In Tanzania, at least 15 banks have closed in the previous five years as financial sector consolidation picks up speed. According to the Bank of Tanzania (BoT), the number of banks peaked at 59 in 2017 before falling to 44 in 2022 as a result of the acquisition of underperforming financial institutions.
Although the 1990s saw the liberalization of the banking sector, which encouraged expansion and competition among lenders, recent economic changes have presented certain banks with capital issues. Despite the presence of a sizable number of rival lenders, a small number of banks monopolize the majority of the industry.
For instance, the top six banks, which had a larger network of branches, agency banking, and Internet financial services, dominated the banking industry deposits. According to the central bank, which regularly monitors the situation to identify and reduce any potential systemic risks, these banks accounted for 65.4% of all deposits.
The number of financial institutions, according to bankers and economists, may be good for competition, but Tanzania needs stronger financial institutions that can match the market's demands. “Consolidation in the banking industry is actually a very good idea to form strong and well-capitalized institutions,” said Tanzania Commercial Bank (TCB) managing director Sabasaba Moshingi.
Following its acquisition of the assets and liabilities of the TIB Corporate Bank, TCB, then known as TPB Bank Plc, entered the exclusive club of first-tier banks in 2020 when its assets surpassed the Sh1 trillion threshold. The bank had already profited from the merger in the past when the central bank combined the assets of Tanzania Women's Bank and Twiga Bancorp into the TPB in 2018.
“You know, normally a bank injects a small capital and uses depositors’ money for lending, and merging of these banks gives them more muscles to do the business,” Mr. Moshingi said.
Midway through 2020, Mwanga Community Bank (MCBL), EFC Microfinance Bank, and Hakika Microfinance Bank (HK MFB) amalgamated to form Mwanga Hakika Bank, which advanced to become a commercial bank.
The BoT placed China Commercial Bank Ltd. under statutory administration in the same year, and in March 2021, it transferred all of its obligations and assets to NMB Bank. The Commercial Bank of Africa (Tanzania) Limited (CBA) and NIC Bank Tanzania Limited (NIC) merged in 2020 to form NCBA Bank Tanzania Limited, a new financial institution.
The two banks' assets and liabilities were combined into a single entity as a result of the merger, creating a Tier-2 institution with assets worth Sh508 billion at the time.
The BoT declared in May of this year that one alternative for the suspended microfinance company was to transfer the assets and liabilities of Yetu Microfinance Bank Plc, which was under statutory administration, to NMB Bank Plc. The BoT placed Yetu Microfinance Bank under statutory administration in December 2022 as a result of the company's failure to adhere to regulatory standards for liquidity and capital adequacy.