In Tanzania, the banking landscape has undergone significant transformation over the past five years, with a series of closures and mergers reshaping the financial sector. The Bank of Tanzania (BoT) reports that the number of banks has declined from a peak of 59 in 2017 to 44 in 2022, driven by strategic acquisitions aimed at revitalizing underperforming financial institutions.

Although the 1990s marked the liberalization of the banking sector, facilitating expansion and competitive dynamics among lenders, recent economic shifts have exposed certain banks to capital challenges. Amid the presence of a multitude of competitors, a handful of banks have asserted dominance, controlling the lion’s share of the industry.

A prime example lies in the dominance of the top six banks, boasting extensive branch networks, agency banking services, and digital financial solutions. These major players command a substantial 65.4% of the total deposits, a statistic regularly monitored by the central bank to mitigate potential systemic risks.

Stakeholders, including bankers and economists, acknowledge the merits of a diverse range of financial institutions, fostering healthy competition. Nonetheless, there is a growing consensus that Tanzania requires more robust financial entities capable of aligning with the market’s evolving demands.

Tanzania Commercial Bank (TCB) Managing Director Sabasaba Moshingi underscores the advantages of consolidation, asserting that it fortifies institutions, propelling them toward capital strength and resilience. TCB’s elevation to a first-tier bank, propelled by the acquisition of TIB Corporate Bank’s assets and liabilities, serves as a testament to the power of mergers. This was not the bank’s first experience with successful consolidation, having previously absorbed Tanzania Women’s Bank and Twiga Bancorp under the umbrella of TPB Bank Plc in 2018.

Moshingi explains the synergy of consolidation, elucidating that merging banks benefits from amplified financial capacity, enabling more substantial lending and enhanced business operations, a boon for both institutions and depositors.

In a notable instance during mid-2020, Mwanga Community Bank (MCBL), EFC Microfinance Bank, and Hakika Microfinance Bank (HK MFB) orchestrated a merger, resulting in the birth of Mwanga Hakika Bank—a pioneering leap from microfinance to full-fledged commercial banking.

The BoT intervened with China Commercial Bank Ltd. in the same year, subjecting it to statutory administration before transferring its obligations and assets to NMB Bank in March 2021. Meanwhile, 2020 witnessed the convergence of Commercial Bank of Africa (Tanzania) Limited (CBA) and NIC Bank Tanzania Limited (NIC), birthing NCBA Bank Tanzania Limited—a novel financial entity.

This amalgamation consolidated the assets and liabilities of both banks into a formidable Tier-2 establishment boasting assets valued at Sh508 billion at that time.

In May of the current year, the BoT proposed a resolution for the suspended microfinance entity—transferring the assets and liabilities of Yetu Microfinance Bank Plc, previously placed under statutory administration, to NMB Bank Plc. This intervention followed the BoT’s decision to place Yetu Microfinance Bank under statutory administration in December 2022 due to regulatory non-compliance pertaining to liquidity and capital adequacy.

The evolution of Tanzania’s banking sector underscores the nation’s commitment to fostering financially robust institutions, poised to adapt and thrive in the dynamic economic landscape.