Tanzania’s CRDB Bank Plc is planning an ambitious programme that could see it expand into seven countries in East and Central Africa.
The largest bank by assets and market share in Tanzania, CRDB had started its regional expansion in 2012 but had to put the plans on ice in 2016 due to financial inadequacy.
The lender, now with improved cash flows and with close to $3 billion worth of assets, hopes to join regional banking giants — Equity and KCB — which have been racing towards transforming into Pan-African banks with assets in excess of $10 billion, only for their efforts to be frustrated by the outbreak of the Covid-19 pandemic.
CRDB, which is listed on the Dar es Salaam Stock Exchange has lined up mineral-rich Democratic Republic of Congo (DRC) as the first point of entry through Greenfield Investments in the next 12 months.
The DRC has become a fertile hunting ground for top EA banks firms looking to consolidate their positions in a country tipped to become one of the richest economies on the continent and a driver of African growth, if it overcomes its political instability and improve governance, according to the World Bank.
Fundamentals
“Initially the bank had plans to go to DRC, but it ended up going to Burundi in 2012 and in 2016 the bank never performed well so they decided to stop the expansion to make sure that they cleaned the house first. When I joined the bank in 2018 the first step was to create the right foundation and put all the fundamentals in the right direction and last year (2019) we opted that we needed to go to Congo and that is when we made the decision towards the end of the year,” said Nsekela.
The DR Congo, which in 2019 formally applied for admission into the six-member EAC bloc has a population of about 85 million people with a low banking penetration at about six per cent, placing the country amongst the most under-banked nations in the world.
The country has already attracted the likes of Kenya-based Equity Group Holdings Ltd and KCB Group.
CRDB chief executive Abdulmajid Nsekela told The EastAfrican that progress towards entering DRC through Greenfield Investment was already at an advanced stage before Covid-19 struck, temporarily slowing the process.
“We have done our preliminary review of the business, we know the environment and should make a move. I would say in a span of one year we should be in Congo. If it were not for Covid-19, we could have been in the DRC by now. Now, with Covid-19 I think it will take us a few months before we get there,” said Mr Nsekela.
“We are exploring both options of acquisition and Greenfield, though I don’t know whether acquisition will be the right strategy in because we have to engage the banks there. We are yet to make that final decision.”
The EastAfrican has learnt that CRDB, which established a presence in Burundi in 2012, is seeking to leverage on technology by partnering with other lenders to expand its operations regionally, targeting countries that carry out huge volume of trade with Tanzania.
The DRC accounts for about six per cent of total exports from the EAC countries.
“Uganda, Rwanda, Zambia, Kenya, Malawi and Comoros are our neighbours with so much trade with Tanzania. CRDB is well positioned to serve those customers, but is still dependent on our mode of entry,” said Mr Nsekela.
Key to expansion
“We need to leverage on technology rather than a physical presence that requires heavy capital investment. With partnership, technology will be key to our expansion and will be the differentiating factor.”
CRDB has a 23.3 per cent market share in terms of deposits and 20.2 per cent in terms of loans in Tanzania’s banking industry, with more than Tsh6.6 trillion ($2.83 billion) worth of assets, according to the unaudited financial statements for Q1 of 2020.
During the three months to March 31 this year, CRDB’s net profit increased 3.2 per cent to Tsh32 billion ($13.76 million) from Tsh31 billion ($13.33 million) in the same period last year helped by growth in both interest and non-interest income.
Deposits grew by 17 per cent to Tsh5.04 trillion ($2.16 billion) from Tsh4.32 trillion ($1.85 billion) and net loans by 10 per cent to Ksh3.48 trillion ($1.49 billion) from Ksh3.16 trillion ($1.35 billion). The bank has 243 branches and offers financial services to over three million customers comprising individuals, micro, small and medium-sized enterprises and large corporations.
