ABOUT 14 per cent of the country’s bankable population accessing the formal financial services, industry stakeholders say it is high time community banks played a bigger role in addressing the unfortunate situation.
According to FinScope, in 2009 only 8.3 per cent of the rural population had bank accounts or were otherwise formally included in the financial system bracket. The revelation has encouraged market players to increase efforts to persuade more rural dwellers to use the banking sector services.
Mwanga Community Bank (MCB) Managing Director Abby Ghuhia calls for concerted efforts among stakeholders to avail the banking services to the majority rural people. The Bank of Tanzania (BoT), realising the need for friendly and affordable financial services to majority Tanzanians, has already issued guidelines and regulations and licenced two banks–CRDB and Tanzania Postal–to offer agency banking.
And according to recent information, the country targets to increase the bankable populations to 50 per cent from the current 14 per cent through the use of agency banking which offers the services using third part agents.
Based in Mwanga, Kilimanjaro Region, MCB envisages using its pool of technical skills to increase the size of population with access to financial services. In its 2013-2017 business plan, MCB wants to play an increased role in ensuring that financial services reach the unbanked segments of the population.
To achieve the goal, the bank is selling its shares to residents of Mwanga District and those living in other regions. The plan, according to Mr Ghuhia, will help the bank to grow and attain its goal of availing its services to the rural community thus increasing their social and economic welfares.
“We all have a role to play in making sure that majority of Tanzanians access financial services and we at MCB are undertaking various measures to make sure that we play an increasingly important role,” Mr Ghuhia said. The bank has already initiated a number of systems that seek to make sure that Tanzanians get MCB services regardless of where they might be–that include mobile banking. “By using the Vodacom’s M-Pesa or Tigo Pesa, a customer can increase deposits at his account or repay a loan without going to the bank…with such services, we serve people beyond Mwanga,” he said. Being a member of Umoja Switch, MCB’s services can also be accessed across the country through over 20 automated teller machines (ATMs). Clients with Visa Cards can also access MCB services via TanPay ATMs countrywide. “MCB goes alongside the growth of technology, whereby it has now joined the Tanzania inter-bank settlement system (TISS) network that enables a customer’s cash to be transferred to any bank at the shortest time possible,” the MD said.
Another method is through special initiatives which in the past five years have shown great success. The initiatives, such special accounts Faidika and Hekima, have clearly indicated help to increase new customers. Deposits, have gone up by 38 per cent to 6.76bn/- and mainly are driven by Hekima and Faidika accounts, the bank MD said. With comfortable deposits the bank loaning ability went up by 14 per cent in 2012.
The bank was on the drive to increase its core capital to 2bn/- by 2015. This would not tally well with the BoT new capital requirements but also enable the MCB to extend services to rural populations. MCB Chairman Mr Ibrahim Sehushi says the bank targets to increase deposits by six per cent in 2013 to 7.14bn/-.
“Until May 2013 we already had 7.82bn/- in deposits, which is equivalent to a surplus of 28 per cent above our target,” Mr Sehushi said. Reaching poor clients in rural areas is often prohibitively expensive for financial institutions since transaction numbers and volumes do not cover the cost of a branch.
Analysts say that low-income clients often feel more comfortable banking at their local store than walking into a marble branch or brick and mortal branches. CRDB Managing Director Charles Kimei cites poor infrastructure and bureaucracy in addition to scattered human settlements among the impediments that frustrate the provision of banking services in rural areas.
“It costs about 700m/- to set up a full-fledged branch and many banks, the small and new entrants in the market in particular, can hardly afford to open up branches in remote areas,” Dr Kimei, the economist turned banker says. MCB efforts to reach the rural are in line with Tanzania Postal Bank and CRDB bank.
In the first quarter of this year, TPB conducted a trial banking agents using their staff in Kilwa District and in two days, 147 people opened up saving accounts, demonstrating the need of such services in rural areas. There are currently 50 registered financial institutions in the country with a total of 525 branches, with each branch serving an average of 85,000 customers. The situation is quite different from the developed world where one branch serves less than 1,000 people.