Tanzanian banks ‘ready to adopt digital currency tech’

According to Ernst & Young’s Tanzania Banking Sub-Sector Report 2023, the banking industry demonstrated robust growth, with total assets valued at Sh54.1 trillion and customer deposits reaching Sh36.1 trillion.

Profit after tax also surged by 71.4 percent from Sh875 billion in 2022 to Sh1.5 trillion in 2023.

CRDB Bank Plc chief executive Abdulmajid Nsekela confirmed the bank’s proactive efforts in this direction.

“As you know, the financial landscape is rapidly evolving, with blockchain and digital currencies gaining significant attention globally. At CRDB Bank, we are closely monitoring these trends and their implications for our operations and our customers,” he said.

In January 2023 the BoT issued a public notice outlining its research in the area of digital currencies.

“Upon conclusion of the research phase, the Bank will provide information to the general public on the way forward, which may include a roadmap for transition to adoption of CBDC,” the central bank said in its statement released through the Directorate of Financial Deepening and Inclusion.

Mr Nsekela said as developments in this area unfold, CRDB Bank is proactively preparing systems to ensure that the lender can seamlessly integrate these technologies once they become operational in Tanzania.

“Our commitment to innovation means that we are investing in the necessary infrastructure and expertise to handle digital currency transactions and blockchain technology effectively.

“We believe that these advancements have the potential to enhance financial services, improve transaction efficiency and provide our customers with greater accessibility,” he said.

Tanzania Commercial Bank (TCB) chief executive Adam Mihayo also affirmed the bank’s digital readiness.

“We are ready to act once the Bank of Tanzania provides the relevant guidelines. TCB has always been at the forefront of championing digital innovation as seen in our recent launch of a digital platform for community savings groups,” he said.

Mr Mihayo added that TCB’s proactive approach to digital innovation reflects its commitment to developing creative solutions and keeping pace with the fast-changing financial landscape.

“We have demonstrated digital readiness by consistently launching innovative products. So, when the regulatory environment aligns, we will be ready to embrace these opportunities.”

Industry analysts have also noted that embracing digital currencies will attract foreign investment and stimulate fintech innovation.

“Tanzania is in a good position to leverage these technologies and build a more inclusive and technologically advanced economy,” the Ernst & Young report suggests.

Seasoned banker and financial analyst Kelvin Mkwawa said that going by the capacity of banks in Tanzania, there is potential to put in place systems that support digital currency trading.

“However, banks have yet to invest in this area, as digital currencies are neither approved nor widely adopted. That said, the capability to make such investments exists if needed,” he said.

Mr Mkwawa emphasised the need for public education, pointing out that there is still hesitation among users.

“Many people are reluctant to engage with digital currencies due to the lack of clear regulations. Without recognised frameworks, it becomes difficult for users to assess risks or know where to turn to in case of disputes.”

Mr Mkwawa further noted that increased public demand and awareness could prompt the government to fast-track the drawing up of regulations.

“If public interest grows and awareness increases, the BoT may accelerate its decision-making process on regulations, thus encouraging banks to invest in digital currency systems,” he said.

BoT's position

BoT governor Emmanuel Tutuba told The Citizen that the central bank has been looking into the possibility of establishing a CBDC since May with the development of a concept note and work is expected to be concluded next year.

He said the study will encompass the entire ecosystem, examining crucial aspects such as security, market dynamics, distribution methods and transaction processes, among others.

"This research is vital, especially since several countries that adopted this technology encountered significant challenges and ultimately abandoned it. We must proceed cautiously to prevent any risk of financial loss for our citizens."

Mr Tutuba said Tanzania currently relies on mobile money transactions, underscoring the importance of this research to identify potential improvements and ensure a secure transition to digital currency.

Additional reporting by Rosemary Mirondo