Interview: Ineke Bussemaker, CEO and Managing Director, NMB Bank
How are commercial lenders working with the central bank to increase private sector credit?
INEKE BUSSEMAKER: Even without the direct influence of the central bank, there are incentives for commercial banks to increase their number of loans to the private sector. Granted, this is done within the parameters established by the central bank, and it is carried out in accordance with the Banking and Financial Institutions Act of 2006. The central bank has quarterly committee meetings with all the banks’ CEOs in which they discuss economic growth, or lack thereof, non-performing loans (NPLs) and the overall climate of the sector.
I believe these dialogues, and both formal and informal relationships between the central bank and commercial lenders, are positive and benefit Tanzania. For larger banks, one-on-one dialogue with the governor has been beneficial, and the Tanzania Bankers Association also provides a forum to discuss successes and challenges. In the first quarter of 2017 the central bank introduced a number of measures to address the liquidity crunch, and its direct actions helped ease up liquidity. Compared to banking sectors in other countries, Tanzania’s is relatively well regulated and in good shape.
What is your interpretation of the high rate of NPLs?
BUSSEMAKER: I am concerned, and it is a direct result of the economic headwinds we have been facing. It is not surprising that actions and measures of a new government take time to create a new economic equilibrium. To a degree, economic growth has slowed and the private sector is struggling, which has made it difficult for companies to meet their loan obligations, therefore increasing the number of NPLs. It is important that banks be attentive to their customers – those affected by a temporary liquidity squeeze may be able to restructure their loans based on their cash flow situation in a way that satisfies both banks and their clients.
It is important that banks maintain a certain degree of flexibility. Other loan customers have fundamental structural issues that may suggest they would not survive in the current operating environment. It is vital to understand not only how to avoid having these clients contribute to the collective rising NPL rate, but also when and where to cut losses. NMB has been fortunate in terms of its NPL rate, because it has a cross section of public and private sector customers; in fact, a large portion of our portfolio is from the government and civil servants. That being said, a proper credit system in place is necessary, as is a proper procedure to deal with loan payments that are in arrears.
How can banks use technological advancements to help increase financial inclusion?
BUSSEMAKER: It is interesting because the number of banked citizens remains low. However, if financial inclusion is defined as individuals that have a mobile wallet from a network operator, then this rate is extremely high. It all depends on perspective. Mobile and internet services have significantly increased financial inclusion, which, naturally, was not possible 10-15 years ago.
Creating physical branches to reach the rural population is expensive and implausible. With mobile banking and mobile services, however, there is a low-cost, scalable way to reach more people than ever before. This will continue to drive financial inclusion in a vast country with dozens of pockets of rural communities.
With an overwhelming majority of Tanzanians involved in agriculture, a number of mobile products and applications are currently being developed for farmers. For informal groups in rural areas of about 75-100 people, NMB has developed the Pamoja account, which means “together” in Swahili, as an aid for village community banks. Traditionally, these groups would save and lend in cash, but with a group NMB account, members can collectively perform transactions with one another, free of charge. The idea for this began by determining how various groups use money on a daily basis, which has helped enhance financial inclusion.
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