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COUNTRY EXPERIENCE

Explore the economic developments and banking sector resilience in Tanzania, the role of the Deposit Insurance Board, lessons learned from handling bank failures, and challenges faced. Understand the importance of maintaining public confidence in the financial system and the need for effective intervention strategies.

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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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