SPEECH BY THE MINISTER FOR FINANCE HON. BASIL P. MRAMBA (MP) TO LAUNCH THE NEW NAME FOR FORMER NATIONAL BUREAU DE CHANGE, ON FRIDAY, 14th JANUARY 2005

The Chairman of the Board of Directors of Twiga Bancorp

Prof. Haidari K. R. Amani

Members of the Board and Staff of Twiga Bancorp,

Invited Guests,

Ladies and Gentlemen.

May I in the first instance, express my sincere thanks and gratitude to you for inviting me to officially launch your new name, Twiga Bancorp Limited. As stated in the welcoming remarks, the new name has already been adopted following the approval by the Ministry and the Central Bank. Positive effects have already been experienced in this short period. Here I am commending you for being that innovative, and turning round the operating environment.

I am glad to note that this is not the only new innovation though. Your proposed Twiga Cash Passport Card product goes a long way towards our endeavour to match with the rest of the world, which is now into plastic and electronic money. We are also looking forward to the “Electronic Payment of Salaries” product, which hopefully will hasten the payment of salaries and do away with the old fashioned practice of queuing for salaries. It should also help to beef up bank deposits.

We in the Government look at Twiga Bancorp with big esteem, as it is one of the very few banks, which are still wholly owned by the Government. We look with pride, at your satisfactory and improving performance.

Mr. Chairman,

The intention and spirit of the Banking and Financial Institutions Act, 1991 was both to stimulate domestic competition in the banking sector and to facilitate the process of making banking services available to large section of the population of the country. Yet, while competition among the private banks and financial institutions appear intense in Dar es Salaam, it has not resulted in adequate spread of banking services sector-wise, leaving most of the informal sector un-banked.

Current actions in terms of extension of banking services to non-banked areas will help build up the required capacity for income generating activities and thus provide ground for profitable banking business in future. Expansion of services and provision of credit to small and micro enterprises will enable the poor to engage in productive activities, reduce unemployment and alleviate poverty. The financial sector should also support the National Microfinance Policy, especially after the regulatory framework is put in place and since it is now established beyond doubt that it is good business to lend to the economically weaker sections of the economy.

Your bank has only 3 branches. I believe you have plans to open more, after consolidating yourselves. But as pointed out in your opening address, the immediate relevance here is your endeavour, to respond to the needs of the informal sector by designing and implementing appropriate loan products for that sector. I commend you for that.

I must hasten to caution all banks that extending physical representation without making the services affordable, will not serve the intended purpose. Here I am specifically referring to required minimum deposits and service charges. We cannot claim that we are cultivating the culture of saving amongst our people by maintaining the minimum balances too high and at the same time imposing a service charge on the saver. Where is the incentive to save?

Mr. Chairman,

Let me also dwell, albeit briefly, on banks’ lending operations. I still believe that the banks have not ploughed enough resources into the economy, in form of lending. Of course, there are a few constraints, including the lack of repayment culture, let alone the low ability to pay due to unexpected poor performance of the financed ventures. Such constraints should be overcome through systematic and appropriate credit rating. I thought that was the purpose of credit appraisal!

It appears that the banking sector is somewhat hesitant to lend, especially to the agricultural sector, despite the vast financial requirements of the sector. Previously, the banks’ outcry had always been “amendment of the Land Act so that land can be used as collateral for bank loans”. This has now been done in addition to the establishment of the Credit Information Bureau, though possibly not fully operational as it takes time to build the required database. We expect positive response from all the parties concerned.

While on credit, mention must also be made on the interest spread. While the interest on deposits has remained below 5% p.a., lending rate for many of the banks and financial Institutions is still above 15%. This large spread is partly due to high lending risks in the economy, inadequate competition, high incidences of non-performing loans, and high operating costs.

I still think banks should make more efforts to address this problem, as it is a potential disincentive to the prospective borrowers, since it reduces their ability to pay, while at the same time increasing the risk of non-performing loans. I believe it is also a disincentive to potential savers.

On our part, the government in partnership with the private sector are revisiting the country’s export development strategy and giving more attention to farms and the small and medium enterprises.

At the same time the Government has increased its budgetary allocation to the Export Credit Guarantee Scheme (ECGS) and Credit Guarantee for Small and Medium Sized Enterprises (CGS – SME). I therefore call upon banks to come up with loan proposals for funding under this scheme.

I expect to see banks and financial institutions taking a keen interest in the export sector not only by financing exports per se, but also by financing export products at production levels. This is crucial in enhancing the country’s foreign exchange generating capacity and, of course, creating employment. At this juncture, we have to take cognisance that the export sector is faced with liquidity shortages. Timely and adequate credit facilities, at the pre and post shipment stages, are essential for exporters to realize their full potential.

Mr. Chairman,

I have been informed that there is considerable improvement in the provision of fast and efficient services over the counters of most banks and financial Institutions. This is definitely one of the positive achievements of competition in the banking sector, and goes a long way towards attracting and encouraging more people to use bank services. I am also informed that the period of clearing cheques has been reduced to three working days. This is a commendable achievement, although I personally consider three working days rather long still, given the current technological developments.

Mr. Chairman,

We are all aware and concerned of the outbreak of bank robbery in our country. This is not only a challenge to the Police, but calls for intensification of bank security systems, integrity of our employees and management. We have to strive to protect customer’s deposits if we need the people to continue banking with us.

Mr. Chairman,

I was invited to launch your new name, Twiga Bancorp, a name that as you said, has brought to an end the denial of prospective good business as it has removed the misconception among potential clients that your bank is merely a money changer. However, in launching your new name, I could not resist the temptation to highlight the importance of the banking sector in Tanzania, because Twiga Bancorp forms part of the vehicles of development of our economy.

It is my belief that the change of the name will go hand in hand with further improvement of services your Institution provide to your customers and the public in general.

May I now formally declare and launch the new name TWIGA BANCORP LIMITED and wish you most successes in your endeavours to serve the people of Tanzania.

I thank you for your attention.

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