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Pursuing efficiency while maintaining outreach: Bank privatization in Tanzania

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  • Cull, Robert
  • Spreng, Connor P.

Abstract

Profitability improvements after the privatization of a large state-owned bank might come at the expense of reduced access to financial services for some groups, especially the rural poor. The privatization of Tanzania's National Bank of Commerce provides a unique episode for studying this issue. The bank was split into the "new" National Bank of Commerce, a commercial bank that assumed most of the original bank's assets and liabilities, and the National Microfinance Bank, which assumed most of the branch network and the mandate to foster access to financial services. The new National Bank of Commerce's profitability and portfolio quality improved although credit growth was slow, in line with the privatization experiences in other developing countries. Finding a buyer for the National Microfinance Bank proved very difficult, although after years under contract management by private banking consultants, Rabobank of the Netherlands emerged as a purchaser. Profitability has since improved and lending has slowly grown, while the share of non-performing loans remains low.

Suggested Citation

  • Cull, Robert & Spreng, Connor P., 2011. "Pursuing efficiency while maintaining outreach: Bank privatization in Tanzania," Journal of Development Economics, Elsevier, vol. 94(2), pages 254-261, March.
  • Handle: RePEc:eee:deveco:v:94:y:2011:i:2:p:254-261
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    Cited by:

    1. Brissimis, Sophocles N. & Delis, Manthos D., 2011. "Bank-level estimates of market power," European Journal of Operational Research, Elsevier, vol. 212(3), pages 508-517, August.
    2. Said Seif Mzee, 2014. "Cost and Profit Efficiency and Management Behaviour of Commercial Banks (Evidence from Tanzania)," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(10), pages 1447-1460, October.
    3. Bos, Jaap W.B. & Millone, Matteo, 2015. "Practice What You Preach: Microfinance Business Models and Operational Efficiency," World Development, Elsevier, vol. 70(C), pages 28-42.
    4. Thorsten Beck & Michael Fuchs & Dorothe Singer & Makaio Witte, 2014. "Making Cross-Border Banking Work for Africa," World Bank Publications, The World Bank, number 20248.
    5. Thorsten Beck & Robert Cull, 2013. "Banking in Africa," CSAE Working Paper Series 2013-16, Centre for the Study of African Economies, University of Oxford.
    6. repec:eee:reveco:v:53:y:2018:i:c:p:88-97 is not listed on IDEAS
    7. Thorsten Beck, 2015. "Cross-Border Banking and Financial Deepening: The African Experience," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 24(suppl_1), pages 32-45.
    8. Alexandra ZINS & Laurent WEILL, 2017. "Do Pan-African Banks Have the Best of Both Worlds?," Working Papers of LaRGE Research Center 2017-05, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    9. Clarke, George R.G. & Cull, Robert & Fuchs, Michael, 2009. "Bank Privatization in Sub-Saharan Africa: The Case of Uganda Commercial Bank," World Development, Elsevier, vol. 37(9), pages 1506-1521, September.

    More about this item

    Keywords

    Bank privatization Tanzania Africa Access to finance;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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