Increasing financial inclusion through integrated support in Tanzania

A growing population, changing food patterns, and sustainable production within planetary boundaries necessitates a transformation of global food systems. Governments, households, agribusinesses and SMEs in emerging markets however lack the means to invest in such transformation. People can often only borrow from family and the local community, not from banks. The possibility to transfer money, save or get loans is crucial for personal growth and rural and business development.

From Rabobank’s mission to Grow a Better World Together, Rabo Partnerships contributes to this transformation by addressing issues that matter for the future – such as financial inclusion, rural development and agrifinance. Rabo Partnerships and NMB have a long-standing relationship dating back to 2005. NMB, as one of the largest domestic banks that focus on the mass market in Tanzania and the third largest bank in the country, has been at the forefront of financial inclusion initiatives in the Tanzanian banking system over the past 15 years. A recently published study explores the effects the partnership achieved within a five-year period between 2014 and 2019.

NMB emerged from the split of the government-owned National Bank of Commerce (NBC) in 1997. Starting in 2005, a partnership has been set up between NMB and Rabo Partnerships, which included technical assistance, an ownership stake (which since 2020 is placed under Arise, an investment and development company jointly operated by FMO, Rabobank and Norfund), and management support until 2019. Together, NMB and Rabo Partnerships made it their ambition for NMB to become a leading bank in Tanzania, especially leveraging on the bank’s outreach to rural areas and its potential to reach this previously unbanked population. In 2016, the Dutch Ministry of Foreign Affairs partnered with NMB and Rabo Partnerships to further support the transformation of NMB into a full-fledged competitive retail bank through a Public Private Partnership. The partnership has been critical in the digital transformation process and thus ultimately also for the stability of NMB. Overall, the long-standing partnership between Rabo Partnerships and NMB has helped increase outreach to marginalised groups and thus expand financial inclusion in Tanzania.

It is commonly known that economists can argue about just anything, but when it concerns development economics, everyone agrees that strong financial institutions are great enablers for economic growth. Rabo Partnerships was able to support NMB on various topics such as new distribution channels, digital innovations, management processes, and business continuity. Since 2016, NMB has increased its range of products significantly, including innovative products developed for specific target groups such as women, youth, SMEs, and agribusinesses. Some of the most successful product offerings include an account that can be opened at an agent rather than a branch and offering a mobile phone platform for the bank’s clients.

The partnership with NMB has been effective in building the capacity of the bank in a number of challenging areas such as corporate governance, risk management, IT systems or digital innovation. Unlike most other African banks, NMB has been trying in a systematic manner to reach out to farmers across all segments of the agricultural pyramid. The number of individual farmers with credit increased from 308 to over 5000 and the number of farmer cooperatives tripled over the period 2016-2019. The number of clients in the broader agribusiness sector increased by a factor of 23 between 2014 and 2019, and the volume of lending increased almost five-fold over the same period. Digitalization is a key area of support, as new technologies allow for improved financial inclusion.

“Rabo Partnerships and NMB both believed that better quality of services with higher volumes and new service channels could go hand in hand”, says Frank Nagel, Global Head of Impact Finance at Rabo Partnerships and long-time Program Director of the NMB partnership. Leveraging the success of cell phone penetration in Tanzania, one of the first services developed was sending customers an alert by SMS for account crediting. This way, customers could take on the often long journey to the bank for effective withdrawals instead of having to inquire whether their wages had already been credited.

“Probably the most impressive move was the introduction of NMB Mobile in 2009. No other bank in Tanzania at the time had been able to successfully introduce mobile banking. Because we were able to develop secure services available on virtually any feature phone, with proper marketing and attractive pricing it became a huge success with more and more people opening accounts at NMB”, adds Nagel.

Since then, NMB has continued to improve its services. An impressive agency network has been rolled out throughout the country. Customers no longer have to travel long distances for basic banking services such as cash deposits and withdrawals. And automated credit scoring helps in receiving credit just at times customer need it most. By now, NMB has a network of around 9.000 agents.

Rabo Partnerships has been involved from the early days of NMB, as a shareholder, with management support and by offering technical assistance. Rabo Partnerships’ involvement has been instrumental in turning NMB into a market leader in many areas. Most important, however, seems to be the long-term relationship that goes beyond individual assignments of consultants. For 9 years in a row now, NMB has received the prestigious Best Bank in Tanzania award. Rabo Partnerships and NMB are looking forward to extending the technical assistance framework and to include the project in the renewed Public Private Partnership up until 2023 with the Dutch Ministry of Foreign Affairs.