckreef Gold mine and Williamson Diamonds. This is what we mean when we speak about our experience about the Tanzania market setting.
Can you give us some statistics of your bank in terms of the number of staff, branches in the country, and what has been your turnover last year?
Let me start with the organizational structure and the staff. We have a Board of Directors at the top; then we have the Managing Director and then we have Departmental Heads - Head of Investment Banking, Head of Credit, Head of Financing and Operations, Head of Human Resources and Administration and Head of Information Technology and Systems.. The total labor force right now is 55. That would appear to be a big labor force for the size of our capitalization. Our total capital right now is about 8 billion Tshs, which is roughly 10 million dollars. That is because we have other activities that we are engaging in apart from the lending business. For instance, we have got a Department of Special Programs. Through the department, we are assisting the government and the Bank of Tanzania (BOT) in the liquidation of the former Tanzania Housing Bank.. We are also responsible for certain non-performing portfolios off loaded from the other government banks. These activities are also being covered by some of our staff. As far as our revenue last year was concerned, we earned about Tshs. 4 billion. Our portfolio was heavily affected by the currency devaluation. We used to lend in foreign exchange, and because of the economic reforms going on in the country especially with regards to a market driven exchange rate regime, some companies incurred very heavy losses. The loans to these companies were denominated in foreign exchange. In June 1986, the Tanzania shilling was devalued from about 20 shillings to a dollar at that time, straight to about 40 shillings to a dollar. Thereafter it went down progressively to the current stabilization level of around 800 Tshillings to a dollar. Remember that TIB lends long term and that means we are talking of loans that have a tenure of 10 years or even more. Most of the projects we financed then were caught up in this situation and could therefore not pay their loans properly. This caused a lot of problems to our loan portfolio and consequently to our income and cash flows. The restructuring program we are currently implementing is aimed at reversing this situation.
What are your future outlooks, where do you see your bank within the next 3 or 4 years? Could you also give us three major points why an investor should come and invest in your bank?
We see our bank as consolidating its position over the next three years. We have already built a solid foundation for a vibrant bank. We have a vision to dream on and a mission to accomplish. Our strategy is hinged on three pillars:
First, the people, our human resources: qualified experienced, with sound training on customer service and well motivated. Our philosophy is founded on the quality and dedication of our labour force. Over the years we have built a very good base in human resources through work experience and training and we are continuously training our personnel.
Second, technology: We recognize the fact that the availability of modern IT/IS is an essential prerequisite for the provision of efficient and timely banking service. To this end we have put in place a most appropriate banking system for the comfort of our customers and the convenience of our officers. Other broader aspects of banking technology are well catered for through proper recruitment and training.
Third, our strategy: A strategy focused on relationship banking. This way, our success is the success of the customer and the prosperity of the customer is our success. We go out to customers, reaching out to them, understanding their plans, problems and so on. Everyone of our workers understands the importance of customer focus.
With these 3 pillars in place we believe that we shall go forward. Over the next 3 to 4 years we shall have consolidated our position in the market. We are likely to start growing at a good pace after the second year. So if an investor wants to look at us, he should see that has a very sound base with an advantage of the knowledge of the local market. We don't have branches at the moment, but that could be looked into for the future. We like our present set up because it means lower overheads. Mind you, we are not a large bank. There is another advantageous feature of TIB that we have not talked about so far, and that is the point that we combine term lending with other banking services. This combination provides for customers long term requirements and short term requirements. Traditionally, long term lending is not preferred by commercial banks. Commercial banks don't want to wait for 10 years to get their money back. As a development finance institution TIB will retain the function of term financing as one of its core activities. We have unique expertise in this area.
What would be your final message to our readers?
The message that I would like to give to potential investors is that Tanzania is a country which meets the investors choice because of a number of reasons:
The government of Tanzania is keen on investment, local and foreign.
The country has a lot of unexploited potentials. Because of the past history the country's resources remain unexploited. Abundant potentials exist in minerals, agriculture, fishing and tourism.
Peace and tranquility in the country. Peace is a prime consideration for any serious investor. Without peace, all other investment incentives are of no value.
My final message to all readers: TIB is your right partner for the growth of your business. No economy can grow without a vibrant and relevant financial system. And no business can grow sustainably without good support from it financiers. |
