坦桑尼亚: Tanzania Finance Profile 2011

Tanzania: Financial Sector Profile

With a per capita income of USD 400 a year, Tanzania is amongst the poorest nations in the world. The population is estimated at 41 million, with the majority of inhabitants living in rural areas.

The Tanzanian economy is dominated by the agricultural sector, which employs 80 percent of the workforce. While the predominance of agriculture makes the country vulnerable to international price shocks and extreme weather conditions, mining and tourism are emerging as strong growth sectors and hold the potential of smoothing dependency on agricultural exports. Today, Tanzania is the third largest gold producer in the continent and its tourism industry is growing.

Since the mid-1980s, Tanzania has been implementing a successful reform program that has made it one of the fastest-growing economies in Africa. Focusing on macroeconomic stability, fiscal prudence and revenue mobilization, Tanzania has implemented significant structural reforms to sustain economic and social stability and attract the resources needed to develop its physical infrastructure. As a result, Tanzania’s GDP rose above the Sub-Saharan average and grew by more than 7 percent annually over the 2003-2008 period.

The financial crisis has deteriorated growth prospects, however: growth slowed growth down to 4 percent in 2009, while inflation accelerated to 10 percent. Further, pressures on Tanzania’s balance of payments translated into the current account increasing to 12 percent of GDP. While the impact of the financial crisis on the banking system has been monitored closely, regulation and supervision of the pension sector is absent, posing risks to financial stability.

Overall, Tanzania’s financial system is shallow. As of 2009, the gross domestic savings rate reached a mere 15 percent of GDP, significantly below the Sub-Saharan average. Signs of deepening have emerged, however, with broad money growing by 20 percent in 2009 and credit to the private sector increasing by 28 percent in the same year.

As of 2003, 22 commercial banks operated in Tanzania, with the top six banks controlling 87 percent of total deposits. The market share of foreign banks is large, at 51 percent of total assets. While the first-round effects of the global financial crisis were limited, worsening overall conditions translated into an increase in non-performing loans (NPLs) to 6 percent of total loans. Banks remain, however, well capitalized, with 15 percent of Tier 1 capital as a percentage of risk-weighted assets, significantly above minimum Basel requirements.

The Dar es Salaam stock exchange is small, with total market capitalization at 20 percent of GDP and operation of the exchange draining scarce public funds. About 70 percent of the market is in the hands of two major foreign parent companies that own domestic listed companies. Another significant portion is held by public agencies. Free-floating shares are very limited and foreign portfolio investments are minor.

The primary government bond market is in its nascent stages of development. While the government has been making efforts to improve both the efficiency and absorptive capacity of the market for treasury bills and bonds, government treasuries amount to a mere 2 percent of GDP.

Tanzania is a member of the East African Securities Exchanges Association (EASEA), which was established in 2004. The formation of the EASEA is part of a broader strategic plan linked to East African Community (EAC), which encompasses capital markets and free‐trade across Burundi, Kenya, Rwanda and Uganda. Plans for a regional, unified East African capital market are currently under way.

The Tanzanian payments and securities settlement infrastructure is largely underdeveloped. However, plans to implement electronic clearing systems and a real time gross settlement system are under way.

The insurance industry in Tanzania is just beginning to emerge, with assets amounting to 2 percent of GDP in 2008. The reputation of the insurance sector was severely damaged by the behavior and subsequent the 2003 bankruptcy of National Insurance Corporation, which had become infamous for its inability to honor claims.

Today, the burdensome regulatory requirements for the sector continue to hamper its development: insurance companies are required to transfer 20 percent of their net profits to a capital reserve account and to reinsure a certain percentage of their liabilities with the public Tanzania National Reinsurance Corporation. Based on available data, most insurers only underwrite urban policies and it is estimated that 80 percent of Tanzania’s rural population is uninsured.

Other institutional investors play a relatively unchecked and potentially harmful role in the country’s financial sector. Rapidly growing pension funds are inadequately supervised and a deterioration of their assets could impose a threat to the stability of the financial system.