Mwanga Bank Embarks On Rural Coverage Campaign

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.

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Mwanga Bank seeks new status

NEW CAPITAL: Ghuhia (L) displays the Umoja ATM card to shareholders during the bank’s AGM with the Managing Director of Umoja Switch Danford Mbilinyi. Courtesy photo

 

MWANGA, Tanzania – Mwanga Community Bank Limited (MCBL) has been advised to change its status into commercial bank if it is to grow its portfolio and have a stronger balance sheet. 

A former Prime Minister and First Vice President of Tanzania, Cleopa Msuya recently provided this advice during the bank’s Annual General Meeting at Mwanga in Moshi.

“I would like to advise the management that to grow and improve its portfolio, the bank has to change from being the people’s bank to a commercial bank,” he said.

Msuya told East African Business Week the change will enable the bank to spread its wings in other regions. He said it will also help MCBL grow faster.

The bank’s Managing Director, Abby Ghuhia, also advised MCBL shareholders to go an extra mile and list on the Dar es Salaam Stock Exchange (DSE).

Ghuhia told East African Business Week the move will help the bank to find more investors who can inject capital and increase efficiency.

Board Chairman, Ibrahim Seushi,  said it would take some time before the programe is implemented.

The Auditor and Examiner of the Bank of Tanzania (BoT), Ephraim Mwasanguti said: “The proposal to expand the scope of the bank and change MCBL to a commercial bank is viable and realistic.”

Mwasanguti said according to the conditions of BoT, the bank should raise its capital to Tsh15billion  (about $9.02 million).

Seushi said by 2014, the bank will have raise the amount of deposits, lending, revenue, control expenses and bad debts.

He said: “We expect to increase deposits, loans, shares through our service centres opened in Moshi, Same, and Hedaru as it is in our Business Plan of 2013-2017.”

In 2015 the bank intends to increase deposits by 15% and reach Tsh9.79billion ($5.88million) from the figure recorded in 2013.

“Until June 2014 we have mobilized deposits amounting to Tsh9.57 billion ($5.75 million), which is equivalent to an increase of Tsh1,090 million ($655,245), equivalent to 12%,” Seushi said.

He said clients increased from 24,455 as of December 31 2013 to 28,513 as of 30 June 2014 or a 17% growth.

He asked shareholders to increase their deposits to benefit from a presently good interest rate.

With regard to ratio of loans to deposits, Mwasanguti said according to BoT’s regulations, the figure should not exceed 80%, but the MCBL has already surpassed that level.

“Deposits in your bank are not impressive, this is because there is no good ratio of deposits and loans,” he told shareholders.

Seushi said the banks’ statistics show that the lending rate in June is higher than the deposit rate.

According to bank’s chief the bank’s total assets increased by 32% to Tsh10.46billion (about $6.29million) in 2013 from Tsh7.99 billion (about $4.80million) in 2012.

However, he argued that the goals of the interest income in 2013 were surpassed-Tsh423 million (about $254,283) equivalent to 32% due to an increase in loans. Interest costs were more than the targets by 8% which is equivalent to Tsh49million (about $29,516).

“The whole expenditure was below targets by 7% although operational costs were high due to expansion of operations in the region after establishing service centers in Moshi, Same and Hedaru,” he said.

The goals of profit before tax were reached and surpassed by Tsh46 million (about $27,653) equivalent to 218% due to the achievement of interest income and expenditure to be below projections.

Normal deposits increased and surpassed the targets at Tsh2.81 billion (about $1.69 million) equivalent to 21% and thus facilitate lending targets to be attained and surpassed at Tsh670 million (about $402,765), equivalent to 11%.

“The total assets of MCBL exceeded the targets by Tsh1,514 million (about $910,129), equivalent to 17% while share capital targets were not met by Tsh205 million (about $123,234), equivalent to 27%,” he noted.

“The challenge we face is that many customers fail to pay their loans according to the agreement as a result that bank is making provision expense ranging from 5% -100% of the loan depending on period of outstanding installment unpaid , for compliance with the laws of the BoT, he said.

Another challenge to MCBL is to increase actual bank capital (core capital), to reach Tsh2 billion (about $1.20million) by December 2017, as he called upon shareholders to increase their shares in order to enable the bank to grow and achieve its goals of strategic business plan.

By Leonard Magomba, Sunday, August 24th, 2014

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MWANGA BANK PLAN FOR LISTING AT DSE

THE Annual General Meeting, (AGM), of the Mwanga based, Mwanga Community Bank Limited, (MCBL), in Kilimanjaro region, have adopted a resolution which would allow the bank to join the Capital Markets, with the intention of attracting more investors.

The decision was reached at the bank’s 14th AGM which was held in Mwanga district, Kilimanjaro Region, recently, following the proposal related to the issue was presented by the Chairman of the Board of Directors of the bank, Ibrahim Seushi.

“The move will help the bank to grow because by selling our shares at the Dar es Salaam Securities Exchange, would attract more investors both inside and outside the country and this will accelerate our processes meant to upgrade our institution”, he said.

He added, the move would also contribute to the realization of our bank’s three-year, (2014-2017), programme, which among other things includes the institution’s transition into a commercial bank from the current status of a community bank.

Earlier, the bank’s Managing Director Mr. Abby Ghuhia said the bank posted a Tsh68 million profit in the year which ended in December, 2013 and that during that period the share values rose by two percent, (2), from Tsh555 million to Tsh567 million.

“The loans portfolios also rose from Tsh4.9 billion in 2012 to Tsh6.8 billion this being an increase of 40 percent,” he said, adding in the same period income from interests also increased due to an increase of the number loans granted to its clients.

Commenting of the challenges facing the bank, Mr. Ghuhia said they included that of some of its members delaying to paying the loans they acquired which he said contributed to the growing number of delinquent loans.

“By December, 2013, the number of delinquent loans was 337 out of the 4,019 loans released by the bank worth Tsh. 7.7 billion”, he said, adding, adding out of the amount provided as loans, delinquent loans amounted to Tsh. 609 million, equivalent to 10.5 percent of all the loans issued.

Mr.Ghuhia continued to say that during the bank’s 2014 financial year, the management was aiming at increasing the values of its deposits, loan portfolios, other incomes while at the same time controlling costs and delinquent loans both at its Headquarters in Mwanga district and its centres situated in Moshi, Same and the new branch which is expected to be opened in Hedaru area, within Same district.

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