With a balance sheet of 14 trillion Tanzanian shillings (about $5.3bn) and a growing footprint across the east African region, the CRDB Bank is now the largest commercial bank in Tanzania.

Current managing director and group chief executive officer Abdulmajid Mussa Nsekela first joined in 1997 as a bank officer – and has played an important role in changing the bank’s fortunes since taking on the leadership. Since then, the bank’s cost-to-income ratio has receded to under 50% (it was above 60%); non-performing loans have shrunk from around 11% to 2.9%; and profits have grown by 500% over this period.

Technology focus

The turnaround strategy, which Nsekela concedes was already in motion when he assumed office, was based on three pillars. “The first was to fix the existing machine. Second was about creating an enabler and the last was to build a bank of the future.”

What he added, he explains, was to reform the operating model, to assess and leverage the opportunities available, and to infuse technology into the operations of the bank.

“Our cost-to-income ratio was quite significant, so we had to look at how to become more efficient and that meant cutting costs,” he reflects. In practice that entailed automating more of the bank’s processes and moving back-office staff to the front office. The bank also had to consolidate some of its activities, such as integrating its microfinance division into its mainstream operations.

Digitalisation was a big part of the effort. “We automated the processes of onboarding through our digital channels, using mobile phones. We automated credit rating and underwritings. We also automated in terms of monitoring and provisions of our credit performance,” Nsekela recalls. That also meant that the bank was able to move away from a branch-heavy approach to customer contact. With over 200 branches at the time, a decision was made not to build more, but to provide alternative channels for customers to engage with the bank.

“As we speak today, digital services account for 97% of our services and branch operations are only 3%,” Nsekela says. Another effect of this rationalisation, he explains, is that it freed up the bank’s human resources for growth-focussed activities.

Women, youth and startups

There has also been a shift in portfolio management in the last five years. The bank, under Nsekela, has broadened its attention to micro, small and medium-sized enterprises; but with a decided twist. “In moving towards a more mass market, we asked ourselves what the best approach was and we decided to focus on women, the youth and startups. So we came up with a framework that more or less put us in an advisory position to our clients.”

The bank has customised its offerings for micro, small, and medium enterprises (MSMEs) to address their unique needs. That involves digitising its services for a segment of the market that prizes efficiency and speed. It has also created space for more one-on-one relationships with customers.

Lastly, Nsekela says, CRDB has offered tailored solutions for traders and small businesses by taking what he describes as a supply-chain approach, evolving from a traditional focus on short term financing that has been shown to be unhelpful to MSMEs. For example, the bank has linked traders with market buyers or off-takers, creating contract-based arrangements and asset financing frameworks. The bank has also aligned its agriculture financing with environmental challenges, becoming the only accredited entity by the Green Climate Fund in 2019.

Reinventing the business

The bank is now moving toward another three-pronged strategy – to reinvent the business; to grow it; and future-proof the bank. It is on this tripod that the bank’s ambition to become a leading player in the region rests. Nsekela believes it has a unique value proposition and that its success with SMEs and around financial inclusion gives it an edge.

In its first forays into the region, CRDB has applied diverse approaches. In Burundi, it opted for a partnership approach, teaming up with World Fund and Danish investment fund Investeringsfonden for Udviklingslande, each contributing 22.5% equity, while CRDB retained 55% majority ownership.

In the DRC the bank opted for a “greenfield approach”, which Nsekela says allows the bank to “nurture our customers and staff and to embed our cultures and our operating framework. Either way, he says, “there is great opportunity in the region.” In the DRC, the bank saw an opportunity in a market that is fragmented and less digitised, “so we had the chance to offer solutions”.

Regional expansion, however, is only one part of what it is trying to achieve. Nsekela says that the bank wants to become a 360-degree service provider. It has branched into insurance, for example, in pursuit of this ambition.

It also wants to reach the parts of the market that remain outside the reach of the financial sector. “If you look at the population in Tanzania, we’re talking about 61m people but the banking sector reaches only around 22% of them. So the opportunity is still there,” he notes.

Investments in technology also mean that the bank is able to integrate its operations across the three countries where it is now present. “Over the course of our five-year plan, we want to grow our asset base to Tzs 20 trillion ($10bn) and bring our cost-to-income ratio further down to 35%” Nsekela declares.

Much will depend on the partnerships that CRDB is able to nurture. “We have two frameworks for partnership – one for the local market and another for the global market,” Nsekela explains. In the local market, the bank has focused on agriculture as a key sector, taking a value-chain approach to support stakeholders in the sector. This includes creating stakeholder maps, supporting the value chain, and entering into three-party agreements with the Ministry of Agriculture, offtakers and farmers to ensure effective monitoring and assessment.

The bank has also partnered with the government and other stakeholders to support large infrastructure projects such as the Standard Gauge Railway (SGR). Working closely with the government, suppliers and other stakeholders, the bank has been able to provide bespoke financing while observing value for money principles, Nsekela says. All of this has been key to the growth of the last few years as has been the just do it approach it has adopted. “We ask ourselves how we can innovate and then we execute the solutions immediately,” Nsekela says.

Partners for growth

Partnerships have been key to helping an indigenous bank such as CRDB grow, he says. Partners include the Africa Guarantee Fund, African Export-Import Bank and the International Finance Corporation, which was until 2020 an equity partner. These partnerships have enabled CRDB to extend lending to women, support traders with lines of credit and generally be a reliable partner for MSMEs in the region.

The bank’s expansion strategy is also driven by economic diplomacy and infrastructure development initiatives between East and Central African countries, where Tanzania plays a key role. As Nsekela notes, “there are ongoing discussions between these countries in terms of infrastructure, infrastructure improvement, where basically the CRDB will obviously be participating.” By establishing a presence in these markets, CRDB Bank can support trade and investment flows, foster financial inclusion, and build a stronger regional presence.

Taking advantage of these opportunities in a market that is as informal as the African market generally is, requires some creativity and Nsekela insists that CRDB is up to the task, pointing to its loan programme in Tanzania as an example. “Recently, we have partnered with telcos to enable Tanzanians to borrow up to $1,000 digitally, right from their mobile phones. We completely digitised the entire loan process, eliminating the need for paperwork and physical visits to our branches. This not only improved the customer experience, but also significantly reduced our operational costs, from acquisition to management.”

Nsekela is not short of ambition for the bank. “Under our 5-year strategy, we are looking to be number one. We already are in Tanzania and Burundi, where we started at seventh. But we want to compete in the DRC and we are also looking at Zambia, Uganda, and Kenya.”

The rubber of these ambitions will however be tested when they meet the road of reality, with regulatory changes expected in Tanzania, a complex terrain in the DRC and the enduring uncertainties of the global economy.