These are in essence banks with a limited license prohibiting the issue of checking accounts, but enjoying a lower capital adequacy requirements and no minimum reserve requirements. Total assets of the nonbank financial institutions are equivalent to only 6 percent of commercial bank assets.
The three large domestic banks (National Bank of Commerce (NBC), National Microfinance Bank (NMB), and Cooperative and Rural Development Bank (CRDB)) account for 49 percent of the system’s assets; the four subsidiaries of major international banks (Citibank, Standard Chartered, Stanbic, and Barclays) account for a further 41 percent; and 14 small banks account for the remainder. NMB is the only large bank in state ownership.
The lending rates and the spread declined from about 20 percent and 16 percent, respectively, in early-2001 to the current levels in early-2002 and stayed generally flat since.
Turnover is showing an upward trend, however. It has gone up from US$517 million in 2000 to US$845 million in 2002. In the first four months of 2003 the total turnover was nearly US$300 million, with the number of transactions ranging from 6 to 10 per day.
The global economic slowdown and the security concerns pose near-term macroeconomic challenges, especially to the Zanzibar’s tourism industry.
Budgetary support includes both program and project aid.
People’s Bank of Zanzibar and Delphis Bank account for 1.5 percent and 0.2 percent of the banking system’s assets, respectively.
The loan portfolios of the three banking institutions that are still owned by the government are small and appear either healthy (NMB and TIB) or well provisioned (TPB).
In calibration of the scenarios, no historical shocks offer guidance as the financial system is relatively new and there have not been major shocks in recent years. The scenarios were calibrated in consultation with BOT staff with the aim to identify exceptional but plausible shocks.
Excess liquidity has been on average over 3 percent of broad money between 1999 and end-2002.
Although available, standing facilities are not currently used as an operative instrument of monetary policy owing to the presence of excess liquidity in the banking system. The reserve requirement, which is currently at 10 percent, has been coming down over the years and the authorities are unwilling to increase it again as a means of sterilizing excess liquidity.
It is believed that the appetite for longer duration securities dissipated because of the issuance strategy employed by the BOT in terms of maturities, volumes and timing.
Mean while, it seems unduly restrictive to require any loan above 5 percent of a bank’s capital to be over-collateralized at 125 percent of value. A relaxation of this rule would go some way to easing the availability of credit for those unable to easily produce sufficient acceptable collateral.
A fifth banking institution, the National Bureau de Change, seems to have no distinctive social role and should be liquidated if no buyer can be found.
The proposed strategy is to sell its franchise to a reputable private bank so that it can resume normal commercial banking activities in Zanzibar on a commercial basis.
A privatized NMB may be able to exploit local monopoly power, for example, in charges made for government payments to remote areas, so coordination with the future strategy for TPB—the only potential competitor for NMB in this area—is necessary.
See Part I of the FSSA report for more details on the industry structure and macro prudential setting.
This area was assessed based on the IMF’s MFP Transparency Code, No detailed assessment was carried out, however.