kiporonauji
New Member
- Nov 9, 2016
- 1
- 1
Few people need to be told that our economy in Tanzania is going through a strait jacket. It is tight on many fronts.
The banking sector is where money gets stationed and move hands, and obviously the slow down should be felt there. The publication of quarterly reports that showed negative profitability was a confirmation of a fact not news.
Given the circumstances, the minds in the bank industry must be working to rectify their positions. Some of them, like NMB, Barclays, Posta Bank and a few others have started issuing products that attract capital from the public in form of bonds and fixed deposits with attractive rates.
Barclays entices clients with a 15 percent up front interest to depositors. NMB reports that its three year bond was oversubscribed—107 percent applications. The minimum is 500,000,000/-.
Within the banking network, there must be now movement of money to the banks that have offered more attractive investment options, logically. The next banking survey reports will capture these movements of capital.
Government policy to retain its income with Bank of Tanzania may probably be the one major blow to banks in the past twelve months. Details about these policy led withdraws may not be accurately available, but they are definitely huge.
Compounding the blow to banks from Ikulu is the traditional tug of nonperforming loans. Probably from risky loans and resulting from the economic slowdown, inconsistent repayment casts a bad spell for banks in many respects.
If the government floats less securities it means banks will have to cozy the business and retail customers. And who are these than the very same who struggle with repaying their loans. Defaulters-- in banking lingo. Is this a vicious circle? I hope it is not. But in case it is a vicious cycle, it bound to last shorter for another vicious cycle will come to its rescue.
Let me prophesy that Hazina will save banks from the costly process of nit picking lendable businesses and individuals. Although the government is proudly reluctant it will have to bend backwards and issue securities to attract cash to finance itself. An indicator of this turn is the slow rate of business. Slower economy means leaner tax receipts. Where else will the government turn to get finance?
At that point, contrary to the past the government will not be borrowing its own money, but bank’s own capital. Banks that attract more capital, by issuing attractive long term deposit products and bonds may likely benefit from lending profitably to the government.
Only caveat I see is a politically dictated lower lending rate. But this is only a possibility.
So finally who benefits?
The banking sector is where money gets stationed and move hands, and obviously the slow down should be felt there. The publication of quarterly reports that showed negative profitability was a confirmation of a fact not news.
Given the circumstances, the minds in the bank industry must be working to rectify their positions. Some of them, like NMB, Barclays, Posta Bank and a few others have started issuing products that attract capital from the public in form of bonds and fixed deposits with attractive rates.
Barclays entices clients with a 15 percent up front interest to depositors. NMB reports that its three year bond was oversubscribed—107 percent applications. The minimum is 500,000,000/-.
Within the banking network, there must be now movement of money to the banks that have offered more attractive investment options, logically. The next banking survey reports will capture these movements of capital.
Government policy to retain its income with Bank of Tanzania may probably be the one major blow to banks in the past twelve months. Details about these policy led withdraws may not be accurately available, but they are definitely huge.
Compounding the blow to banks from Ikulu is the traditional tug of nonperforming loans. Probably from risky loans and resulting from the economic slowdown, inconsistent repayment casts a bad spell for banks in many respects.
If the government floats less securities it means banks will have to cozy the business and retail customers. And who are these than the very same who struggle with repaying their loans. Defaulters-- in banking lingo. Is this a vicious circle? I hope it is not. But in case it is a vicious cycle, it bound to last shorter for another vicious cycle will come to its rescue.
Let me prophesy that Hazina will save banks from the costly process of nit picking lendable businesses and individuals. Although the government is proudly reluctant it will have to bend backwards and issue securities to attract cash to finance itself. An indicator of this turn is the slow rate of business. Slower economy means leaner tax receipts. Where else will the government turn to get finance?
At that point, contrary to the past the government will not be borrowing its own money, but bank’s own capital. Banks that attract more capital, by issuing attractive long term deposit products and bonds may likely benefit from lending profitably to the government.
Only caveat I see is a politically dictated lower lending rate. But this is only a possibility.
So finally who benefits?
