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Recent African experience in SME Financing – A case of CRDB Bank LTD (Tanzania) Presented by Elibariki Masuke. Presentation Outline. Country Profile CRDB Bank Ownership CRDB Bank Mission and Vision CRDB Bank’s performance Why SME Lending Definition of SMEs at CRDB Bank
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Presented by Elibariki Masuke
Tanzania is located in East Africa and the
countries boundaries are as follows;
(Mount Kilimanjaro, Lake Victoria, Serengeti
Natinal Park and Ngorongoro crater)
Congo (Lake Tanganyika)
Selous game reserve
* Source: BOT (Bank Of Tanzania) and Ministry of Planning, Economic and Empowerment
Overview of Bank’s performance by end of 1st quarter of 2007 was as follows;
Most commercial banks in Tanzania Including CRDB Bank cannot escape doing and expanding business with the SME segment, due to severe competition for the small corporate market.
Due to this dilemma CRDB Bank has been forced to modify the traditional banking philosophy and practice and search for methodologies of addressing the problems inherent in financing of small and medium enterprises in Tanzania.
SMEs have been given many definition Worldwide but CRDB Bank defines SMEs are those with;
CRDB bank conducted a survey to find out what problems were hindering SMEs from accessing finance from the Bank and the following were the major outcomes;
High cost of screening and administering small loans spread over big areas. Absence of Credit Rating Agencies (CRAs: CRAs tend to reduce the unit costs of credit screening by exploiting economies of scale.)
-SMEs are not transparent in their accounting records and financial statements;
-auditing firms have failed to disclose to the public the true and fair financial assessments.
3.1 To design customised products for SMEs
The bank had developed two credit products for SMEs which are working capital loan and Investment loan
a) The bank had to recruit new staff who specifically
deals with SMEs at branch level and head office level
b) All recruited staff had to undergo an intensive training (class and field training)
financial statements from theSME primary data.
want to borrow between TZS 1,000,000 to TZS20,000,000
Capacity building for SMEs
Increase the range of collaterals accepted by the bank
Before implementation of SMEs concept, the bank used to require only traditional collateral.
Under SME scheme the bank has widened the range of acceptable collaterals to include non traditional collaterals such as Residential Licence (Leseni za Makazi), properties with offer letters, used motor vehicles and machines etc.
Introduction of Customer relationship concept at Branch level
been introduced at branch level
The SME concept was implemented as a project in year 2005 . The project has been a success with tremendous growth in terms of portfolio and number of customers.
The status of the project by May 2007 was as follows;
Evaluation is done on individual customer to measure the impact on:
The outcome shows that customers have:
The above resulted in clean loan portfolio for the Bank
The Government is playing a remarkable role in the market by making continuous reform on the following major area that leads to conducive market environment:
This segment is profitable but investment to train staff and customers is of supreme importance to uphold the profitability
1) Communicate clearly to targeted audience prior and after reforms
2) Speed up roll out of projects such as Leseni za Makazi (Formalization of non traditional security)
3) Improve legal and regulatory framework that create conducive climate for SME lending
Capacity Building to Staff
Training of Customers