Ecobank

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CHAPTER ONE
BACKGROUND OF THE TANZANIAN BANKING INDUSTRY
The evolution of banking sector in Tanzania can be broken down into four main phases. These are colonial era, post-independence and the period before Arusha Declaration of 1967, post Arusha Declaration and the period prior to 1991, and the period after 1991. PRE-INDEPENDENCE OR COLONIAL ERA

The development of the banking sector started way back in the early 1900s. During that period, commercial banks were the dominant financial institutions in the then Tanganyika. During the German rule there were two commercial banks established in Tanganyika, namely the Deutsche Ostafrikanische Bank, which was established in 1905 and the Handel bank fur Ostafrika in 1919. These banks were mainly for serving colonial rulers and a few businesses. After World War I in 1918, the British took over the control of the country from the Germans. Three commercial banks were established in order to replace the German banks. These banks were the National and Grindlays Bank, the Standard Bank and the Barclays Bank D.C.O. In the early 1950s, other banks from India opened branches in Tanganyika. These were Bank of India and the Bank of Baroda, which opened branches in Dar es Salaam, Moshi and Mwanza. Other banks that established their presence in Tanganyika included an Anglo-French institution known as the Ottoman Bank, which operated in Dar es Salaam Kigoma and Moshi. Also, during the 1950s, specialized Non- Bank Financial Institutions (NBFIs) started to evolve. POST INDEPENDENCE

By the time of independence in 1961, the country’s banking industry was comprised of Standard Bank of South Africa, National and Grind lays Bank, Barclays Bank DCO and Ottoman Bank. Others were Bank of India, Bank of Baroda, Commercial Bank of Africa, and the National Bank of Pakistan. NBFIs which were present on the day of independence included the Post Office Savings Bank, Land Bank, Local Development Loan Fund, African Productivity Loan Fund and a few housing and loan associations catering mainly for Asians and white settlers. The colonial banking system was characterized by the following: dominance of foreign owned commercial banks; inability to sufficiently mobilize savings and deploying funds to productive sectors of the economy; and concentration in urban areas such as Dar es Salaam, Mwanza, Moshi and Kigoma. After independence, the government established new financial institutions to compliment those existing at that time. The Tanzania Bank of Commerce (TBC) was established in 1965 and the Government of Zanzibar established the People’s Bank of Zanzibar in 1966 to act as a government banker as well as provide financing to state-owned companies in Zanzibar. There were also other specialized financial institutions involved in financial intermediation. These were formed by assistance from the Government and external donors to assist sectors considered important for development of in 1962, and later converted to National the country. These are institutions like Agriculture Credit Agency, which was established Development and Cooperative Bank in 1964. POST ARUSHA DECLARATION AND PERIOD PRIOR 1991

In 1967, following the Arusha Declaration, all private commercial banks were nationalized and their assets and liabilities were merged resulting into the establishment of one big commercial bank, namely the National Bank of Commerce (NBC), which was wholly owned by the Government.The period after the Arusha Declaration was marked by rapid development of non-bank and development financial institutions. This was due to the increased role of public sector in development and the need to mobilize long-term funds to finance various productive sectors in the country. TanzaniaInvestment Bank (TIB) was established in 1970 to provide development finance to the country’s productive sectors especially large-scale industry. Another non-bank financial institution was Tanzania Rural Development Bank (TRDB), which was established in...
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