Banks reform to meet new challenges
TANZANIA'S BANKING AND INSURANCE SECTORS ARE ENTERING A NEW ERA IN WHICH DIVERSITY, IMPROVED CUSTOMER SERVICES, AND GREATER EFFICIENCY ARE THE ORDER OF THE DAY

One of the areas of the Tanzanian economy that has undergone an almost complete transformation in the last decade is the banking and insurance sector. Only a decade ago, just two commercial banks were present in Tanzania, but since its liberalization in 1993 the financial sector has undergone a major expansion with 18 commercial banks and 11 non-bank financial institutions now operating in the country.
The job of supervising the sector falls to the central bank, the Bank of Tanzania, which is responsible for licensing, supervising and regulating all of the nation’s financial institutions as part of its mission to ensure the establishment and smooth operation of a stable and effective financial system.

The central bank has also been at the forefront of measures to encourage the restructuring of existing banks and financial institutions. The Tanzanian Investment Bank (TIB) is one such institution. It has had to undergo significant changes in order to meet the challenges posed by a more competitive market place and a more
demanding business community.
Established back in 1970 as a development finance institution, the TIB originally specialized in the provision of medium and long-term finance, but it has now made a decision to diversify its operations as Managing Director W. A. Mlaki explains.
“With the emerging competition we are in the process of transforming ourselves,” he says. “So, apart from our traditional role of long term financing we are also providing short term loans, trade finance, as well as foreign exchange, stock broking and deposit services.”

The TIB now runs a far more flexible operation which provides a wide range of services including anything from personal banking to corporate credit facilities.
According to Mr. Mlaki the healthy state of the financial sector and the stable macro-economic environment in Tanzania are a major attraction for potential investors and will enable the bank to continue to play an important role in the future development of the country.
“The TIB has contributed significantly to the country’s economic growth in the past, and in the future we intend to build on that contribution.”
Another financial institution that is undergoing a significant transformation in order to face up to the challenges of the new financial world is the National Insurance Corporation of Tanzania Ltd. (NIC).
Founded in 1963, the NIC enjoyed a monopoly on all insurance services for some 33 years. However, since the liberalization of the market in 1996, NIC has been forced to change its entire outlook and undergo a major restructuring program.

MARGARET T.M. IKONGO Managing Director of the National Insurance Corporation of Tanzania Ltd.

“The NIC was tainted by a negative image of unnecessary bureaucracy, poor customer care, weak marketing and non-settlement of claims,” says Managing Director Margaret T.M. Ikongo, who has an insider’s experience of over 20 years at the company. “These problems stemmed from our monopoly position and amounted to the fact that we just weren’t doing good business. So that is why we decided to re-launch the company.”
A clear agenda aimed at seeing the business become more customer-oriented, competitive and efficient was developed and is now being implemented by the board of directors.
The painful process of staff cuts has seen the workforce halved to around 650 employees, faster and more efficient services have been introduced, and the company now offers a range of new and more affordable products.

The NIC, which controls between 50-60% of the national market, is now targeting new customers for its products and is embarking on an ambitious education program designed to help exploit the largely untapped market of personal insurance.
Mrs. Ikongo is confident that a rejuvenated NIC will be able to face the challenges that lie ahead with a new optimism ready for the planned privatization of the business in 2004. “We are now talking about a complete break from the past leading to a very different future for the company.”