NMB Benki ya wanyonge

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I really enjoyed our meeting with Hans Christiaanse at the National Microfinance Bank (not just because of the cool air-conditioned office and snacks). NMB formerly called the Cooperative Farmer’s Bank was privatized in 2005. 51% is still owned by the Tanzanian government and 49% is owned by Bank of the Netherlands a AAA Bond rated bank. Before it was privatized NMB focused on doing banking and payments for government initiatives and employees. However it is becoming a full commercial bank. It is currently the most successful bank in Tanzania, with the most assets on its balance sheet.

Since Tanzania is a developing nation, whose economy is heavily rooted in agriculture the bank focuses heavily or agricultural loans. Being part of farming cooperative is the best way to secure a loan to invest in capital. The bank sees cooperative loans as less risky. In addition cooperatives are able to pool their resources to negotiate better contracts. NMB charges 20% for Micro Loans and 14% for larger loans.

This Cooperative model reminded me of Muhammed Yunas’s micro financing model. This model of using collective efforts and reputation seems to work in developing countries where physical asset collateral is hard to come by.

What surprised was that Tanzania does not have a national ID number equivalent to the Social Security number used in the US. This makes it difficult to perform credit checks and hold borrowers accountable for loan defaults.

The policy that restricts land ownership in Tanzania was also surprising. The Tanzanian government owns100% of the country’s land and leases it out its citizens and residents. In light of this, I wondered what type of collateral Tanzanians used to secure their loans, if the did not own land. According to Mr. Christiaanse they use farm equipment, crops, the home they built on the leased land or have someone with means cosign their loan.

A third revelation that surprised me was that NMB only introduced ATMs to its customers 11 months ago. Nonetheless, bank lines were still pretty long. In addition, all NMB were connected in early 2007 throughout the country.

During our visit, we noticed that Customer Service in Tanzania was lacking. Poor customer service coupled with new technology and new ways of doing business I though it may be difficult for NMB to find qualified employees. Mr. Christiaanse confirmed this. To solve this problem the bank sends its top managers (first and second tier) to Holland to that they can have a better understanding of customer service and the business model.

By going private, Tanzania has significantly sped up the development of its banking industry. NMB has accomplished a great deal in only 2 ½ years. This growth is encouraging. Fertile soil is being laid for the Tanzanian entrepreneurs.