<ul><li>TANZANIA @ 50 AND BEYOND: ENGAGING ITS DIASPORA </li></ul><ul><li>Challenges of the past, Opportunities for the Fu...
Outline <ul><li>An overview of TZ’s development process and diaspora engagement. </li></ul><ul><li>Diasporas and developme...
Overview (1) <ul><li>The Tanzania’s financial sector development history can be divided in two distinct phases: Prior - an...
Overview (2) <ul><li>Post 1991 (the 2 nd  phase): Was characterized by: </li></ul><ul><li>Comprehensive financial reforms ...
Overview (3) <ul><li>Following the economic and financial reforms macroeconomic and financial stability in the economy was...
Diasporas have a role to play in developing home economies (1) <ul><li>A major interest driving diasporas for development ...
Diasporas have a role to play in developing Home Economies (2) <ul><li>Successful story elsewhere should teach us a lesson...
Diasporas have a role to play in developing Home Economies (3) <ul><li>In East African Region: </li></ul><ul><li>Remittanc...
Opportunities for Diaspora Engagement (1) <ul><li>A: Continued macroeconomic and financial stability: </li></ul><ul><li>Th...
Opportunities for Diaspora Engagement (2) <ul><li>Non-performing loans rose but still within target : NPL ratio at end-Dec...
Opportunities for Diaspora Engagement (3) <ul><li>Banks are reducing their lending rates  in line with money markets devel...
Opportunities for Diaspora Engagement (4) <ul><li>Inflation is generally under control, save for the inflation spike in 20...
Opportunities for Diaspora Engagement (5) <ul><li>On account of the macroeconomic stability, GDP continued to register str...
Opportunities for Diaspora Engagement (6) <ul><li>B: Government’s high commitment to structurally transforming the economy...
Opportunities for Diaspora Engagement (7) <ul><li>C: Measures taken remove obstacles to short - and long-term lending, dee...
Opportunities for Diaspora Engagement (8) <ul><li>D: Government securities: </li></ul><ul><li>Broadened investor base in g...
Opportunities for Diaspora Engagement (9) <ul><li>E: Facilitating Diaspora remittances : </li></ul><ul><li>Regulated under...
Challenges Going Forward <ul><li>In the next 50 years, Tanzanians in the diaspora are likely to play a greater role in  Ta...
Challenges Going Forward <ul><li>Supporting the participation of diaspora in partnership with the public  and private sect...
<ul><li>THANK YOU FOR LISTENING ! </li></ul>
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Bank of Tanzania - Presentation

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Courtesy of BoT as presented at Diaspora III Conference In London May 2011 Edition.

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Bank of Tanzania - Presentation

  1. 1. <ul><li>TANZANIA @ 50 AND BEYOND: ENGAGING ITS DIASPORA </li></ul><ul><li>Challenges of the past, Opportunities for the Future: A Case of the Financial Sector </li></ul><ul><li>Wilfred Mbowe </li></ul><ul><li>Bank of Tanzania </li></ul><ul><li>Presented at the Diaspora London 3 Conference, 6-7 May 2011, London </li></ul>
  2. 2. Outline <ul><li>An overview of TZ’s development process and diaspora engagement. </li></ul><ul><li>Diasporas and development process: a world perspective. </li></ul><ul><li>Opportunities for diaspora engagement in Tanzania. </li></ul><ul><li>Challenges going forward. </li></ul>
  3. 3. Overview (1) <ul><li>The Tanzania’s financial sector development history can be divided in two distinct phases: Prior - and post 1991. </li></ul><ul><li>Prior 1991 : the financial sector was predominantly under state control—characterized by high monopolistic tendencies. </li></ul><ul><li>The private sector was discriminated through a system of preferential interest rates limiting its role in economic development. </li></ul><ul><ul><li>By 1973, the share of banking system’s credit to government had reached around 80%, before persistently rising to the peak of 93% in 1987. </li></ul></ul><ul><li>High macroeconomic instability –characterized by double digit inflation and low and unstable economic growth. </li></ul><ul><li>In 1986, comprehensive reforms were undertaken to build a private sector led economy, but no deliberate effort was directed into engaging Tanzanians in the diaspora. </li></ul>
  4. 4. Overview (2) <ul><li>Post 1991 (the 2 nd phase): Was characterized by: </li></ul><ul><li>Comprehensive financial reforms to liberalize the sector, accompanying the broad economic reforms started in 1986. </li></ul><ul><ul><ul><li>The aim of the reforms was to put in place conducive environment for free market operations and improve provision of financial services to support economic growth . </li></ul></ul></ul><ul><li>Key Legislation milestones: </li></ul><ul><li>BAFI Act (1991) reintroduced competitive banking abolished in 1967. </li></ul><ul><li>Foreign Exchange Act (1992) liberalized external trade and foreign exchange. </li></ul><ul><li>Capital Market Act (1996) gave way to the establishment of DSE in 1998. </li></ul><ul><ul><ul><li>In 1995, BoT Act (1995) refocused BoT’s primary objective to price stability—as a means of achieving sustainable economic growth. </li></ul></ul></ul><ul><ul><ul><li>The drive towards price stability was broad based as the government also adopted a more responsible cash budget system in 1996/97. </li></ul></ul></ul>
  5. 5. Overview (3) <ul><li>Following the economic and financial reforms macroeconomic and financial stability in the economy was restored: </li></ul><ul><li>Generally, inflation has declined to low single digits from double digit levels (30% on average) in the 1980s through the first half of the 1990s. </li></ul><ul><li>Economic growth is buoyant, averaging 7 percent a year since 2000. </li></ul><ul><li>The economy has been diversified from agricultural to include other sectors such as trade and services particularly tourism and transport. </li></ul><ul><li>Public finances are sound with low debt/GDP ratio of around 35% over the past five years, well below regionally required ratio of less than 60%. </li></ul><ul><li>In addition , there has been high political will to engage the Diaspora— especially since 2005—in economic development process. </li></ul>
  6. 6. Diasporas have a role to play in developing home economies (1) <ul><li>A major interest driving diasporas for development studies is the perceived importance of the impact of transnational populations in the development process. </li></ul><ul><li>Orozco (2003) summaries the economic involvement of diaspora under the ‘Five Ts’: “Tourism, Transportation, Telecommunications, Trade, and Transmission of monetary remittances” </li></ul><ul><li>Other studies suggest that significant amount of diaspora remittances is used for direct consumption </li></ul><ul><ul><li>Hence, the need to increase the money’s impact on economies by directing it into long term investment and savings. </li></ul></ul>
  7. 7. Diasporas have a role to play in developing Home Economies (2) <ul><li>Successful story elsewhere should teach us a lesson! </li></ul><ul><li>Bangladesh : attractive policies and citizenship rights, diaspora engaged in medium scale investment. </li></ul><ul><li>India: Targeted policies along with growth in national economy helped attract large scale investment by members of its diaspora in areas such as airlines, electronic media, IT, and deposits. </li></ul><ul><li>The Philippines: It also experienced a growth of IT and diaspora charity (hospitals, roads). </li></ul><ul><li>Ghana: issued a 5 year Government bond to encourage long-term savings and investment among Ghanaians including diaspora. </li></ul>
  8. 8. Diasporas have a role to play in developing Home Economies (3) <ul><li>In East African Region: </li></ul><ul><li>Remittances to: Kenya stood at USD641.9 million in 2010 ; </li></ul><ul><li>Uganda : USD 914 million in 2010. </li></ul><ul><li>Rwanda: USD126.1 million (at end-July 2010). </li></ul><ul><li>For Tanzania , remittances (compensation of employees and workers remittances from abroad): </li></ul><ul><ul><li>Has been increasing over time, </li></ul></ul><ul><ul><li>But very small at USD 25 million in 2010 (aver. of 22.3 million btn 2008 and 2010). </li></ul></ul><ul><li>Going forward, economic and financial achievements in Tanzania offer windows of opportunities important for enhancing diaspora’s participation in development process. </li></ul><ul><ul><li>This includes financial transfers in form of FDI, trade, remittances, savings, start-up or business investments, purchase of real estate and humanitarian support. </li></ul></ul>
  9. 9. Opportunities for Diaspora Engagement (1) <ul><li>A: Continued macroeconomic and financial stability: </li></ul><ul><li>The sector’s assets continue to grow : it grew by 25.42% in 2010, to TZS 12.52 Trillion (equivalent of USD 8.39 billion). </li></ul><ul><li>Overall the banking sector is adequately capitalized : capital stood TZS 1.33 trillion at end Dec. 2011, from TZS 1.26 Trillion in corresponding period a year earlier. </li></ul><ul><li>The ratio of Core Capital to Risk Weighted Assets was 18.3% compared with legally minimum requirement of 10%. </li></ul><ul><li>Overall liquidity of the sector continues to be high : the ratio of liquid assets to demand liabilities was 46.08% against 46.38% in the previous year— being above the minimum requirement of 20% for individual institutions. </li></ul><ul><li>As at end-Jan. 2011, total official reserves was USD 3,925.7 million, up from USD 3,589.6 million in January 2010— reserves were enough to cover 5.2 months of import of goods and services. </li></ul>
  10. 10. Opportunities for Diaspora Engagement (2) <ul><li>Non-performing loans rose but still within target : NPL ratio at end-Dec 2010 was 9.32% above 6.60% in Dec. 2009, but slightly below the internationally accepted ratio of less than 10%. </li></ul><ul><ul><li>Compensation for loss provided to exporters in the form of financing their loan repayment obligations indirectly reduced exposure of banks to a build up on NPLs – thus, partly helped to secure financial stability . </li></ul></ul><ul><li>Private sector credit to total credit continues to be high: 90% of total banking system credit in 2010, compared with 29.0% in 1995. </li></ul><ul><li>And the ratio of private sector credit to GDP more than doubled: from 7.2% in 1995 to over 18% in 2010. </li></ul>
  11. 11. Opportunities for Diaspora Engagement (3) <ul><li>Banks are reducing their lending rates in line with money markets developments and decline in credit risks as reflected by waning interest spread. </li></ul>
  12. 12. Opportunities for Diaspora Engagement (4) <ul><li>Inflation is generally under control, save for the inflation spike in 2009, following adverse weather conditions and rise in energy prices. </li></ul>
  13. 13. Opportunities for Diaspora Engagement (5) <ul><li>On account of the macroeconomic stability, GDP continued to register strong growth despite GFC—GDP grew from 1.4% in 1994 to about 7.0% since 2001. </li></ul>
  14. 14. Opportunities for Diaspora Engagement (6) <ul><li>B: Government’s high commitment to structurally transforming the economy, including: </li></ul><ul><li>Enhancing productivity in agriculture and difficulties in reaching profitable markets, including: </li></ul><ul><ul><li>Programs under ASDP, complemented by Kilimo Kwanza A ction Plan which includes road construction, market improvement and irrigation , and SAGCOT. The later two initiatives put greater emphasis on PPP potentials. </li></ul></ul><ul><li>Transforming Tanzania from a gateway for transit trade to its landlocked neighbors to hosting labor-intensive industries to serve the same markets, including: </li></ul><ul><ul><li>Implementation of special economic zone, SME policy and Tanzania Trade Integrated Strategy. </li></ul></ul><ul><ul><li>Improving infrastructure and connectivity with neighbors to fully benefit from regional trading arrangements (EAC and SADC)— in the medium term, more infrastructure projects to be developed through PPP arrangements. </li></ul></ul>
  15. 15. Opportunities for Diaspora Engagement (7) <ul><li>C: Measures taken remove obstacles to short - and long-term lending, deepening financial intermediation, and helping develop the financial system. </li></ul><ul><li>Long-term Finance Facilities: </li></ul><ul><ul><li>The Tanzania Investment Bank (TIB) was launched a development financial institution in 2010 to support the development of SMEs – a window for lending to agriculture has been provided. </li></ul></ul><ul><li>Launching of Agricultural Development Bank under a PPP framework to support the implementation of Kilimo Kwanza, is at final stages. </li></ul><ul><li>Credit Guarantee schemes have been established to enhance Exports and SMEs development. The schemes leverage commercial bank credit to these enterprises through mitigating risk. </li></ul><ul><li>Lease Finance : to enable SMEs to finance capital equipment using the same as collateral. Regulations to operationalise the lease finance have already been prepared.. </li></ul><ul><ul><li>Mortgage finance : </li></ul></ul><ul><ul><ul><li>Facility to provide medium and long-term liquidity to mortgage lenders. </li></ul></ul></ul><ul><ul><ul><li>Housing Microfinance has been set up to provide longer-term loans to low income group. </li></ul></ul></ul><ul><ul><ul><li>Affordable Housing supply fund to support the development of a private developer industry and promote use of lower cost construction technologies. </li></ul></ul></ul>
  16. 16. Opportunities for Diaspora Engagement (8) <ul><li>D: Government securities: </li></ul><ul><li>Broadened investor base in government securities: by reducing the threshold for direct investors in stages: from about TZS10 million (around USD 70,000) to TZS 500,000 (around USD350). </li></ul><ul><li>Move from the current tender box bidding system to online bidding system for government securities auction (in two-year time) to ease accessibility by the diaspora and investors worldwide. </li></ul><ul><li>Full capital account liberalization (by 2015) to ease flow of remittances from the diaspora and investors worldwide— this will increase participation, and thus, enhance innovation. </li></ul><ul><ul><li>Progress on measures taken to liberalize capital account: </li></ul></ul><ul><ul><ul><li>A list of laws and regulations which need to be amended already identified by a National Task Force. </li></ul></ul></ul><ul><ul><ul><li>The Bank has started reviewing the Foreign Exchange Act of 1992. </li></ul></ul></ul>
  17. 17. Opportunities for Diaspora Engagement (9) <ul><li>E: Facilitating Diaspora remittances : </li></ul><ul><li>Regulated under the Foreign exchange Act of 1992 and the Anti Money Laundering (AML) Act of 2006: </li></ul><ul><ul><li>Banks and Money Transfer Operators (MTO) are authorized to offer international money transfer services. MTO (e.g. Western union, Money Gram and CoinStar) are required to partner with local banks. </li></ul></ul><ul><li>However, Money Transfer Operators dominate the market with approximately 70% of the Tanzanian market share. </li></ul><ul><li>To increase competition, and thus, reduce cost of transferring money from abroad, the Bank encourages financial institutions on their own or any legal person to partner with local banks to offer money transfer services. </li></ul><ul><li>Meanwhile, Mobile Network Operators in collaboration with local banks are in consultation to start offering international mobile payments—M-Pesa has applied. </li></ul>
  18. 18. Challenges Going Forward <ul><li>In the next 50 years, Tanzanians in the diaspora are likely to play a greater role in Tanzania’s development process. </li></ul><ul><li>To attain this, there is a need for Tanzania to strengthen ties with its diaspora. </li></ul><ul><li>A number of challenges: </li></ul><ul><li>Identifying development needs and priorities in Tanzania. </li></ul><ul><li>Identifying partners among diasporas and recognizing their own agenda—including building databases listing diaspora networks and their initiatives. </li></ul>
  19. 19. Challenges Going Forward <ul><li>Supporting the participation of diaspora in partnership with the public and private sectors; academia; and NGOs— to tally diaspora inputs to identified development needs. </li></ul><ul><li>Indentifying the obstacles that diaspora perceive as barriers to their contributions— such as lack of an appropriate transport. </li></ul><ul><li>Adopting incentives that will attract diaspora to participate in development programs—such as dual citizenship, property rights, national or special identification cards; access to credits; and remittance transfer services at low rates. </li></ul><ul><li>It is my hope that this Conference will get time to deliberate on some of these issues to enable the country to engage its Diaspora in a more productive way. </li></ul>
  20. 20. <ul><li>THANK YOU FOR LISTENING ! </li></ul>

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