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COUNTRY EXPERIENCE

COUNTRY EXPERIENCE. TANZANIA. Tanzania Experience. Outline : An Overview Deposit Insurance Board of Tanzania DIB Experience Lessons and Challenges Way Forward. 1.1 Economic developments. 2005 – 2009 recorded relative economic growth 12.1 % Annual average inflation in 2009

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COUNTRY EXPERIENCE

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  1. COUNTRY EXPERIENCE TANZANIA

  2. Tanzania Experience Outline : • An Overview • Deposit Insurance Board of Tanzania • DIB Experience • Lessons and Challenges • Way Forward

  3. 1.1 Economic developments • 2005 – 2009 recorded relative economic growth • 12.1 % Annual average inflation in 2009 • 6.9 percent economic growth in 2009 • Per Capita USD. 525.0 • Population 40.7 million in 2009

  4. 1.2 Banking Sector • Remained resilient despite global financial turmoil which distressed major international capital and fin. markets

  5. 1.2 Banking Sector (Cont) • Due to low degree of integration of the sector with major international capital and financial markets • No securities of international banks held by local banks and financial institutions'

  6. 1.2 Banking Sector (Cont) • As at end of June, 2010 • 41 banking institutions • 448 branches and agencies • 33.5 % of branches in commercial city Dar es Salaam

  7. 1.2.Banking Sector (Cont) • As at end of June, 2010 • Total Assets TZS 11,392.9 billion equivalent to USD. 8.4 billion • Total Deposits TZS 9,172.5 billion equivalent to USD. 6.8 million • 90.8% of banking funding structure is composed of deposits

  8. 2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.1 Mandate • Deposit Insurance Fund is established under Section 37(1) of Banking and Financial Institutions Act, 2006. • Establishment of Deposit Insurance Board is provided under section 38(1) of BFIA, 2006.

  9. 2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.2 Mission Statement: Effectively contribute to country’s financial stability by maintaining public confidence in the financial system through prompt payment of protected deposits to depositors of a failed member bank or financial institution

  10. 2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.3 Objectives : • Protect small and unsophisticated depositors • Maintain depositors confidence in the banking system

  11. 2. DEPOSIT INSURANCE BOARD OF TANZANIA • 2.4 Governance: • Board of Directors • Policy formulation and direction • Director • Day to day management

  12. 2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.5 Membership • Compulsory to all licensed banking institutions in Tanzania • 11 members in June, 1996 • 41 members in June, 2010 • 29 Banks • 12 Non bank financial institutions

  13. 2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.6 Coverage • TZS 250,000/= (USD. 250) from 1996 • TZS 500,000/=(USD. 500) from 2003 • TZS 1,500,000/= (USD.1,000) from May, 2010

  14. 2. DEPOSIT INSURANCE BOARD OF TANZANIA • 2.6 Coverage (Cont) • All types of deposits received by banks and financial institutions are insured except: • Inter bank deposits • Government Deposits • Deposits of investment company or security firms

  15. 2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.7 Funding • Main Source is premiums from members • Size of the Fund by end June, 2010 was TZS 58,922.9 million equivalent to USD. 43.6 million

  16. 3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES • Bank Failures were experiences between 1995 and 2003. • Four bank failures: • Meridien Biao Bank (T) Ltd April, 1995 • Tanzania Housing Bank August 195 • Greenland Bank (T) Ltd April, 1999 and • Delphis Bank (T) Ltd June, 2003

  17. 3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES • 3.1 Tanzania Housing Bank • Failed due to: • Liquidity and Solvency • Weak Management • Weak internal controls • Voluntarily Liquidate by shareholders • All depositors were fully compensated by the government

  18. 3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES 3.2 Meridien Biao Bank (T) Ltd • Failed due to: • Poor Mgt • Huge placement with parent abroad • Sold to Standard Bank of South Africa limited • Depositors were given choice of fully compensation or continue as customer of the new bank • More than 95 % opted to continue as depositors of the new bank. by the government

  19. 3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES 3.3 Greenland Bank (T) Ltd • Failed due to: • Weakness on Board oversight • Insider dealings • Troubled parent company in Uganda • DIB was appointed liquidator By BOT • All depositors were compensated by government

  20. 3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES 3.4 Delphis Bank (T) Ltd • Failed due to: • Capital impairment • Weak Board oversight and management • Non performing assets • Part of Assets and Liabilities sold to Federal Bank of the Middle East • DIB was appointed liquidator By BOT • All depositors were assumed by new bank hence no loss to depositors

  21. 4. LESSONS AND CHALLENGES 4.1 Increase in Public confidence • Proper handling by safety net players of the failed bank cases as there were no absolute loss • Challenges • Depositors not promptly compensated • Wrong signals to the public that government will always rescue all failures

  22. 4. LESSONS AND CHALLENGES 4.2 Need for safety net collaboration • Early detection by regulator and timely intervention • Timely failure resolution is paramount

  23. 4. LESSONS AND CHALLENGES 4.3 Cross Boarder Issues • Globalization Impact • Establishment of East Africa Common market • Need for a closer collaboration with foreign safety net players

  24. 4. LESSONS AND CHALLENGES 4.4 Independence of Deposit Insurance System • Enable public to comprehend roles, duties, responsibilities and limitations

  25. 5. WAY FORWARD Undergoing reform of its legal and operational framework to enable: • More effectively contribute to countries financial stability • Operate in conformity with international best practices Improve Corporate governance • Greater accountability • More transparency

  26. The END Thank you for your attention

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