I and M Bank Tanzania has crossed the Sh 1 trillion asset threshold and set its sights on joining the country’s top 10 banks within the next three to four years, as it turns to the capital market to finance its next phase of growth.
The bank’s expansion strategy will be supported by the I and M Hatua Bond, a Sh 100 billion Medium-Term Note Programme intended to diversify funding, support loan growth and strengthen balance-sheet management.
Chief Executive Officer and Managing Director Zahid Mustafa said the bank could reach the top 10 through organic growth in about four years, while an acquisition could shorten the timeline to approximately three years.
I and M Bank Tanzania has crossed the Sh 1 trillion asset threshold and set its sights on joining the country’s top 10 banks within the next three to four years, as it turns to the capital market to finance its next phase of growth.
The bank’s expansion strategy will be supported by the I and M Hatua Bond, a Sh 100 billion Medium-Term Note Programme intended to diversify funding, support loan growth and strengthen balance-sheet management.
Chief Executive Officer and Managing Director Zahid Mustafa said the bank could reach the top 10 through organic growth in about four years, while an acquisition could shorten the timeline to approximately three years. I and M Bank Tanzania is part of I and M Group, which has operations in Kenya, Rwanda, Tanzania, Uganda and Mauritius. Mr Mustafa said Tanzania’s position within the group gives the bank an advantage in serving businesses with operations in more than one East African market.
A customer with an established banking relationship in Kenya who expands into Tanzania, Uganda or Rwanda can be assessed using existing information and experience, rather than being treated as an entirely new borrower, he said.
The group’s cross-border proposition includes Brisk, an instant-credit product designed to support customers operating across borders. Mr Mustafa said Tanzania was strategically important to the group because of its large population, growing middle class and opportunities in areas such as infrastructure, mining, energy, oil and gas.
He said Tanzania currently ranks fourth among the group’s five markets. Kenya remains the largest business, while Rwanda is the group’s oldest operation. Tanzania’s own business was established in 2010 following the acquisition of CF Union Bank.
Digital-first growth
I and M Bank Tanzania entered the market primarily as a corporate and business bank before expanding into retail and consumer banking as the middle class grew and the economy became more digital.
Rather than competing for every retail customer, the bank has chosen selected segments in a market where the three largest banks control about 70 percent of retail banking revenue, according to Mr Mustafa.
The bank has nine branches, but has used digital channels to extend its reach. Mr Mustafa said I and M had the second-largest digital-lending portfolio in Tanzania and more than six million customers on a mobile-network-operator platform. The platform has originated more than billions in digital loans over the past four years, he said. The bank is also the second-largest digital lender in Zanzibar despite not yet having a branch there. Mr Mustafa said a branch in Zanzibar was planned.
Another part of I and M’s strategy is allowing customers to move money between mobile wallets and bank accounts without a charge under the ‘Ni Bure’ compaign. Mr Mustafa said the decision reduced fee income in the short term but helped attract customers, deepen account balances and create a bridge between mobile-money users and formal banking services.
Focus on SMEs and last-mile finance
The bank also plans to expand lending to small and medium-sized enterprises through faster, technology-based credit assessment. Mr Mustafa said traditional bank processes often made it too costly to serve smaller borrowers because loans of Sh10 million were assessed using procedures similar to those applied to much larger corporate facilities.
He identified last-mile financing as a major opportunity, particularly loans of between Sh1 million and Sh10 million for retailers, distributors and other businesses in supply chains that remain heavily cash-based.
I and M is piloting partnerships with companies in the fast-moving consumer goods and distribution sectors. Mr Mustafa said the partnerships would need to demonstrate viable business models, manageable credit risk, sound technology and a reliable customer experience.
The bank’s efforts to expand lending will be accompanied by risk-based pricing and improved credit scoring. Mr Mustafa said earlier asset-quality challenges were partly linked to concentration in a smaller number of corporate borrowers, where the failure of one customer could have a significant effect on the bank’s non-performing loan ratio. Portfolio diversification, stronger recovery efforts and improved underwriting have since helped reduce the ratio, he said.
Growth through consolidation
Mr Mustafa said I and M Bank Tanzania would continue developing capabilities in sectors that support Tanzania’s economic priorities, including infrastructure, energy, mining and manufacturing. The bank also intends to participate in syndicated financing for large projects while supporting the suppliers, contractors, engineering firms and distributors linked to those investments.
He said the bank remained open to acquisitions as Tanzania’s banking sector moves towards possible consolidation. While organic growth could take I and M into the top 10 in about four years, he said the right acquisition could make the target achievable in roughly three years.
The bank’s immediate challenge will be to convert its asset milestone and new capital-markets access into sustainable growth while maintaining asset quality in a competitive banking market.