Banks have merged. Do you know why ?

In 2019 for example, Azania Bank acquired Bank M Tanzania Plc (Bank M), and Exim Bank Tanzania Limited established unity with UBL Tanzania Limited.

One of the main objectives behind the merging in the banking industry is to expand operations and stay competitive in the delivery of services.

In June 2020, the Bank of Tanzania (BoT) merged TIB Commercial Bank Limited with Tanzania Commercial Bank (TCB). In the same year, Mwanga Community Bank (MCBL), EFC Micro6nance Bank, and Hakika Micro Finance Bank (HK MFB) amalgamated to form Mwanga Hakika Bank, which advanced to become a commercial bank.

Furthermore, The Commercial Bank of Africa (Tanzania) Limited (CBA) and NIC Bank Tanzania Limited (NIC) merged to form NCBA Bank Tanzania Limited, a new Financial institution. A year later, the National Bank of Malawi Plc (NBM) completed the acquisition of a 51 per cent controlling stake in Akiba Commercial Bank Plc (ACB) of Tanzania. Exim Bank Tanzania Limited acquired First National Bank (FNB) Tanzania Limited in 2022 and NMB Bank Plc accrued Yetu Micro Finance Bank Plc in 2023. Also, in 2023 Access Bank Plc (Access) acquired a majority stake in African Banking Corporation (Tanzania) Limited (BancABC Tanzania).

Lastly, on June 4th, 2024, Selcom Tanzania announced the acquisition of Access Micro Finance Bank Tanzania Limited and rebranded it as Selcom Micro Finance Bank Tanzania Limited.

Executive Director for the Tanzania Institute of Bankers

Patrick Mususa, Executive Director for the Tanzania Institute of Bankers says merger and acquisition is good for banking because it consolidates businesses, while increasing protection to deposits, which account for nearly 80 percent of the industry’s assets.

“We have observed banks merging with others, once the banks are acquired or merged, it means customer deposits continue to exist because what changes is only the name,” he describes.

In August 2020, the sector witnessed the merger of Twiga Bancorp, Tanzania Women’s Bank (TWB) to Tanzania Postal Bank (TPB Bank) Plc, after the two former banks failed to meet the capital adequacy as required by the regulator.

The merger involved all assets, and workers’ debts of TWB and Twiga, which were both owned by the government, through the Treasury registrar, being transferred to TPB Bank Plc, the oldest institution in Tanzania’s Financial and banking sector.

The merger of banks is expected to create a strong capital and liquidity base, which will help to cushion risks facing the banking industry.

Kelvin Mkwawa who is a banker says the competitive and regulatory developments in the industry are the main reasons for mergers and acquisitions.

“Some of the reasons used by some banks in many M&As are aimed at growing into relatively virgin areas where competition is less, to pool together scarce resources thus having more working capital, to enter into new markets via diversification, and to improve efficiency by pooling together management skills,” Mkwawa notes.

Studies have shown that the most common one is to expand/grow; in today’s business environment, banks may have to grow to survive, and one of the best ways to grow is by merging with another bank or acquiring another bank.

Through M&A, banks can achieve significant growth in their operations, minimise their expenses, and encourage healthy competition in the banking sector. It is worth noting, however, that not all

M&A are successful and not each situation is calling for M&A as a growth strategy.

When the marketplace changes in response to external events or new laws and regulations, it can create a gap in a bank’s critical conditions. It is a prime opportunity for a strategic merger.

For example, when the government decided to bar public institutions from depositing their funds in commercial banks and implemented the Treasury Single Account (TSA) which caused a liquidity crisis in the banking industry.

Because of that, some banks lose signi6cant deposits in their balance sheet and could have looked at M&A as a growth strategy to increase their deposits and hence maintain the shareholders’ value.

Banks can use M&A to enter into new markets through diversification.

We have seen the banking industry’s main competition comes from some companies thus the banks that see some companies are partners will survive and those that do not will die.

Therefore, bank mergers are unavoidable in today’s world due to globalization and competition in financial institutions.

“By promoting M&A, we will have fewer healthier banks which will be a good way to restore discipline and con6dence in the industry” Mkwawa explains.

According to him, Banks should see M&A as an opportunity to expand their reach quicker and achieve higher productivity, diversify risk, increase efficiency, and reduce costs.

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