SCHOOL OF BUSINESS
COURSE: Msc ENTR
SUBJECT: STRATEGIC MANAGEMENT
SUBJECT CODE: BUS 5021
TASK: TERM PAPER
SUBMITTED TO: Prof. ELISANTE OLE GABRIEL
NAME: VICENT TURUKA
SUBMITION DATE: 9th January 2012
Using an industry of your choice, discuss various challenges facing business operators in Tanzania and which strategies could you suggest to address the challenges. How could those challenges be converted to opportunities?
The primary function of banks to the world over is to play an intermediation role i.e., to Collect funds (through borrowing) from surplus households and invest the funds (through lending among others) to deficit units. In this way, banks are considered the harbinger or buttress of economic development of any country. ( Kibodya Felix G. 2008)
The banking sector in Tanzania started to operate on a plan for financial liberalization in 1992 in order to uphold its economic growth. This has been proficient through the mobilization of financial resources as well as by mounting competition in the financial market and by pleasing to the eye the quality and efficiency of credit allocation. As a result of the liberalization, the banking sector in Tanzania has been successful, particularly over the last few years.
For most of the period since the late 1960s and 1970s the Tanzanian financial sector was mainly government-owned with pervasive government interference in the financial system. Credit was directed on the basis of government priorities with little regard to credit-worthiness, and banks were convenient agents of fiscal policy. (Wangwe 2004)
The total assets have been greater than before by 60%, from $ 1.7 billion at the end of 1999 to $ 2.7 billion at the end of June 2004.Because of this, up-to-the-minute merchant banks, commercial banks, bureau de change, insurance companies, a stock exchange and related financial units have entered the market. With a total of 27 banks and a few non-banking financial institutions, which are not allowed to open current accounts, the market is characterized by a few big players and several small banks.
90% of deposits In Tanzania are in the hands of eight banking institutions, namely three local banks and five foreign banks. Local banks primarily service local customers while foreign banks tend to operate as subsidiaries of large groups, such as Citigroup and Barclays, using strategies oriented to the international market. As a result, foreign banks spotlight on international customers and national clients who prefer to keep their deposits in foreign currencies.
There are four categories of banks, oriented towards different markets and clientele operating in Tanzania: local private banks, regional banks, international banks and multinational banks. Taken as a whole, the outlook for the banking industry in Tanzania is very positive and there are appealing opportunities for new comers to the sector. At present, there is a positive trend in lending to SMEs that is producing greater confidence in their growth potential among financial institutions and, more generally, in the economy as well, which is generating a positive spiral. In addition, the government is also introducing new laws that are expected to enhance lending activities.(BOT)
1.1 The Tanzania Bankers Association (TBA) is an association of banks and non-bank financial institutions registered in September 1995 under the Societies Ordinance Cap. 337 of 1954. Objectives
1.To facilitate the consideration and discussion of matters of common interest to members. 2.To develop and maintain a code of banking practice for its members and to facilitate the harmonization of operations in the banking sector. 3.To facilitate the promotion of on-the-job training as well as professional training leading to professional banking...