Sound macroeconomics underpins CRDB's spectacular growth

CRDB Bank is now Tanzania's largest financial services provider by assets and has a 25% market share. It is rooted in the country's post-independence history. Following the denationalisation strategy of the Tanzanian government, the bank was privatised in 1996 and became CRDB Bank.

The bank has set itself ambitious but achievable targets for its growth. It plans to treble its current TSh20trn ($) balance sheet to TSh60-70trn ($24-28bn) over the next decade. It also expects to increase its foreign footprint from the current three countries to more over the same period. This would place it firmly among the ranks of the continent's fastest-growing financial institutions.

"We're always guided by a long-term vision," explains Prof. Mori, the bank's chairperson. "Our strategic plans typically run in five-year cycles. The current strategy, which began in 2023, will take us through to 2027. After that, we'll embark on the next five-year plan, which will represent another phase of our growth journey."

CRDB Bank is already registering annual growth figures of 20-30%. Mori credits this to a combination of factors. "Yes, the [national] economy is expanding at about 6%, but our growth has been faster because of how diversified our business is. We serve the public sector and government institutions, but our main focus remains the private sector."

The private sector has benefitted from a wave of policy reforms designed to make Tanzania more attractive to investors.

"The government has done a lot to improve the business environment, making it easier for local entrepreneurs to thrive and for international investors to come in. At the same time, major infrastructure projects are being rolled out, and we've been active in providing financing for those."

Tanzania's macroeconomic stability has also been critical to CRDB Bank's sustained success. The country's inflation rate has remained relatively low, hovering below 5%, which is as much good news for the bank as it is for borrowers.

"Stable inflation and a steady currency have been very helpful for us," Mori explains. "When prices aren't rising sharply and the shilling remains stable, it gives us predictability in how we operate.

"When we issue a loan that, for example, matures in five years, we can do so knowing that the borrower won't face unexpected inflation shocks that make repayment difficult. Because prices are stable, our clients can service their loans smoothly, and we can manage risk more effectively," she says.

The country's relatively stable inflation rate is another benefit. "When inflation is under control, it means that the salaries we pay retain their value. Our employees [over 4,000] are able to sustain their living standards, and that contributes to morale and productivity. It all ties back to the wider stability of the economy," she notes.

CRDB Bank's exposure cuts across the full economic spectrum - from microenterprises and small traders to large corporates and public entities.

"The SME sector is expanding rapidly," Mori notes. "We've seen microenterprises evolve into small businesses, small ones grow into medium-sized companies, and eventually some become large enterprises. We are supporting all these stages. That's why we're able to sustain growth rates above the national average, because we're present in every segment of the economy."

These benefits extend to the bank's shareholders. More than 30% of the bank's shares are held by the public through the Dar es Salaam Stock Exchange - an uncommon level of retail participation for a listed African bank.

Alongside institutional investors and pension funds, thousands of ordinary Tanzanians own a stake in the country's largest financial institution, making CRDB Bank one of the most actively traded stocks on the exchange.

"For many years, it was believed that people were not aware of how capital markets work," Mori observes. "But what we've seen through CRDB Bank's experience is that people are becoming aware of the importance of participating in the capital markets."

Pan-African ambitions

As the bank pursues its pan-African ambitions, investor participation will become even more critical and Mori says the bank is working to bring in more people and institutions for the journey.

"We are inviting them to continue being participants because the performance is good. And we have even been doing investor meetings to invite private institutions to invest. We tell them the story. We show them the numbers. We explain what we are doing, how we are performing and invite them to become shareholders. And that's why we have shareholders from outside Tanzania and within," she says.

The bank is looking further afield than the continent. It recently became the first East Africa-domiciled bank to establish a representative office in Dubai where Mori sees opportunities and potential partnerships.

The United Arab Emirates has become one of the most dynamic hubs connecting Africa to Asia and beyond. For CRDB Bank, establishing a presence there means that it is able to serve its customers who are also expanding into the region. In the same vein, Mori adds, the Bank now has desks for countries where it sees increased activity.

Interestingly, it's exploring synergies with Air Tanzania, as travel volumes can provide an indication of where business is going or, indeed, coming from. "Looking at the way Air Tanzania flies and the way the bank is doing, you can see that we complement each other."

Due to this continuing engagement with the international market, Ms Neema Mori had made the trip to Washington for the meetings of the World Bank and the International Monetary Fund. These meetings draw the cream of the international investor and financial worlds and provide an ideal opportunity to network.

The aim is to generate interest in Tanzania's mining, agriculture, tourism and other expanding sectors. "We are also discussing how to enhance SME financing and financial inclusion. We are talking to partners in that space as well as in trade finance, because we need to support the businesspeople who are doing international transactions or international business. Our conversation has been around that," she says.

Despite the fact that an increasing number of international banks have been retreating from the continent, Mori says it is necessary to continue engaging with international partners. "We are growing and we need to engage. We need to be visible," she points out.

She adds that the bank has robust relationships with development finance institutions. "We have been doing a lot of engagements just to be able to get their buy-in and to let them know that we are very serious about what we are doing." It also helps that the regulator in Tanzania has seen to the implementation of Basel II and III, providing cover for local players to engage with international institutions with confidence.

Focus on ESG and technology

One area where CRDB Bank is putting renewed focus is environmental, social and governance (ESG) principles. While this seems to have lost favour in some quarters, Mori says that the bank remains fully committed to it. "It is important to us," she says firmly, "because when you look at it, we already had, or were practising ESG even before it started being talked about."

This is at least in part due to CRDB Bank's strong presence in Tanzania's agricultural sector, where environmental and social considerations are by their nature, necessary for success. So instead of retreating, CRDB Bank has instead doubled down. "Now we are able to implement it in a better way, in a more formalised way and that's why we have been able to produce the reports on ESG last year and this year," she points out.

Keeping up with the global technological trend, the bank is placing digitalisation at the centre of its growth strategy, part of what Mori refers to as making it a "futuristic bank".

This, she says, includes applying the full might of artificial intelligence to better serve its customers. "You cannot have a futuristic bank without really leveraging AI and the digital arena," she affirms.

The transformation is already underway. Although the bank maintains a strong physical presence across Tanzania, with 261 branches, the vast majority of transactions now occur outside traditional banking halls. "We have a lot of digital tools, digital platforms which we are using to make sure that our customers are able to access services wherever they are. 98% of transactions conducted take place outside the branch."

The bank is a strong barometer of the political climate. She says that the upcoming elections [29 October] have not disrupted the business atmosphere in any way. Mori insists that the outlook is positive, especially in the mining, energy, and real estate sectors. Infrastructure, in which the government has invested tremendously, is also expected to
open up the economy to the region and beyond.

While these growth trends offer a healthy future for the financial sector, CRDB Bank and others in Tanzania's banking sector may find themselves needing to expand even more rapidly to match the level of demand that will be occasioned.