TIB Final Annual Report 2011.pdf - Tanzania Investment Bank

2011 

ANNUAL REPORT 

Your Partner for Growth

Our Mission 

To provide development financing and complentary services for 

diversified, vibrant and competitive National economy. 

Our Vision 

To be the premier National development financing bank for 

promoting sustained economic growth and poverty alleviation.

Our Profile 

Tanzania Investment Bank Ltd. (TIB) was established by an act of Parliament in the year 1970 following the 

recognition by the Government that there was a need for a development financial institution (DFI) to supplement 

the financing activities of the existing largely commercial banking institutions. The main objective of establishing 

TIB was to enhance the process of bringing about economic growth through development financing, particularly in 

the industrial, agricultural and service sectors. Given economic realities of today’s Tanzania, this objective is clearly 

relevant. 

The Government designated TIB a national development finance institution in August 2005 in recognition of the 

important role played by development banks in economic development and in acknowledgement of the growing gap 

for medium and long term lending within the economy. The transformation of TIB into a DFI mainly involves additional 

capital and retaining of staff to keep them abreast with the changing development finance techniques. 

The long term growth and sustainability of the Tanzanian economy depends, among other things, on availability of 

sufficient funds to finance projects and the capacity to conceive and nurture projects that bring about rapid economic 

growth. The additional equity and new mandate will empower TIB to play a critical role in the implementation of the 

Government’s National Strategy for Growth and Reduction of Poverty (NSGRP) as well as the Employment Policy. 

As a DFI, TIB is to perform the functions that address the specific financial markets deficiencies as follows: 

l Extension of term loans 

l Provision of technical advice and support to investors 

l Strengthening of entrepreneurship culture as well as identification of viable business opportunities 

l Provision of equity financing 

l Targeting of social and environmental needs 

In complementing the above, TIB will continue to offer the following services: 

l Trade financing, 

l Deposit taking, 

l Treasury services, 

l Foreign exchange, 

l Special credit facilities to SMEs, 

l Fund transfers, 

l Stock broking advisory services and 

l Funds administration. 

TIB will work with stakeholders to ensure that the bank becomes a profitable and sustainable DFI. Given its proven 

track record of good performance during the last five years, TIB is ready to take up the challenge. However, Whilst the 

bank will play a development role, the bank will remain committed to operating sustainably. 

The bank foresees a bright and prosperous future outlook as it continues to play an increasingly active part in financing 

economic growth and empowering Tanzanians to become substantive players on the world stage. 

At the same time TIB will seek to achieve the twin objectives of providing the highest level of service to its customers 

and contributing to the development of our country. TIB’s Mission Statement says it all.

ii 

Your Partner for Growth 

Prof. W. M. Lyakurwa 

CHAIRMAN 

Board of Directors 

M. I. Msindai 

DIRECTOR 

P.M. Noni 

MANAGING DIRECTOR, TIB 

H.S. Masebu 

DIRECTOR 

A.V. Magere 

DIRECTOR 

M. J. Maeda 

LEGAL COUNSEL & SECRETARY TO THE BOARD

Management Team 

J. S. Machano 

HEAD OF STRATEGIC PLANNING & 

CORPORATE AFFAIRS 

B. P. Mono 

HEAD OF TREASURY & FUNDING 

R. J. Ndaki 

HEAD OF INFORMATION & 

COMMUNICATION TECHNOLOGY 

P. M. Noni 

MANAGING DIRECTOR 

T. F. Samkyi 

HEAD OF DEVELOPMENT 

FINANCING 

S. M. Nghambi 

HEAD OF HUMAN RESOURCES & 

ADMINISTRATION 

I. E. Kiputa 

CHIEF INTERNAL AUDITOR 

L. O. Mlewa 

HEAD OF PORTFOLIO 

MANAGEMENT 

J. B. Mukoji 

HEAD OF RISK & COMPLIANCE 

M. J. Maeda 

LEGAL COUNSEL & SECRETARY TO 

THE BOARD

iv 


Bank INFORMATION 

Registered office: Consolidated Holding Corporation Building 

Samora Machel Avenue/Zanaki Street 

Plot No. 53/40 

Dar es Salaam, Tanzania. 

Current physical address 

Mlimani City Office Park 

Building No. 3 

Sam Nujoma Road 

Postal Address: 

P.O. Box 9373, 


Main bankers 

Stanbic Bank (T) Limited 

Main Branch 

P. O Box 72647 


SWIFT- SBICTZTX 

National Bank Of Commerce 

Corporate Branch 

P.O. Box 9062 


SWIFT- NLCBTZTX 

Standard Chartered Bank 

London, EC2V 7SB 

Aldermanbury Square. 

SWIFT- SCBLGB2L 

The Standard Bank of South Africa Ltd 

Standard Bank Centre 

5 Simmonds Street 

Johannesburg 2001 

P.O. Box 7725 

Johannesburg 2000. 

SWIFT-SBZAZAJJ 

Bank Auditors 

The Controller and Auditor General 

National Audit Office 

Samora Avenue/ Ohio Street 

P. O. Box 9080 


Website: www.nao.go.tz 

Current contacts 

Telephone +255-22-2411101-9 

Telefax +255-22-2411095 

Email md@tib.co.tz 

Website www.tib.co.tz 

Swift – TAINTZTZ 

Bank of Tanzania 

P.O. Box 2939 


SWIFT – TANZTZTX 

The Bank of Tokyo Mitsubishi UFJ, Ltd 

P.O. Box 191 

Nihonbashi 

Tokyo, Japan. 

SWIFT – BOTKJPJT 

Standard Chartered Bank 

New York, NY 10010- 3663 

One Madison Avenue 

SWIFT-SCBLUS33 

Bank Secretary: 

Ms Martha J. J. Maeda 

P.O. Box 9373, 

Dar es Salaam, 

Tanzania. 

Ernst & Young 

Certified Public Accountants 

Utalii House, 36 Laibon Road, Oysterbay 

P.O. Box 2475 


Website: www.ey.com

Table of Contents 

Bank information iv 

Letter of Transmittal 1 

Chairman’s Statement 2 

Managing Director’s Report 4 

Divisional Performance Review 7 

Report of the Directors 15 

Statement of Director’s Responsibility 30 

Independent auditors’ report 31 

Financial statements: 

Statement of comprehensive income 33 

Statement of financial position 34 

Statement of changes in equity 35 

Statement of cash flows 37 

Notes to the financial statements 38

1 


Letter of Transmittal 

LETTER OF TRANSMITTAL 

Hon. Dr. William Mgimwa, 

Minister of Finance, 

P.O Box 9111. 

Dar es Salaam. 

Dear Honourable Minister, 

Tanzania Investment Bank Limited, 

P.O Box 9373 Dar es Salaam, 

Date: 25th May 2012. 

I hereby submit, on behalf of the Board of Directors, the Annual Report and Audited Financial 

Statements of the Tanzania Investment Bank Limited for the period 1st January to 31st December 

2011 as approved by the Board of Directors, on 30th April 2012. 

Yours Faithfully, 

_______________________________ 

_______________________________ 

Professor Professor William Will ll ll llll lll lllllllllllllllllllllllia i m Lyakurwa, 

Lyakurwa, 

Chairman Chairman of thhhhhhhhhhhhhhhhhhhhhhhhhhe the e e e e Board Board of Directors Directors

Chairman’s Statement 


Chairman’s Statement 

It is my great pleasure, to present to you the Annual Report and Audited Financial Statements of 

Tanzania Investment Bank Ltd for the year 2011. As in the previous year, continued efforts and 

commitment of the entire bank’s staff, management and TIB Board led the bank into another 

profitable year. The bank recorded a 62% growth in profits before tax at TZS 5.8 billion from TZS 3.5 

billion recorded in 2010, accompanied by an expansion in the loan portfolio from TZS 106 billion in 

December 2010, to TZS 181 billion at the close of 2011. 

The results achieved during 2011 reflect TIB’s growing capacity as it is tranforming itself into a 

fully fledged Development Financing Institution (DFI). TIB management continued to lead the 

bank through this tranformation as articulated under the bank’s 2009 long term strategy. The 

transformation is anchored in the Government’s long term vision, five year development plans and 

the annual development plans all geared at transforming Tanzania into a middle income economy by 

the year 2025. Accordingly, the bank’s focus during 2011 earmarked projects in the priority sectors, 

mainly agriculture and agro-processing, tourism, manufacturing and infrastructure. In that regard, 

livestock processing, cotton ginning cotton seed oil processing, hotels, water and juice packaging, 

lapidaries, quarries, sugar processing, (dump site) waste management infrastructure are some of the 

projects that were implemented during the year through the bank’s financial assistance. 

The performance of the bank during the year 2011 was also characterized by the approval of 

different policies that have a long term effect on the bank’s governance processes. Specifically, the 

bank reviewed and transformed its credit policy focusing on its core loan appraisal processes. TIB 

will be combining different specialists in its appraisal process where credit proposals are analyzed 

from economic, legal, environmental, engineering and financial perspectives. The approach aims at 

giving TIB the capability of managing the funding and implementation of complex industrial and 

infrastructure projects using higher levels of efficiency. This is a conservative risk averse approach 

targeting to identify and mitigate different investment risks and, allowing the bank to have high 

quality portfolio of assets. 

The transformation of the bank into a Development Finance Institution picked further momentum 

during 2011. The process to procure the transformation Consultant was completed and the 

Consultant was appointed to advise on the transformation of the bank into a two-tier development 

finance institution. The process is expected to be completed before the end of 2012, whereby a 

subsidiary corporate bank would be established. Furthermore, the DFI financial regulations from 

BOT are expected to be gazetted in the early part of 2012 and will create an operational environment 

that is consistent with the demands of TIB DFI clients, whose development projects (proposals) are 

long term in nature. 

The 2011 performance of the bank was also characterized by many economic challenges, ranging 

from crippling power rationing to a volatile foreign exchange rate and soaring inflation. Overall 

inflation, which had been below 7 percent in 2010 trended upward reaching a double digit level to 

close at 19.8% in December 2011. However, economic growth recorded at 6.4% in 2011, demonstrates 

that the economy is resilient to macro-economic shocks. In particular, the ability of the economy to 

sustain production despite increased use of costly thermal power provides optimism for even better 

economic performance in 2012 as the power situation improves.

3 


The bank faces many challenges but so are the opportunities. With the support of the Government, 

the bank will methodically expand in pursuit of financing infrastructure, agricultural processing, 

tourism and SME’s among other sectors, catalytic to the realization of the National economic goal of 

achieving middle income status by the year 2025. Given the enormity of the resource requirements 

and the potential development impact, TIB established a collaborative programme of joint funding 

arrangements with major regional funding institutions during 2011. Memoranda of Understanding 

(MOUs) have been signed with South African Development Financing Institutions, namely 

Industrial Development Corporation (IDC) and Development Bank of Southern Africa (DBSA). DBSA 

subsequently set up its Tanzanian Representative Office within the TIB premises collaborating with 

TIB in developing intervention programmes. 

Both the opportunities and mandate of TIB necessitate the expansion of the bank’s activities. 

Accordingly in 2011, TIB recruited additional staff members growing the staff complement from 

160 to 170. This growth is in line with TIB’s overall growth strategy and pursuits to deliver quality 

development finance services around the country, using the geographical zonal approach in order 

to contain the cost of operations. During the year, TIB officially inaugurated its Arusha Branch and 

by December, 2011 the renovation of the Mbeya Branch and Zonal offices was complete ready for a 

launch in early 2012. This will be TIB’s fifth branch and will extend the bank’s reach to the Southern 

Highlands. 

I wish to extend my sincere gratitude to all our customers for their continued loyalty and patronage 

and to management and staff for their dedication and hard work; my fellow Board members 

whose tenure expired towards the end of 2011 for their support and valuable guidance. I would 

also specifically want to thank the Government for continued commitment to support TIB. I am 

convinced that given the synergy that has developed between TIB and its parent Ministry of Finance, 

in the coming year, the bank will continue to make steady progress and deliver quality development 

finance products thus making this economy more efficient, stronger and diversified. 

Once again, I am looking forward to your continued partnership with incoming Board of Directors to 

make 2012 another successful year for all of us. 

____ ___________________________ 

_ ________ _ ______________ ___ _ 

Professor Professor William Willia ia ia ia ia ia ia ia ia ia ia ia iaam Lyakurwa, 

Lyakurwa, 

Chairman Chairman of thhhhhhhhhhhhhhhhhe the e Board Bo B ard of Directors Directors 

Managing Director’s Report

Managing Director's Report 

1.0 Introduction 

It is with great pleasure that I present to you the bank’s performance and achievements for the year 2011. 

The year under review witnessed high inflationary pressures, escalating fuel prices, power rationing and 

attendant high electricity tariffs that had an adverse influence on the operations of a cross section of the 

bank’s clients. Indeed, the continuing European debt crisis also affected the market prospects of some export 

companies and operations of some donor funded development programmes. 

Despite the ferocity of these challenges, the bank has achieved an overall good performance during the year, 

a proof that the bank is strong and resilient to shocks. This implies that the restructuring measures by the 

Government, the bank’s strategy and efforts of the Board, Management and staffs including the support of 

clients are all contributing towards the bank’s success. Growth has been recorded on both profits and assets 

and the client base recorded a considerable expansion during the year under review compared to the previous 

year. To further expand the bank’s presence and reach, considerable work was undertaken during the year 

towards opening the Branch and Zonal offices in Mbeya by mid-2012. 

2.0 Operating Environment 

Annual inflation rose from 5.6% in December 2010 to reach 19.8% in December 2011, mainly on account of the 

pass through from higher global oil prices, a surge in food prices resulting from drought in the East African 

region, and a general weakening of the Shilling, which contributed to the rising domestic cost of imports. 

Inflation is projected to abate as a result of measures undertaken by the Bank of Tanzania together with the 

prospects of good harvests and leveling of global oil prices. 

In spite of the high inflationary trends, GDP grew at an estimated average rate of 6.4% in 2011 (calculated on 

the basis of NBS quarterly GDP estimates), which is above the projected 6%. This growth was spearheaded by 

higher growth rates in construction, transport and communication, financial intermediation, trade and repairs. 

The economy’s resilience to shocks has been strong and particularly in its ability to sustain production despite 

increased use of costly thermal power. This provides optimism for even better performance going forward as 

hydro power generation returns to normal. 

3.0 Highlights of 2011 Operations 

The transformation of the bank into a national Development Financial Institution (DFI) slowed down during 

the year under review. While the Government has pledged continued support to strengthen the bank’s capital 

base with scheduled annual capital injections, some delays have been experienced, jeopardizing the pace on 

the initially agreed timeline. 

The process to procure a Consultant to advise and guide on the establishment of a two-tier Development Bank 

with a subsidiary Corporate Bank was delayed. The Consultant was appointed towards the end of 2011 with 

the scheduled date for commencement of the exercise in March 2012. The Consultant’s work is expected to be 

completed by June 2012 so that the bank starts operating under the new structure towards the last quarter of 

2012. 

Delays in forming the Corporate Bank notwithstanding, I am pleased to inform that the bank’s Arusha branch 

became fully operational during the year after completion of all formalities and meeting the compliance 

requirements of Bank of Tanzania (BOT). Meanwhile, progress to set up the Mbeya Branch and Zonal office 

gathered pace towards the end of the year and we look forward to the Branch and Zonal office becoming 

operational before the end of the second quarter 2012. 

1 

Source: National Bureau of Statistics, Tanzania. 

2 

Source: National Bureau of Statistics, Tanzania Quarterly GDP estimates 2011. 


5 


MANAGING DIRECTOR'S REPORT 

4.0 Highlights of Year 2011 Results 

In line with the bank’s strategy to support economic development and to become strong, profitable and 

sustainable, during 2011, operations focused on expanding the loan book while at the same time strengthening 

and improving the quality of the loan portfolio. In this connection, the staff complement grew by 8% in the 

Portfolio Management and Development Finance Divisions. Further, a review of the entire credit process was 

conducted with a view to strengthening the credit risk management function. In addition, the implementation 

of the Credit Quest system was completed as well as two Consultants funded by UNOPS/DBSA were on the 

ground to train staff from the two Divisions. Accordingly, the bank’s lending activities expanded during the 

year with projects from agriculture and agro-processing, manufacturing, tourism and infrastructure joining the 

portfolio and helping to create more than 824 direct and 8,340 indirect/temporary jobs. 

Profit before tax recorded for the year 2011 is TZS 5.8 billion, which is higher than the 2010 profit of TZS 3.5 

billion. Once again, this growth in profits is mainly accounted for by growth of the loan book, firming up of 

interest rates in the market, as well as efforts in overall expenditure management. 

I am also pleased to report a significant growth in the bank’s Balance Sheet that was recorded during the 

year. Total assets have grown from TZS 244 billion to reach TZS 306 billion as at the end of 2011. This growth is 

accounted mainly by the growth in the loan book, from TZS 106 billion to TZS 182 billion. 

For the second year running, utilization of credit lines was lower at TZS 2.1 billion compared to TZS 3.8 billion 

at the end of December 2010. It was TZS 5.8 billion at the end of 2009. This was mainly due to repayments of 

the existing borrowings as well as utilization of capital that was injected to the bank towards the end of 2010. 

At the same time, deposits grew by more than 40% from TZS 129.7 billions at December 2010, to TZS 184.2 

billion as at December 2011. 

The bank’s interest income during the year grew by about 48% to TZS 27.9 billion from TZS 18.9 billion earned 

in 2010. The increase in income emanates mainly from growth in the loan book and debt securities compared 

to previous year positions. 

Interest expenses during the year amounted to TZS 5.1 billion an increase of 17% compared to TZS 4.3 billion 

incurred in 2010. This increase is accounted for mainly by higher interest rates during the year and growth in 

total deposits. 

There was a 47% increase in non-interest expenses during the year from TZS 16.5 billion to TZS 24.3 billion, 

which is attributed to a high impairment level and charged off loans brought about partly by erratic power 

supply during the year which affected some borrowers, as well as start-up problems experienced in some new 

projects. 

5.0 Future Outlook 

Tanzania’s Development Vision 2025 that is geared towards transforming the country from a low productivity 

to a semi industrialized economy, guides TIB in the formulation of its strategies and investment activities. The 

bank is set to take all necessary steps to ensure that Tanzania’s vision, that of an economy led by modern and 

highly productive activities integrated into industrial and service activities conducted in both rural and urban 

areas, is achieved by 2025. 

The number of challenges and often times difficult operating conditions for the bank’s clients notwithstanding, 

the medium to long term prospects for financial intermediation business in the country continues to hold a 

great deal of promise. As a bank, we are monitoring developments both in the local and global economy, and 

applying pragmatism and dynamism in our investment approach. The continuing Government support on the 

other hand, provides the platform for TIB to play an effective role in the national economic growth through 

financing judiciously selected strategic investment priorities. As the Government continues to inject more

MANAGING DIRECTOR'S REPORT 

capital, TIB will be able to achieve its objectives by attracting more capital inflows from other stakeholders and 

therefore adequately provide financial services to deserving strategic projects/programmes in priority sectors 

e.g. agriculture, agro-processing, mining, tourism and infrastructure. 

I feel proud to say that even in the face of this very challenging operating environment, TIB has maintained its 

recent outstanding performance. It is my conviction that while transforming itself into a bank of choice for the 

country’s long term development finance requirements, TIB’s presence is becoming more pronounced and in 

the process solidifiying its foundation for delivery of better financial services. 

With the envisaged two-tier structures expected to become operational before the end of 2012, TIB intends to 

further blend its development financing function with core activities of its Corporate Bank subsidiary that will 

be incorporated and therefore become a one-stop financial services centre for a growing number of long term 

investment opportunities. Once licensed, the Corporate Bank subsidiary will provide all other commercial bank 

services that TIB has hitherto been incapable of providing thereby generating major complaints by existing 

clients. Indeed services such as trade credits, treasury services, bills discounting and bankers’ guarantees will 

continue to play a major role in the Corporate Bank product bouquets complementing the long term financing 

products of the DFI, besides contributing to the profitability and sustainability of the bank. 

Mindful of the demands and obligations inherent in our environment, TIB continues to abide and adhere to 

global best practices in every facet of it’s operations, which are anchored on good corporate governance and 

risk management practices. 

On behalf of management and all staff, I would like to thank all stakeholders very sincerely for your unwavering 

support. The future though challenging, remains for all of us to work tirelessly and remain focused on our 

strategic priorities to ensure attainment of our goals in line with the Tanzanian Development Vision 2025. The 

operating environment has so far remained conducive and postulates optimism for TIB’s effective role in the 

national economic growth efforts. We are all happy at TIB for the Government’s pledge to continue with further 

capital injections that will enable the bank to implement its mandate through the long term funding product, 

whose availability continues to be scarce to strategic sectors like agriculture, agro-processing, mining and 

infrastructure. Special emphasis, though, will continue to be given to Small and Medium Enterprises (SMEs), 

which if serviced with appropriate financial products, remain to be the major players given the structure of the 

Tanzanian economy. 

Finally, let me take this opportunity to convey my gratitude to all our customers for their patronage and the 

Government for its support. I also wish to acknowledge the support and guidance from the Board of Directors, 

and the co-operation I continue to receive from colleagues in the Management team and the entire TIB staff. 

It is my belief, the good cooperation from stakeholders coupled with the good business environment in 

Tanzania, is a recipe that will propel TIB into making a lasting development impact in our country. May I wish 

you all a truly prosperous year, 2012. 

__ ____ ________________________ 

__ _ ____ __ ________________ 

Peter M. M Noni, Noni 

Managing Director 


7 


Divisional Performance Reviews 

1.0 Strategic Planning and Corporate Affairs Division 

Strategic Planning and Corporate Affairs Division has two main roles: to give the bank a strategic focus in 

the market, and to make sure that the focus is clearly communicated both internally and externally to other 

stakeholders. 

Having assumed its original functions, the bank is re-engineering its position to catalyze the financing of 

Tanzania’s Development Agenda. While continuing with the bank’s focus on agricultural funding through 

primary cooperative societies/SACCOS which are primarily rural based, the Division developed a Municipal 

Infrastructure development programme during 2011 to further widen TIB’s reach and partly address the urban 

population as among ways of catalyzing balanced economic development. 

In that regard, Memoranda of Understanding were signed with Municipal Councils such as Ilala, Moshi and 

Bukoba, while Dar Es Salaam Development Corporation (DDC) signed one for the re-development of the DDC 

Magomeni Social Hall into an ultra-modern social services delivery centre. The Municipal programme is basically 

targeting revenue based local government infrastructures, including land development into serviced plots, 

municipal markets, bus stands, social halls and dumping sites, among others that serve and thereby increase 

the local Government capacity for service delivery to the community. The financing that the bank shall provide, 

is envisaged to be paid back using the revenue streams that the new developed infrastructures will generate. 

Towards the end of the year, Bukoba Municipal Council was ready with the Architectural and engineering 

drawings for the re-construction of the Municipal Central Market. The revival and development of Municipal 

infrastructures is likely to impact positively on the general public, link the main beneficiaries to the envisaged 

efficient Municipal services delivery and opportunities to be made available. 

Collaborative programmes to reach productive small and medium enterprises in rural and other areas were 

initiated through respective Community Banks during the year. Tandahimba, Mbinga and Mufindi Community 

Banks and Kagera Farmers’ Cooperative Bank are some of the institutions that have shown interest. Indicative 

ability to play part in the effective implementation of the proposed approach is the main guiding factor. 

Discussions are also ongoing with the Bank of Tanzania on the need for an Equity Investment framework to guide 

TIB’s delivery of the product, in consultations with the Industrial Development Corporation of South Africa. The 

equity product, being long term in nature, is intended among others, to assist promoters and investors with 

new bankable project ideas that address contemporary economic development challenges but lack sufficient 

capital to initiate the required implementation. The presence and guidance of institutional investors would 

normally instill confidence in the long term sustainability, and therefore encourage private investors to come 

forward to participate in the implementation of such proposals. 

To spread its presence and therefore widen its reach in the country, the bank engaged in the rehabilitation 

and modernization of the NHC building in Mbeya that will house the TIB Branch and Zonal offices to serve the 

Southern Highlands zone. The process commenced during the year and offices are expected to be ready for 

operations before end of the second quarter 2012. 

For the first time, the bank developed an Institutional Almanac, a Communication Plan putting forth the Public 

Relations and Events Calendar for the coming year. The Division also facilitated preparation and production of 

the 2010 TIB Annual Report. 

Research and particularly value chain studies on livestock, oilseeds, rice for “Chama cha Ushirika wa Umwagiliaji 

Ruvu” (CHAURU) and on the cotton industry were initiated/concluded during the year. These are useful tools in 

providing information on the economic potential of the respective values of the products along their individual 

value chain and therefore the background guide to the bank’s investment intervention priorities.

2011 DIVISIONAL PERFORMANCE REVIEWS 

Based on the cooperation and understanding with different stakeholders in agriculture, the bank is developing 

initiatives that will take care of agro processing activities in order to add value to agricultural products hence 

better prices to farmers. This will involve such crops like cashew nuts, cotton, etc. 

The bank successfully participated in the TCCIA Financial institution Fair in Arusha (March 24th to 27th 2011); 

International Labour Day on May 1st 2011; Launching of the Arusha Branch and Zonal offices on May 20th 2011; 

the Public Service week (June 16th to 23rd 2011); Dar Es Salaam International Trade (SABA SABA) Fair in Dar Es 

Salaam, from July 1st to 7th 2011; National Agricultural Show (NANE NANE), in Dodoma from August 1st to 8th 

2011 and the Lake Tanganyika Investors Forum and exhibition from October 16th to 20th 2011. As part to its 

Corporate Social Responsibility (CSR), the Bank involved in: 

• Donating to the Gongo la Mboto bomb blast victims in February 2011 

• Donating sewing machines to groups of disabled people in Dar Es Salaam 

• Donating to facilitate the Prostate Cancer Sensitization Program, and 

• Donating to the victims of the Zanzibar MV. Spice Islander accident 

Internally, the Division facilitated a number of staff confidence, morale raising and fraternity building activities 

such as quarterly birthdays in April, June and November 2011; town Hall meeting for all Staff Members; and 

gifts, luncheons to deserving staffs on special occasions. 

To make the bank more visible and well understood by the general public, a media coverage campaign via 

publications, documentaries, radio, Television and newspapers was conducted during 2011. The coverage was 

in forms of news, advertisements and features on various events particularly during exhibitions and on the 

Bank’s services and products, including the Agricultural Window. 

The future of the Division is promising to be quite challenging with development of practical steps to implement 

some of the unfolding projects under the Municipal lending and Community Banks collaboration programmes. 

This will call for pragmatic supervisory approaches for the Bank to realize the viability and therefore the 

rationality and wisdom of these strategic choices. 

2.0 Development Financing Division 

As a Development Bank, the core business of TIB is financing of commercially viable developmental projects, 

in line with the country’s Development Vision 2025 and other national policies and programmes. The Division 

of Development Financing is charged with origination of such financing transactions, particularly in relation 

to credit appraisal and processing of necessary approvals. This entails taking a long-term perspective in 

financing, by identifying projects that will make an impact on the economy and supporting them through 

financial and non-financial services. The Division operates with four Departments and two Zonal Offices. 

The Departments are Project Finance, responsible for medium and long term financing activities for medium 

and large scale borrowers; Trade Credits, responsible for short term lending and other working capital related 

activities/ services; SME Lending & Leasing, dedicated to financing small and medium sized enterprises; and 

the Agriculture Window, the latter working as agent of the Government in extending loans for agriculture, that 

are booked off the bank’s balance sheet. The two Zonal Offices are located in Arusha (for Arusha, Kilimanjaro, 

Manyara, Singida and Tanga) and Mwanza (for Mwanza, Shinyanga, Mara, Kagera, Tabora and Kigoma). 

During the year 2011, the Division obtained approvals for loans worth TZS 196.3 billion compared to TZS 103 

billion in the year 2010. The approvals were 9% above the target of TZS 179.4 billion. Out of the approvals 

obtained, TZS 7.8 billion was in respect of the Agriculture Window. Trade credits accounted for TZS 49.4 billion, 

and Financial Leasing TZS 3.9 billion. The SME Unit contributed TZS 3.2 billion. Zonal offices in Arusha and 

Mwanza accounted for TZS 20.9 billion and TZS 42.7 billion, respectively. Resulting from the approvals and net 

of repayments, by the end of the year 2011 the Bank’s balance sheet loans position stood at TZS 181.7 billion 

compared with TZS 106.1 billion at the end of 2010. Other Divisional achievements during the year included 

reviewing of the Bank’s Credit Policy and implementation of a credit risk management system (Credit Quest), 

which was completed in 2011. 


9 



The Bank’s development financing philosophy places emphasis on projects that utilise local resources, create 

employment, generate foreign currency and empower local Tanzanians; for such projects are bound to 

contribute positively to growth, poverty reduction and stabilisation of the national economy. The Division 

ensures that projects financed by the bank make a positive social and economic impact on society, and are free 

from environmental hazards. 

3.0 Finance, Treasury and Operations Division 

The Finance, Treasury and Operations Division was established in 2011 as a result of merging the former 

Finance and Operations Division and Treasury and Funding Division. The main responsibility of the Division is 

to handle accounting, treasury management and operations issues in the bank. The Division is comprised of 

three Departments namely; 

• Finance Department 

• Treasury Department 

• Operations Department 

In the interim, as process to incorporate a corporate bank subsidiary continues, the Division is also responsible 

for branch banking operations which offer transactional banking services, including serving customers over 

the counter. 

During the year under review the Division managed to achieve most of the targets set despite the fact that 

2011 was characterised by many economic challenges, ranging from crippling power rationing to a very volatile 

foreign exchange rate and soaring inflation. 

The bank’s liquidity situation remained stable during the year although additional capital injection was not 

received as expected. This exerted some pressure especially towards the end of the year when liquidity 

dried from the market due to the liquidity mop up exercise conducted by the Central Bank. Prudent foreign 

exchange management resulted in the bank making a foreign exchange profit of TZS 3.1 billion, a growth of 

119% compared to previous year performance. Interest expenses were well managed and the bank registered 

a 57% growth in net interest income. 

All statutory and management financial reports were prepared in time and the bank was among three winners 

of best presented accounts in 2010 from banks sector in a competition overseen by the National Board of 

Accountants and Auditors. Constant improvements have been recorded in terms of timeliness and accuracy of 

reports produced. 

During the year, the bank opened the Arusha branch. Mbeya branch is expected to be opened within the first 

half of 2012 to serve Mbeya and other regions in the Southern Highlands zone. The bank added two new ATMs, 

one in Arusha and another in Mwanza, while the ATM at Mwenge, which was removed due to security reasons, 

will be installed in Mbeya. The bank has henceforth decided that in future ATMs will only be installed where 

there are banking operations nearby. 

The bank’s transformation process is approaching the climax with the imminent separation of DFI operations 

from commercial banking operations. The appointed consultant is expected to conclude the report by mid-2012 

paving the way for incorporating the Corporate Bank and obtaining its commercial banking licence that will 

also allow the operation of current accounts. The Corporate Bank is not only expected to improve monitoring 

of the DFI borrowing customers but also help in the deposit mobilization drive. The imminent improvements in 

the accounting system are expected to increase efficiency to the bank. 

4.0 Portfolio Management Division 

The Portfolio Management Division is responsible for monitoring and supervising disbursements, 

implementation and operations of projects financed by TIB funds.


The monitoring and supervision process ensures that projects are implemented as planned in line with the 

bank’s Credit Policy, including ensuring that funds are utilized for purposes approved by the bank. It is in that 

regard that funds disbursements is an important function of the Portfolio Management Division. Structurally, the 

Division has 3 Departments and 1 Unit which are Monitoring and Supervision Projects Under Implementation, 

Monitoring and Supervision Completed Projects, Credit Administration, and Loan Work out and Recovery Unit. 

As at 31st December 2011, the bank had an “on balance sheet” loan portfolio amounting to TZS 181.7 billion 

(net of provision) a growth of 71.4% from the portfolio position of TZS 106.1 billion as at 31st December 2010. 

Of the total on balance sheet portfolio, 68% are developmental term loans. The concentration of resources to 

term financing is in line with the bank’s mandate of using term financing as a vehicle in contributing towards 

national development. Projects under implementation account for 36% of the total on balance sheet portfolio 

while completed projects accounted for 64%. 

In terms of sector distribution, investments in agriculture and agro processing lead at 45% followed by trade 

at 9% and leasing at 6% of the total portfolio. Geographically, the bank’s investments are in 14 regions out of 

the 29 regions of mainland Tanzania, with concentration in 4 regions of Dar Es Salaam, Mwanza, Shinyanga 

and Arusha, accounting for 73% of the total investments while the remaining 27% of the bank’s portfolio 

is distributed in the remaining 10 regions of the Mainland and Zanzibar. The opening of the bank’s Branch 

and Zonal offices in Mbeya will accelerate implementation of the Government’s development agenda in the 

Southern Highlands regions. 

During the year 2011, permanent jobs created by projects financed by the bank stood at 824 and 8,340 for 

casual labourers. 

The “off balance sheet non performing portfolio’’ is made up of all accounts due to various reasons were 

charged off and lined for recovery measures. During the year under review, the bank had a total of 112 such 

charged off accounts, with total exposure of TZS 19,059 million. The bank’s objective is to critically analyze their 

problems and institute measures to revamp their operations and enable generation of sufficient cash flow to 

repay the outstanding loans instead of immediate realization of pledged securities. 

The bank’s portfolio faced a number of challenges with a negative impact on respective project performances 

during the year. These include tight cash flows for most of the borrowers due to high operational costs from 

the depreciating Tanzanian Shilling, power problems and rising fuel prices. As a consequence, a number of TIB 

clients failed to meet their loan obligations in time leading to increased provisions that impacted negatively on 

the bank’s profit. Lack of DFI regulations also aggravated the bank’s client problems as the current regulations 

are geared towards short term and commercial facilities requiring for example, a client to pay 10% of the 

outstanding principal and all interest past dues before a loan can be rescheduled. This is hard to the bank 

clients who are basically long term investors. DFI regulations, expected to be in place in 2012, will go a long way 

towards ameliorating such difficulties facing the bank’s clients that require financial relief on their cash flows 

for smooth initial operational take off. 

Agency Funds Administration Department 

Through the Agency Funds Department, the bank manages special loan funds from the Government through 

Bank of Tanzania (BOT), Ministry of Finance (MOF), Rural Energy Agency (REA) and the Ministry of Energy and 

Minerals (MEM). In recognition of TIB’s good project management capacity and skills, the Government has 

been placing some funds for developmental projects to be managed by the bank. 

The Agency Funds Department total portfolio increased by 28% during the year, from TZS 134,394 million at 

the end of 2010 to TZS 235,770 million as at 31st December 2011. The increase is mainly a result of Government 

placement of additional TZS 20,000 million under the Agriculture Window and TZS 44,853 million under the 

Rural Energy Funds. 


11 



The range of developmental projects covered fall under the following: 

IN MILLION TZS Approved AMOUNT Outstanding Balance 

i Special Government Funds for 

a) Refinancing Facility 

b) Structured Finance Facility for Floriculture, Gas, 

TZS 12,514 million TZS 9,743 million 

Meat processing projects TZS 63,185 million TZS 63,185 million 

ii Rural Energy Projects TZS 83,090 million - 

iii Agriculture Projects TZS 42,000 million TZS 17,287 million 

iv Tanzania Energy Devt. Access Project(TEDAP) TZS 34,500 million TZS 34,500 million 

v Commodity Import Support TZS 17,094 million TZS 9,564 million 

TOTAL FUNDS AS AT 31ST DECEMBER 2011 TZS 252,383 million TZS 134,279 million 

No repayments of the Structured Finance facility were made during the year as a number of restructuring 

options, including invitation to external shareholders, were being pursued. The approved Structured financing 

facility between 2005 and 2008 amounted to TZS 63,172 million. 

Under the Agricultural window, cumulative approvals since the inception of the programme amount to TZS 

24.7 billion, with the corresponding disbursements at TZS 18.4 billion. Out of the approved 70 projects, 27 are 

corporate borrowers, 36 SACCOS/cooperatives/associations and 7 microfinance institutions. No major problems 

were experienced during the year under the Agricultural Window operations. Total collections amounted to 

TZS 1.5 billion made up of principal of TZS 1.1 billion and interest of 0.4 billion. 

The horticulture sector has been experiencing market problems since 2007. Other problems affecting farm 

operations and servicing of the Government’s refinancing and structured facilities include management and 

financial constraints. In view of these problems, BOT convened a meeting with beneficiaries of the Government 

facilities, which also included officials from the Ministry of Finance and TIB to discuss and agree on measures 

to resuscitate the sector. Proposals submitted by the beneficiaries were reviewed by TIB and recommendations 

therefrom, forwarded to BOT. Among these were the need to consolidate/merge some of the flower companies 

to enhance production, restructuring of the facilities in terms of extension of the respective grace periods and 

elongation of the repayment periods. TIB also obtained and submitted a legal opinion on the recommendations, 

especially with regard to the proposed mergers and consolidations, as requested by BOT. The proposed 

measures were still under evaluation by BOT as at the close of the year. 

Under Rural Energy Agency (REA), 9 projects worth TZS 17 billion were approved during the year 2011, with the 

cumulative number of approved projects now reaching 95. The cumulative total disbursements reached TZS 81.4 

billion by the year end. During the year, REA released to the Trust Agent (TIB) TZS 45 billion for financing approved 

projects for the year 2011, including those approved in 2010 but for which funds had not been released. 

The outstanding balance under the Commodity Import Support fund was TZS 9,564,132,451.61 (i.e. JPY 

869,466,586.51) as at 31st December 2011. The challenge in managing the collection process for these funds 

includes: difficulties in tracing some borrowers who were not registered by BRELA; tracing borrowers that 

used forged documents, and sorting out and agreeing to the real borrowers amongst the merged government 

entities such as ministries and agencies. 

5.0 Human Resources and Administration Division 

The Human Resources and Administration Division comprises of two departments, namely Human Resources and 

Administrative Services. The Division’s objective is to ensure efficient and effective provision of human capital 

and administrative services so as to enable the bank meet its set objectives and targets. In implementing its 

functions, the Division amongst others facilitated recruitment of qualified staff, their training and development 

to improve their skills and as well as acquisition of working tools to enable them operate in conducive work 

environment and therefore perform their functions effectively and efficiently.


To ensure the bank’s human capital have the appropriate job related skills and knowledge needed for desired 

productivity, training and development assumed a more focused approach in line with transformation process 

taking place at TIB. The bank offered more training opportunities for staff both locally and abroad in order for 

them to update and acquire specialized skills and knowledge for improved performance. Emphasis continued 

to be put on those courses relevant to the transformation of TIB into a Development Finance Institution as well 

as in-house and on-the-job training. To impart employees with awareness and the right and standard attitudes, 

and foster the teamwork spirit and work values, a training programme on Culture Change and Customer care 

was prepared and conducted for all TIB employees. 

The bank continued to partner with institutions like the Development Bank of South Africa (DBSA), Association 

of African Development Finance Institutions (AADFI) and Southern Africa Development Cooperation – 

Development Finance Resource Centre (SADC-DFRC), in order to benefit from training funds for full or partially 

funded programmes. As a result of this initiative TIB staff participated in partially funded courses organized by 

SADC – DFRC in collaboration with DBSA and AADFI. The courses attended include Project Finance and Financial 

Modeling, Risk Management, Project Management, and Sustainable Development of SME’s. In addition, the 

bank obtained funds from the Second Generation Financial Sector Reform Program that sponsored seven 

core Business Units staff to attend five different courses in Project Finance Modelling, Credit Management, 

Monitoring and Evaluation, Project Appraisal and Development Planning; and Advanced Financial Statement 

Analysis. The bank also benefited from the Technical Assistance Facility sponsored by the United Nations 

Operation Services and DBSA where two Consultants were seconded for a period of six months to assist in 

capacity building and provide employees with hands-on training on Business Development, Project Appraisal 

and Portfolio Management. 

6.0 ICT Division 

Information and Communication Technology is crucial for ensuring timely delivery of customer services. 

Adoption of ICT in the banking industry has led to a number of benefits such as greater productivity, 

profitability, efficiency, customer satisfaction, accurate records, 24 hours a day, 7 days a week services, cost 

savings, convenience and flexibility. In the contemporary business environment, technology has become a 

driving force of competition in the banking industry. However, in order to remain competitive, it’s imperative 

for TIB to be aware of the rapid changes of business environment resulting from technological innovation, 

increased awareness and customer demands. Hence, the Information and Communication Technology Division 

will continue managing its critical resources, processes and systems in such a way that they are up to date, 

resilient, recoverable and available to ensure business continuity in the event of any manmade or natural 

disaster. 

During the year under review, the Division offered daily support to all functional units. It also finalized the 

implementation of the Credit Risk Management system (CreditQuest), to streamline the credit decision making 

process. The system has several modules such as Credit Manager, Rating Manager, Financial Analyzer, Project 

Manager, and Portfolio Manager. These modules are used to manage both credit origination and portfolio 

management processes. 

In addition, the Division implemented an Intranet application as a cost effective tool to facilitate timely 

information and knowledge sharing to all staff across TIB branches, Zonal Offices and Headquarters. Furthermore, 

the Division implemented teleconferencing facility, and Integrated Services Digital Network (ISDN) telephone 

system to facilitate virtual meetings and timely communication with customers. Communication systems were 

also upgraded to ensure the use of reliable, secure and best performance technologies. 

7.0 Internal Audit Department 

The Internal Audit Department assists the Board of the bank in discharge of its responsibilities through 

independent audits designed to evaluate and promote the System of Internal Control, Risk Management and 

Corporate Governance for effective and efficient operations. 


13 



For the year 2011, audit activities focused on implementation of the corporate strategies on strengthening 

governance and management, as well as improving development banking by ensuring compliance with the 

set accounting standards, regulations, legal and regulatory requirements. Therefore the internal audit activities 

were mainly of four types namely, operational audit assignments, corporate governance activities, financial 

audit activities and routine activities. The results of the audit work on all activities were reported to the Board 

for action and/or guidance in line with the good corporate governance principles and practices. 

8.0 Risk and Compliance Department 

The bank takes risks in pursuit of its business goals based on the following principles: 

• Risk is taken within a defined risk limit. 

• All risk limits are approved at appropriate levels of Authority and independently monitored and reported. 

• Every risk taken is appropriately priced 

• Strong Risk Management culture is a key ingredient in the bank’s sustenance of its business mission. 

Under TIB’s Risk Management Framework therefore: 

• The inter-relations of the business objectives and developmental objectives require the Department to 

identify, measure, aggregate and manage risks effectively. 

• The Board Risk and Audit Committee provide overall risk and control supervision for the bank. 

• The Department strives to embed an effective risk management model in which the business management 

is the first line of defense, supported by a risk management function, and complemented by an internal 

audit oversight. 

• The Department targets to link the business strategy to a defined risk appetite with monitored 

performance targets. 

• Provides that all major risk classes, i.e.; Credit, Liquidity, Market, Operational, Strategic and Compliance 

risks are managed via risk management processes, compliant with the regulatory requirements, but 

informed with our business model. 

• Ensures that modeling and measurement approaches for quantifying risk are implemented across the 

major risk classes where applicable. 

• Effective systems, processes and policies are a critical component of the risk management capability. 

During the year under review, the Department main accomplishments were as follows: 

i. Prepared a bank wide inventory list of all required bank policies and assisted in the review of the policies 

and manuals such as the Branch Operations Manual, Credit Policies and AML policies all aimed at the 

improvement of the Risk Governance, Monitoring and Feedback Tools. 

ii. Championed the establishment and embedding the Risk Champion concept to ensure risk management 

practice integration across individual business departments and, thereby improving accountability. 

iii. Provided Risk Management awareness training to all staff including the designated Risk champions 

iv. Drafted a Risk Management Framework which provides, among others, the bank’s approach in 

risk management through setting up of risk appetite, risk controls and risk management reporting 

requirements in the bank 

v. Motivated a change in the credit risk management process through providing for dedicated risk analysis 

of credit applications 

The Board accepts final responsibility for the risk management and internal control systems while the Executive 

Management is responsible for the day to day management of the bank, and thus ensuring effective control of 

all the bank’s operational activities. The future for the Risk Management function therefore is to: 

• Develop a comprehensive view of the risks across the businesses in the bank and to focus on cross-risk 

concentrations and risk-reward; 

• Provide a strategic and forward-looking perspective on the key risk issues for discussion at senior levels 

within the bank (risk appetite, stress testing framework); 

• Strengthen risk culture in the bank;


• Foster the implementation of a consistent risk management standard(s) across the bank and the 

restructuring process; 

• Align and relate with the Finance Department to help quantify and verify the risk that we assume and 

ensure improvement of the quality and integrity of our risk-related data; 

• Improve capability to use utilize the metrics provided by the Finance and Treasury as an input to an 

informed Risk Management reporting system. 

This will create an effective platform for monitoring the Strategic Risk and risk appetite as a basis of alignment 

of the strategic plans to the risks and performance targets of the bank. 

9.0 Legal Counsel and Secretary Department 

The Legal Services Department is an independent department under the Managing Director’s Office. The 

Department’s main role is to provide legal services to the Board and Management in all legal related matters as 

and when they arise or where the bank is part of that respective matter (be contract/agreement or litigation) 

with the main objective of ensuring that the bank is legally protected and is operating in accordance with the 

laws of Tanzania and to minimize legal risks which may arise. 

In this respect, the Department renders secretarial services to the Shareholders’ Meetings, Board and its 

Committees, Executive Management, Credit Committee and to the bank’s subsidiary company, M/S Rasilimali 

Limited. All the drafting, reviewing and registration of the contracts which the bank enters into are handled 

by the Department. The Department also offers legal opinion to Management, its committees and other 

department as and when requested. The Department, which has three (3) Advocates, represents the bank in 

litigations in collaboration with retained law firms/advocates. Other duties include being custodians of the 

bank’s Common Seal and all security documents, maintaining and updating all statutory books, register of 

Company Directors, filing of all statutory returns with the Registrar of Companies, work in liaison with appointed 

receivers/liquidators, and handling other assignments as assigned by Board or Management. 

During the year 2011, the Department carried out its activities as per the approved action program. The said 

activities included the routine preparation of various contracts/agreements, review of loan and security 

documentation to verify that the bank is adequately covered, undertook due diligence on the borrowers and 

their collaterals, registration of security instruments, attended to Court cases whereby the bank is/was a party, 

successfully convened meetings of the Board and its Committees, Management and Credit Committee whereby 

a number of credit and other decisions were made, and was involved in negotiations involving the bank. 

During the year, the Department members participated in two workshops/short term training and participated 

in the continuous legal trainings offered by the Tanganyika Law Society. 


15 


Report of the Directors 

1. INTRODUCTION 

The Directors present this report and the audited financial statements for the year ended 31 December 

2011 which disclose the state of affairs of Tanzania Investment Bank Limited (the “bank”). 

The financial statements for the year ended 31 December 2011 were authorized for issue in accordance 

with a resolution of the Board of Directors, at the meeting held on 30.4. 2012. 

2. INCORPORATION 

The bank is incorporated in Tanzania under Companies Act, 2002, domiciled in Tanzania, and is licensed to 

undertake banking business under Section 7 of the Banking and Financial Institutions Act 2006. 

3. MISSION AND VISION 

Vision Statement: 

To be the Premier National Development Financing Bank for promoting sustained economic growth and 

poverty alleviation 

Mission Statement: 

To provide development financing and complementary services for a diversified, vibrant and competitive 

national economy 

4. PRINCIPAL ACTIVITIES 

The principal activity of Tanzania Investment Bank Limited is the provisioning of banking and related 

services as stipulated by the Banking and Financial Institutions Act, 2006. This includes the following: 

i. To provide short, medium and long term credit facilities, leasing and equity financing; 

ii. Administration of Government Funds; 

iii. To provide support services to SMEs such as preparation of business plans and other feasibility 

studies; and 

iv. To provide retail banking services such as deposit taking, funds transfer, trade credits, guarantees 

and letters of credit services 

There have been no significant changes in the principal activities of the bank during the financial year 

ended 31 December 2011. 

5. COMPOSITION OF THE BOARD OF DIRECTORS 

Majority of the Board comprises of non-executive directors. The tenure of the Board is three years. The 

Chairman of the Board and the Managing Director are presidential appointees, where as all other members 

of the Board are appointed by the Minister for Finance. The Composition of the Board is representatives 

from the main shareholder, i.e. the Government of the United Republic of Tanzania and others who are not 

affiliated to any shareholder. 

The directors of the bank who held office during the year and to the date of this report, except where 

otherwise stated were:

REPORT OF THE DIRECTORS 

5. COMPOSITION OF THE BOARD OF DIRECTORS (Continued) 


Name Position Age Qualification/ 

Discipline 

Prof. William M. 

Lyakurwa 

Mr. Haruna S. 

Masebu 

Mr. Mgana I. 

Msindai 

Mr. Bedason A. 

Shallanda 

Mrs. Elipina 

Mlaki 

Mr. Adatus V. 

Magere 

Mr. Peter M. 

Noni 

Chairman 63 PhD Economics, 

Cornell University, 

Ithaca New York 

Director 56 MBA, Msc. (Reading 

University) UK 

Director 63 Advanced 

Diploma in Wildlife 

Management & 

Administration. 

Nationality Date appointed/ 

Resigned 

Tanzanian Appointed 14th 

November 2008 


November 2008 


November 2008. 

Director 50 M.A Economics Tanzanian Appointed 12nd 

November 2009. 

Resigned 4th 

January 2011 

Director 59 MBA, Diploma 

in Economics & 

Advanced Diploma 

in Accountancy. 

Director 66 B. Com (Hon’s) 

& PG Diploma 

in International 

Studies & 

Diplomacy 

Managing 

Director 


January 2011 


November 2009 

56 M.A Economics Tanzanian Appointed 27th 

May 2009 

In January 2011, Director Mr Bedason A. Shallanda resigned and he was replaced by Director Mrs Elipina 

Mlaki. 

The Board Secretary as at 31 December 2011 was Ms Martha J.J Maeda. 

6. CORPORATE GOVERNANCE 

The Directors are committed to the principles of good corporate governance and recognize the need 

to conduct the business in accordance with generally accepted best practice. In so doing the Directors 

therefore confirm that: 

• The Board of Directors met regularly throughout the year; 

• They retain full and effective control over the bank and monitor executive management; 

• The positions of Chairman and Chief Executive Officer are held by different people; 

• The Chairman of the Board of Directors is non-executive; 

• The Board accepts and exercises responsibility for strategic and policy decisions, the approval of 

budgets and the monitoring of performance; and 

• They bring skills and experience from their own spheres of business to complement the professional 

experience and skills of the management team. They are the driving force towards transforming 

Tanzania Investment Bank into a fully fledged development bank.

17 



6. CORPORATE GOVERNANCE (Continued) 

Board and Committee meetings 

In 2011 the Board of Directors had five non executive directors. The Board continued to carry out its role 

of formulating policies and strategies of the bank, reviewing the business plan, ensure that the accounting 

system is maintained in accordance with acceptable standards, the books of the bank are kept properly, 

and that accounts are checked by authorized auditors, as well as recruitment and development of key 

personnel. The Board is also responsible for managing the bank’s risk profile and meets at least once a 

quarter to perform these duties. 

The Board Committees act on behalf of the Board to direct the bank effectively and accelerate the decisionmaking 

process. The three Board Committees are: the Board Executive Committee (BEC), the Board Audit 

and Risk Committee (BARC) and the Board Human Resources and Remuneration Committee (BHRRC). 

During 2011, the Board and its committees met to discuss and make business decisions. The numbers of 

meetings held were: 

• Full Board of Directors (9) 

• Board Executive Committee (0) 

• Board Audit Risk and Compliance Committee (3) 

• Board Human Resources and Remuneration Committee (0) 

Number of meetings attended 

Name of Director Full Board 

meeting 

BEC BARCC BHRRC 

Prof. William M. Lyakurwa 9/9 - - - 

Mr. Adatus V Magere 9/9 - 3/3 - 

Mr. Bedason A. Shallanda - - - - 

Mrs. Elipina Mlaki 5/9 - 2/3 - 

Mr. Peter M. Noni 8/9 - 2/3 - 

Mr. Mgana I. Msindai 9/9 - 3/3 - 

Mr. Haruna S. Masebu 6/9 - 3/3 - 

Executive Committee of the Board 

The committee exercises the powers of the Board of Directors during the intervals between the meetings 

of the Board, to decide upon matters which go beyond the authority of Management such as credit issues 

for deliberation of credit applications when it is not possible for the full Board to be convened at a short 

notice. It also deliberate on other things as may be referred to it from time to time by the Board. 

The Executive Committee members who served the Committee during 2011 are detailed below: 

Executive Committee of the Board 

Name Position Nationality Qualifications 

Prof. William M. Lyakurwa Chairman Tanzanian PhD Economics, Cornell University, 

Ithaca New York 

Mr. Adatus V. Magere Member Tanzanian B. Com (Hon’s) & PG.Diploma in 

Mrs. Elipina Mlaki Member Tanzanian 

International Studies & Diplomacy 

MBA, Diploma in Economics & Advanced 

Diploma in Accountancy. 

Mr. Peter M. Noni Member Tanzanian M.A Economics


6. CORPORATE GOVERNANCE (Continued) 

Human Resources and Remuneration Committee 

The primary function of this Committee is to assist the Board in fulfilling its oversight responsibility to 

shareholders by ensuring coherent remuneration policies and practices that fairly and responsibly 

reward staff, it consider, recommend and approve changes in philosophy and/or general composition of 

remuneration packages such as for Managing Director and Directors fees and allowances. It also considers 

and recommends appointments, retirements, resignation or dismissals of Executive Management and 

oversees all human resource policies within the organization. 

The Human Resources and Remuneration Committee members who served the Committee during the 

year to 31 December 2011 are detailed below: 

Human Resources and Remuneration Committee members 


Mr. Haruna S. Masebu Chairman Tanzanian MBA, MSc.(Reading University) UK 

Mr. Adatus V. Magere Member Tanzanian B. Com (Hon’s) & PG. Diploma in 


Mr. Mgana I. Msindai Member Tanzanian Advanced Diploma in Wildlife 

Mr. Peter M. Noni Member Tanzanian 

Management & Administration. 

M.A Economics 

The Human Resources and Remunerations Committee reports to main Board and meets when there is an 

agenda to discuss. 


Audit and Risk Committee 

The functions of the Audit and Risk Committee are to assist the Board in meeting its responsibilities for 

an effective system of financial reporting, internal control and risk management; and to assist Board in 

discharging its responsibilities under the Banking and Financial Institutions Act 2006 for ‘keeping under 

review the internal financial controls of the bank with a view to securing the proper conduct of its financial 

affairs’. 

The Committee is responsible for providing independent assurance to Board that the bank’s risk and control 

procedures are adequate. The Committee, which meets regularly, has detailed terms of reference that 

include: receiving reports from, and reviewing the work of, the internal and external auditors; reviewing 

the annual financial statements prior to their submission to Board; considering the appropriateness of the 

accounting policies and procedures adopted and reviewing the bank’s risk matrix and specific business 

controls. 

The Audit and Risk Committee members who served the Committee during 2011 are detailed below: 

Audit, Risk and Compliance Committee members 


Mr. Haruna S. Masebu Chairman Tanzanian MBA, MSc.(Reading University) UK 

Mr. Adatus V. Magere Member Tanzanian B. Com (Hon’s) & PG.Diploma in 

Mrs. Elipina Mlaki Member Tanzanian 


MBA, Diploma in Economics & Advanced 

Diploma in Accountancy. 

The Audit and Risk Committee reports to main Board and met three times during the year.

19 



7. CAPITAL STRUCTURE 

The bank capital structure for the year ended 31 December 2011 and 2010 respectively is shown below. 

Authorized, called up and fully paid 

2011 

The total authorized share capital of the bank is TZS 500 billion made up of 500 million ordinary shares 

of TZS 1,000 each. As at 31st December 2011 the issued and fully paid up share capital was TZS 92,137.661 

million comprised of 92,137,661 shares of TZS 1,000 each. 

2010 

The total authorized share capital of the bank was TZS 500 billion made up of 500 million ordinary shares 

of TZS 1,000 each. As at 31st December 2010 the issued and fully paid up share capital was TZS 92,137.661 

million comprised of 92,137,661 shares of TZS 1,000 each. 

8. MANAGEMENT OF THE BANK 

The bank is under the supervision of the Board of Directors and the day to day management is entrusted to 

the Managing Director who is assisted by the Heads of divisions and independent departments and units. 

The organization structure of the bank comprises of the following divisions 

• Strategic Planning and Corporate Affairs 

• Development Financing 

• Monitoring and Portfolio Management 

• Finance Treasury and Operations 

• Information and Communications Technology 

• Human Resources and Administration 

In addition there are the following independent departments and units 

• Risk and Compliance 

• Internal Audit 

• Legal and secretarial Services 

• Managed Funds 

• Procurement Management Unit 

The Managing Director reports to the Board and in turn all Heads of Divisions and independent departments 

report to the Managing Director except the Chief Internal Auditor who although he reports to the Managing 

Director administratively, he functionally reports to the Audit and Risk Committee of the Board. 

9. SHAREHOLDERS OF THE BANK 

The total number of shareholders in 2011 was 3 (2010: 3 shareholders). There was no director holding 

shares in the bank. The shares of the bank are held as follows: 

2011 

Name of the shareholders Number of shares 

held 

Amount TZS 

(million) 

Treasury Registrar on behalf of the 

Government 

92,097,661 92,098 99.96% 

Consolidated Holding Corporation 30,000 30 0.03% 

National Insurance Corporation of 

Tanzania Limited 

10,000 10 0.01% 

%


2010 


Name of the shareholders Number of shares 

held 

Amount TZS 

(million) 

Treasury Registrar on behalf of the 

Government 

92,097,661 92,098 99.96% 

Consolidated Holding Corporation 30,000 30 0.03% 

National Insurance Corporation of 

Tanzania Limited 

10,000 10 0.01% 

10. STOCK EXCHANGE INFORMATION 

Currently the bank is not listed on any stock exchange market in Tanzania. 

11. PERFORMANCE FOR THE YEAR 

The bank’s results are set out on page 21 of these financial statements. During the year under review, the 

bank recorded profit before tax of TZS 5,788 million (2010: Profit of TZS 3,608 million). The group made a 

profit before tax of TZS 5,846 million (2010; profit TZS 3,464). As the operations of the subsidiary company 

are insignificant, the following details are based on bank’s operations as highlighted below: 

Interest income 

Interest income during the year amounted to TZS 27,952 million compared to TZS 18,887 million in prior 

year, representing an increase of 48% (2010: 0.86%). The increase in income from last year levels emanates 

mainly from growth in the loan book and debt securities during the year. Loans reached TZS 181,750 

million while debt securities reached TZS 94,467 million on 31st December 2011 against TZS 106,052 and 

TZS 74,933 million respectively on 31st December 2010. 

Interest expenses 

Interest expenses during the year amounted to TZS 5,067 million compared to TZS 4,330million in prior 

year, representing an increase of 17% (2010: a decrease of 16%). The increase in interest expense is mainly 

accounted for by higher interest rates during the year and growth in total deposits by 42% (from TZS 

129,704 million in 2010 to TZS 184,165 million in 2011). 

Gross Profit Margin 

Gross profit margin ((interest income less interest expenses)/Total interest income *100) was 82% compared 

to 77 % in 2010. The ratio improved due to growth of loan book and debt securities as well as general rise 

in interest rates during the year. 

Non - interest Income 

Non-interest income amounted to TZS 7,224 million compared to TZS 5,582 million earned during 2010, 

representing an annual increase of 29% (2010: 138%). The increase was largely attributed by increase in 

fees and commission due to growth in bank activities as well as growth in foreign exchange income as a 

result of more volatility during the year. 

Non-interest expense 

Non- interest expenses include operational expenses, impairment and credit losses on loans and advances. 

Operational expenses include personnel costs, occupancy costs, depreciation of property and equipment, 

amortization of intangible assets, amortization on leasehold improvements and general administrative 

costs. During the year, non-interest expenses amounted to TZS 24,321 million as compared to TZS 16,531 

million in prior years, implying an increase of 47 % (2010: 27%) 

%

21 



11. PERFORMANCE FOR THE YEAR (Continued) 

The increase in non-interest expense is attributed to high impairment level and charged off loans that 

carries about 34% of total non-interest expenses. , such an increase was partly due to erratic power supply 

during the year which affected some borrowers as well as start-up problems in some new projects. The 

bank continues to monitor the trend and several measures have been taken including streamlining the 

appraisal process as well as recruiting additional staff to match with the expanding business. 

Key performance ratios 

The key performance ratios of the bank are as indicated hereunder: 

2011 2010 Variance 

i. Return on total assets 2.3% 2% 0.3% 

ii. Return on Equity 6% 3% 3% 

iii. Non-interest income to interest income 26% 30% -4% 

iv. Operating expenses to total assets 5% 5% 0% 

v. Interest margin to average earning assets 9% 7% 2% 

vi. Non-interest expense to gross income 69% 68% 1% 

12. FINANCIAL POSITION 

The bank’s financial position is set out on page 22 of these financial statements. The major movements 

during the year are briefly explained below: 

Cash and balances with Bank of Tanzania 

Cash and balances with Bank of Tanzania increased by TZS 5 million (0.14%) from prior year to close at TZS 

3,502 million. The slight increase was a deliberate strategy to limit cash holding. 

Reverse repurchase agreements 

There was no Reverse Repurchase Agreement (Reverse Repo) as at 31st December 2011 compared to 

previous year (2010) which was TZS 34,102 million. 

Balance with other banks 

Balances with other banks increased by TZS 4,431 million (81%) from prior year due to more deposits 

mobilization and closed the year at TZS 9,903 million. 

Placements with other banks 

Other money market placements decreased by TZS 5,670 million (47%) from prior year and closed the year 

at TZS 6,515 million. The decrease was mainly accounted for by increase in loan disbursement towards year 

end as placements usually are used to keep short term excess cash. 

Government securities held to maturity 

Investment in Government securities increased by TZS 19,534 million or 26% to close the year at TZS 94, 

467 million. The increase resulted from the funds designated for lending which were temporarily invested 

in debt securities pending fulfillment of pre - disbursement conditions by loan applicants.


12. FINANCIAL POSITION (Continued) 

Loans and advances 

Net Loans and advances increased by TZS 75,698 million (71%) from prior year to close the year at TZS 181,750 

million. The growth is in line with bank’s strategy to increase lending to sectors that spur development. 


Equity investment – Available for sale 

Equity investment – available for sale increased by TZS 500 million (100%) and closed the year at TZS 1,000 

million. The increase was due to additional subscription of 500,000 shares valued at TZS 1,000 each in 

Tanzania Mortgage Refinance Company Limited. 

Investment in Subsidiary 

Equity in Subsidiary increased by TZS 393 million (630%) to close the year at TZS 456 million. The increase 

of TZS 393 million was due to transfer of advances towards share capital to fully paid up share capital after 

completion of legal procedures and registration of new capital injection to Rasilimali Limited. 

Property and equipment 

Property and equipment decreased by TZS 187 million (10%) from prior year mainly due to depreciations 

over the period and closed the year at TZS 1,663 million. 

Landed property 

During the year the bank had a possession of three plots allocated by the Government for future use of the 

bank’s expansion activities of which one located at Masaki and two located along Ohio Street registered 

with title deed number 120047 in plot number 1763 Msasani Peninsular Dar es Salaam and Plot no 223/50, 

184/50 and 190/50 City Centre Dar es Salaam respectively. 

Other assets 

Other assets decrease by TZS 129 million (8%) from prior year. The decline is due to the decrease in the 

levels of receivables over the period. 

Deposits 

Deposits increased by TZS 54,461 million (42%) to close the year at TZS 184,165 million mainly because of 

business expansion. 

Other liabilities 

Other liabilities increased by TZS 1,355 million (87%) mainly due to accrued expenses on services received 

before year end and increase in the levels of other creditors (suppliers) during the year. 

Non-distributable reserve 

Non distributable reserves increased to TZS 15,686 million from TZS 4,658 million an increase of TZS 11,028 

(237%). The increase is mainly due to increase in Risk Regulatory reserves on loan losses accounted for 

in accordance to Bank of Tanzania prudential guidelines on provisioning for loan losses which requires a 

creation of a special non distributable reserve to cushion for the difference between IFRS provisioning and 

BOT provisioning on non performing portfolio loans.

23 



12. FINANCIAL POSITION (Continued) 

Key efficiency ratios 

The key performance ratios of the bank as indicated as hereunder: 

2011 2010 Variance 

Total capital to total assets 38% 45% -7% 

Non-performing loans to total advances 21% 15% 4 % 

Gross Loans to total deposits* 102% 87% 15% 

Loans to total assets 60% 44% 16% 

Liquidity ratio 112% 140% -28% 

*Due to the nature of its mandate, the bank has been using other sources of funding including capital to 

issue loans and does not entirely rely on deposits. 

13. TANZANIA INVESTMENT BANK (TIB) TRANSFORMATION PROCESS TO DEVELOPMENT 

FINANCIAL INSTITUTION (DFI) 

The bank continued with the transformation agenda during the year. In particular, the bank participated in 

Bank of Tanzania program to put in place Development Finance Institution (DFI) regulations. This activity 

is at an advanced stage and it is hoped that it will bring clarity in management of the bank’s loan portfolio 

which has been subjected to commercial banking regulations. 

The bank also continued with the plan to restructure itself in two tier structure whereby a consultant to 

advice on the best way to separate the DFI operations from Corporate banking operations was selected 

and is expected to submit the report by end of June 2012. The consultant will also advise on the way 

forward for Rasilimali Limited. Meanwhile the bank continued with expansion plan by opening a Zonal 

office and branch in Mbeya whose operations are expected to start in the second quarter of 2012. 

14. FUTURE DEVELOPMENT PLAN 

On the basis of the approved restructuring plan the bank will continue to improve its profitability through 

the introduction of innovative products, focusing on value-added customer services and selective 

expansion of its branches while carefully managing both costs and risks. The bank will continue to focus 

on improving productivity through re-engineering of its internal processes, and the use of modern 

technology. The following changes are envisaged in the foreseeable future. 

i. Ownership: 

Tanzania Investment bank will remain 100% government owned with an option to invite a development 

oriented partner to take some stake in order to benefit from knowledge sharing and provide additional 

funding. 

ii. Organizational Structure: 

The organization structure of Tanzania Investment Bank will follow a two-tier structure. The parent 

Development Financial Institution (TIB Limited) which will be responsible for mobilizing medium and 

long term resources and lending them on long term basis, while the new corporate bank subsidiary (TIB 

Corporate Bank) will mobilize short term deposits and provide short term lending in form of working 

capital, letters of credit guarantee and offer current account facilities particularly to DFI customers.


14. FUTURE DEVELOPMENT PLAN (Continued) 

Capitalization: 

As provided in the Cabinet approval made in (June 2010), the paid up share capital of the bank will be 

enhanced annually through budgetary allocation to the envisaged level of TZS 500 billion by 2015. 


iii. Legal and Regulatory Framework: 

Tanzania Investment Bank is currently being regulated under Bank of Tanzania prudential guidelines 

established for deposit taking commercial banking. 

As mentioned above, the bank participated in the process to promulgate new Development Financial 

Institution (DFI) regulations and it is hoped that their existence will play major role in supporting the role 

of TIB and other DFIs in the country. 

15. RESULTS AND DIVIDEND 

During the year the bank had a tax credit of TZS 1,337 million arising from deferred tax asset, and therefore 

profit after tax stood at TZS 7,125 million,(2010 – TZS 3,189 million). The Board of Directors did not propose 

any dividend relating to financial year ended 31 December 2011 nor for 31 December 2010 because the 

bank is still in transformation process and requires capitalization. 

16. RISK MANAGEMENT AND INTERNAL CONTROL 

The Board accepts final responsibility for the risk management and internal control system of the bank. 

The management ensures that adequate internal financial and operational control systems are developed 

and maintained on an ongoing basis in order to provide reasonable assurance regarding: 

• The effectiveness and efficiency of operations; 

• The safeguarding of the bank’s assets; 

• Compliance with applicable laws and regulations; 

• The reliability of accounting records; 

• Business sustainability under normal as well as adverse conditions; and 

• Responsible behaviors towards all stakeholders. 

The efficiency of any internal control system is dependent on the strict observance of prescribed measures. 

There is always a risk of non-compliance of such measures by staff. Whilst no system of internal control can 

provide absolute assurance against misstatement or losses, the bank’s system is designed to provide the 

Board with reasonable assurance that the procedures in place are operating effectively. 

The Board assessed the internal control systems throughout the financial year ended 2011 and the Directors 

are satisfied that they met accepted criteria. The Board carries risk and internal control assessment through 

its Audit and Risk Committee.

25 



17. ADMINISTRATION OF GOVERNMENT FUNDS 

One of the principal activities of the bank is to administer funds for special projects on behalf of the 

Government. During the year 2011 the following funds were administered by the bank. 

S/N Name of the 

Project 

1 Agricultural 

Financing 

Window 

Funds from the 

Government 

Amount 

disbursed 

TZS 42 billion TZS 27.4 

billion 

2 Floriculture Funds TZS 50.75 billion TZS 50.75 

billion 

3 Rural Energy 

Agency (REA) 

4 Tanzania Housing 

Bank (THB) 

TZS 81.5 billion TZS 81.4 

billion 

Balance Remarks 

TZS 14.6 

billion 

Disbursement is in progress 

upon receiving the approvals 

and fulfillment of the terms and 

conditions of the facility 

- Generally the performance of the 

sector has not been satisfactory; 

the bank has reviewed and 

submitted recommendations to 

the Government through Bank 

of Tanzania for further guidance. 

However at the end of the year one 

of the borrowers was processing full 

repayment of the loan amounting to 

TZS 5.305 billion. 

TZS 0.1 

billion 

A total of TZS 81.375 was disbursed; 

site visits are being conducted 

and reports are submitted to the 

principal (REA) at the end of each 

quarter and completed projects 

are recommended for completion 

certificates. 

NA NA NA Only TZS 16.0 million was 

collected during the year ended 

31st December 2011. The bank is 

discussing with the Ministry of 

Finance on the way forward. 

5 Artumas Gas TZS 10 billion TZS 9.97 

billion 

TZS 0.03 

billion 

The customer will start repayments 

in March 2012. 

6 SAAFI LIMITED NA NA - No disbursement was made during 

the year. The performance of the 

facility is not satisfactory. So far 

two strategic investors have been 

identified. Negotiations are ongoing. 

7 Commodity 

Import Support 

(CIS) 

8 Tanzania Energy 

Development and 

Access Expansion 

Programme 

(TEDAP) 

TZS 17.09 billion TZS 17.03 

billion 

TZS 36.524 

billion (held at 

BOT) 

TZS 0.06 

billion 

Generally the performance has not 

been good due to low repayments. 

Discussions are being done with 

the Ministry of Finance on the way 

forward. 

- - No application was received from the 

approved PFIs (Banks) for refinancing 

the renewable energy. Funds are only 

disbursed to TIB when PFI application 

has been approved.


18. SOLVENCY 

The Board of directors confirms that applicable accounting standards have been followed and that 

the financial statements have been prepared on a going concern basis. The Government of the United 

Republic of Tanzania shall continue making capital injection through budgetary allocation until such time 

the paid up share capital of the bank have reached TZS 500 million. The Board of directors has reasonable 

expectation that Tanzania Investment Bank (TIB) has adequate resources to continue in operational 

existence for the foreseeable future. 

19. EMPLOYEES WELFARE 

Relationship between management and employees 

There were continuous good relation between employees and management for the year 2011. There is one 

unresolved complaint received by Management from an ex-employee during the year. However, a healthy 

relationship continues to exist between management and trade union. 


The bank is an equal opportunity employer 

It gives equal access to employment opportunities and ensures that the best available person is appointed 

to any given position free from discrimination of any kind and without regard to factors like gender, marital 

status, tribes, religion and disability which does not impair ability to discharge duties. 

Training 

Training and development of staff capacity is one of the key priorities of the bank as re-orientation to 

development banking continues. The bank spent TZS 641 million during the year (TZS 303 million in 2010) 

to train staff on various programs. This is in addition to training programs that are fully or partially funded 

by partner institutions such as SADC-DFRC and World Bank through Second Generation Financial Sector 

Reforms operated by the Bank of Tanzania. The bank will continue to train, re-train and develop staff in 

order to improve service delivery and innovation in development financing. 

Staff loans and advances 

Loans are available to all confirmed employees depending on the assessment of the need and ability to 

pay in compliance of staff loan policy. The bank also supports the staff run Credit Co- operative Society 

(SACCOS) to assist in promoting the welfare of its employees. 

Medical facilities 

All members of staff plus a maximum number of four beneficiaries (dependents) for each employee were 

availed medical insurance guaranteed by the bank. Currently these services are provided by AAR Health 

Insurance (AAR). 

Disabled Persons 

Applications for employment by disabled persons are always considered, bearing in mind the aptitudes 

of the applicant concerned. In the event of members of staff becoming disabled, every effort is made 

to ensure that their employment with the bank continues and appropriate training is arranged. It is the 

policy of the bank that training, career development and promotion of disabled persons should, as far as 

possible, be identical to that of other employees. 

Retirement benefits 

The bank pays contributions to a publicly administered pension plans on mandatory basis which qualifies 

to be a defined contribution plan. The average number of employees during the year was 170. (Previous 

year: 154.)

27 



20. GENDER PARITY 

The bank is equal opportunity employer. It gives equal access to employment opportunities and ensures 

that the best available person is appointed to any given position free from discrimination of any kind. As 

at 31 December 2011 the bank had the following distribution of employees by gender. 

Gender 31 st Dec 2011 31 st Dec 2010 

Male 105 99 

Female 65 55 

Total 170 154 

21. RELATED PARTY TRANSACTIONS 

Related party transactions and balances are disclosed in note 37 to these financial statements. 

22. POLITICAL AND CHARITABLE DONATIONS 

The bank did not make any political donations during the year. However, donations made to charitable 

organizations during the year as part of the bank’s corporate social responsibility amounted to TZS 83 

million (2010: TZS 46 million). 

23. CORPORATE SOCIAL RESPONSIBILITY 

The bank participates actively in community activities and development programmes throughout the 

country. Areas being given priority by the bank are health, environment conservation, education, orphanage 

centers and sports. During the year, the bank participated in the following selected programmes. 

• Donation to National Kidney Foundation; 

• Donation to Tanzania Prostrate Cancer Foundation – 50 Plus campaign; 

• Donation to Tanzania Breast Cancer Foundation; 

• Sponsorship to National Development Co-operation Delegates from Exim Bank of China; 

• Sponsorship to National Economic Empowerment Council; 

• Donation to Kisesa Development Fund; 

• Donation to Gongo la Mboto bomb blast victims; 

• Donation to Zanzibar Municipal for Mv Spice Islander Victims; 

• Sponsorship to DIASPORA Conference in USA; 

• Sponsorship to Lake Tanganyika Investment Forum in Rukwa; 

• Sponsorship to 50th Anniversary celebrations Bonanza; 

• Donation to Hassan Maajar Foundation for school desks; and 

• Donation to Dar es Salaam Disabled handcrafters Groups. 

24. CAPITAL ADEQUACY 

The bank monitors the adequacy of its capital using ratios established by the Bank of Tanzania (BOT). These 

ratios measure capital adequacy by comparing the bank’s eligible capital with its statement of financial 

position assets, off-statement of financial position commitments and market and other risk positions at a 

weighted amount to reflect their relative risk.



The bank’s capital adequacy ratios are included as summarized below: 

Nominal 

financial 

position 

amounts 

2011 

TZS ‘000 

Risk 

weighted 

amounts 

2011 

TZS ‘000 

Nominal 

financial 

position 

amounts 

2010 

TZS ‘000 

Risk 

weighted 

amounts 

2010 

TZS ‘000 

Financial position assets (net of 

provisions) 

Cash and balances with Bank of Tanzania 3,502,019 - 3,497,067 - 

Reverse repurchase agreements - - 34,102,192 - 

Balance with other banks 9,902,933 1,980,587 5,471,755 1,094,351 

Placements with other banks 6,514,649 1,302,930 12,184,328 2,436,866 

Cheques and items in course of collection 18,110 3,622 

Government securities held to maturity 94,466,755 - 74,932,758 - 

Loans and advances 181,750,408 181,750,408 106,051,982 106,051,982 

Equity investment-Available for sale 1,000,000 1,000,000 500,000 500,000 

Investment in Subsidiary 455,653 455,653 62,453 62,453 

Property and equipment 1,662,630 1,662,630 1,849,975 1,849,975 

Leasehold improvements 660,149 660,149 957,671 957,671 

Intangible assets 681,981 681,981 612,500 612,795 

Tax recoverable 2,498,113 - 1,872,242 - 

Deferred tax asset 1,188,607 - - - 

Other assets 1,501,158 1,501,158 1,630,207 1,630,207 

Total 305,803,166 190,317,138 243,725,130 114,583,505 

Off – statement of financial position 

balance 

Outstanding letters of credit 

Outstanding guarantees and 

5,229,743 1,045,949 2,561,992 512,398 

commitments 

Total off – statement of financial 

11,025,930 11,025,930 30,836,912 30,836,912 

position balance 16,255,673 12,071,879 33,398,904 31,349,310 

Total risk-weighted assets 322,058,839 202,389,017 277,124,034 145,932,815 

Capital Ratios Capital Ratios 

Tier 1 capital 98,733,208 49% 102,829,635 70% 

Tier 1 + Tier 2 capital 98,733,208 49% 102,829,635 70%

29 



25. EVENTS AFTER REPORTING DATE 

a) Corporate Structure 

As a development financial institution, TIB is envisaged to change its Corporate Structure from the current 

setting into a two tier structure comprising of TIB DFI and TIB Corporate Structure. Appointment of a 

consultant for doing the separation was completed in March 2012, and the fieldwork started. It is expected 

that the exercise will be completed in three months period to 30 June 2012. 

b) Development Financial Institution (DFI) Prudential Guidelines and Regulations 

As a development bank, TIB is being regulated by BOT using existing prudential guidelines and regulations 

which are suitable for operations of the Commercial Banks. Meanwhile, BOT in consultation with other 

stakeholders, have formulated DFI prudential standards and guidelines and the same have been forwarded 

to Attorney General for Gazzeting before official use. 

26. AUDITORS 

The Controller and Auditor-General (CAG) is the statutory auditor for the Tanzania Investment Bank Limited 

pursuant to the provisions of Article 143 of the Constitution of the United Republic of Tanzania of 1977 

(revised 2005), Sections. 30 – 33 of the Public Audit Act No. 11 of 2008. Ernst & Young, Certified Public 

Accountants were appointed by the CAG to audit the financial statements of the Bank for the year ended 

31 December 2011. 

Approved by the Board of Directors on _____________2012 __________ and signed on its behalf by: 

Name: _______________________ ______________ _ ________ 

Chairman 

Signature:____________________ 

ture:____________________ 

Name: _______________________ 

Director 

Signature:____________________ 

: 

Name: _______________________ 

Managing DDirector 

Signature:____________________ 

e:____________________

STATEMENT OF DIRECTORS' RESPONSIBILITIES 

The Companies Act, No.12 of 2002 requires the Directors to prepare financial statements for each financial 

period that give a true and fair view of the state of affairs of the Company as at the end of the financial year 

and of its profit or loss. It also requires the Directors to ensure that the Company keeps proper accounting 

records that disclose, with reasonable accuracy, the financial position of the Company. The Directors are 

also responsible for safeguarding the assets of the bank and hence for taking reasonable steps for the 

prevention and detection of fraud, error and other irregularities. 

The Directors accept responsibility for the annual financial statements, which have been prepared using 

appropriate accounting policies supported by reasonable and prudent judgments and estimates, in 

conformity with International Financial Reporting Standards (IFRS) and the requirements of the Companies 

Act, 2002 and the Banking and Financial Institutions Act, 2006. The Directors are satisfied that the financial 

statements give a true and fair view of the state of the financial affairs of the Bank and of its profit or loss. 


The Directors further confirm that there were no major changes in the assets, capital, and borrowings. 

The Directors further accept responsibility for the maintenance of accounting records that may be relied 

upon in the preparation of financial statements, as well as adequate systems of internal financial control. 

Nothing has come to the attention of the Directors to indicate that the bank will not remain a going concern 

for at least twelve months from the date of this statement. 

Name: ___________________ ______________ _ ____ SSignature:_____________________ 

ure:_____________________ DDat Date:______________ 

te:____________ _ __ 

Chairman Chairman 

Name: ___________________ 

Signature:_____________________ _________________ Date:______________ 

ate:__________ __ ____ _ __ 

Director 

Name: ___________________ ________________ _ __ Signature:_____________________ _________ __ ______________ DDate:______________ 

____________ 

Managing M i Di Director

31 


Independent Auditors Report 

AUDIT REPORT ON THE FINANCIAL STATEMENTS 

To: Chairman of the Board of Directors 

Tanzania Investment Bank Limited 

P. O. Box 9373 

Dar es Salaam 

REPORT OF THE CONTROLLER AND AUDITOR-GENERAL 

ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS OF TANZANIA INVESTMENT 

BANK LIMITED FOR THE YEAR ENDED 31ST DECEMBER 2011 

Report on the financial statements 

I have audited the accompanying consolidated financial statements of Tanzania Investment Bank Limited (‘the 

bank’) and its subsidiary which comprise the consolidated statement of financial position as at 31 December, 

2010, and the consolidated statement of comprehensive income, consolidated statement of changes in equity 

and the consolidated statement of cash flows for the year then ended, and the notes to the consolidated 

financial statements which includes a summary of significant accounting policies and other explanatory notes 

set out on pages 21 to 87. 

The Controller and Auditor-General is the statutory auditor for the Tanzania Investment Bank Limited pursuant 

to the provisions of Article 143 of the Constitution of the United Republic of Tanzania of 1977 (revised 2005), 

Sections. 30 -33 of the Public Audit Act No 11 of 2008. 

Directors’ responsibility for the financial statements 

The Board of Directors of Tanzania Investment Bank Limited are responsible for the preparation and fair 

presentation of these financial statements in accordance with International Financial Reporting Standards and 

in the manner required by the Tanzanian Companies Act, 2002 and the Banking and Financial Institutions Act, 

2006. This responsibility includes designing, implementing and maintaining internal control relevant to the 

preparation and fair presentation of financial statements that are free from material misstatements, whether 

due to fraud or error, selecting and applying appropriate accounting policies and making accounting estimates 

that are reasonable in the circumstances. 

Responsibility of the Controller and Auditor General 

My responsibility as auditor is to express an independent opinion on these financial statements based on the 

audit. The audit was conducted in accordance with International Standards on Auditing (ISA), International 

Standards of Supreme Audit Institutions (ISSAIs) and such other procedures I considered necessary in the 

circumstances. These standards require that I comply with ethical requirements and plan and perform the audit 

to obtain reasonable assurance about whether the financial statements are free from material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the 

financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of 

the risks of material misstatement of the financial statements, whether due to fraud or error. In making those 

risk assessments, the auditor considers internal control relevant to the Bank’s preparation and fair presentation 

of the financial statements in order to design audit procedures that are appropriate in the circumstances but 

not for the purpose of expressing an opinion on the effectiveness the Bank’s internal control. An audit also 

includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting 

estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

INDEPENDENT AUDITORS REPORT 

In addition, Sect. 10 (2) of the Public Audit Act No. 11 of 2008 requires me satisfy myself that the financial 

accounts have been prepared in accordance with the appropriate accounting standards and that, reasonable 

precautions have been taken to safeguard the collection of revenue, receipt, custody, disposal, issue and 

proper use of public property, and that the law, directions and instructions applicable thereto have been dully 

observed, expenditures of public monies have been properly authorised. 

Furthermore, Section. 44 (2) of the Public Procurement Act, No. 21 of 2004 and Regulation No. 31 of Public 

Procurement (Goods, Works, Non-Consultant services and Disposal of Public Assets by Tender) Regulations 

of 2005 requires me to state in my annual audit report whether or not the auditee has complied with the 

provisions of the Law and its Regulations. 

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit 

opinion. 

Unqualified Opinion 

In my opinion, the consolidated financial statements present fairly, in all material aspects, the consolidated 

financial position of Tanzania Investment Bank Limited as at 31 December, 2011, and its financial performance 

and its cash flows for the year then ended in accordance with International Financial Reporting Standards and 

in the manner required by the Banking and Financial Institutions Act, 2006. 

Report on other legal requirements 

Report on compliance with procurement legislation 

As required by the Public Procurement Act, 2004, I report to you, based on my normal audit procedures, that I 

did not find any material divergences by management from the requirements of the Public Procurement Act, 

2004 and its related regulations of 2005 in its procurement transactions during the year. 

Francis Mwakapalila 

Ag. CONTROLLER AND AUDITOR GENERAL 

Office of the Controller and Auditor General, 

National Audit Office, 

Dar es Salaam, Tanzania 

9th May, 2012 


33 


Financial Statement 

Statement of comprehensive income 

CONSOLIDATED BANK 

Notes 2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

Interest income 7 27,938,528 18,886,916 27,951,750 18,886,916 

Interest expense 8 (5,066,797) (4,329,579) (5,066,797) (4,329,579) 

Net interest income 

Fees, commissions and other 

22,871,731 14,557,337 22,884,953 14,557,337 

income 

Foreign currency dealing and 

9 3,541,152 2,633,515 3,176,624 2,457,096 

exchange income 10 3,069,165 1,398,855 3,069,165 1,398,855 

Recoveries during the year 11 978,135 1,726,462 978,135 1,726,462 

Total operating income 30,460,183 20,316,169 30,108,877 20,139,750 

Impairment losses on loans and 

advances 22 (8,219,835) (3,668,069) (8,219,835) (3,668,069) 

Net operating income 22,240,347 16,648,100 21,889,041 16,471,681 

Personnel expenses 12 8,579,065 5,992,146 8,361,414 5,757,466 

Occupancy expenses 

General and administration 

13 2,209,168 2,155,469 2,205,751 2,153,421 

expenses 

Depreciation of property and 

14 4,469,878 4,187,050 4,406,342 4,108,525 

equipment 

Amortization of leasehold 

25 538,087 447,786 530,626 442,197 

improvements 26 328,792 193,827 328,792 193,827 

Amortization of intangible assets 27 269,158 208,072 268,533 207,759 

Total operating expenses 16,394,148 13,184,350 16,101,458 12,863,195 

Profit before tax 5,846,199 3,463,750 5,787,583 3,608,486 

Income tax credit/(expense) 28 1,337,341 (419,668) 1,337,341 (419,668) 

Profit for the year 7,183,540 3,044,082 7,124,924 3,188,818 

Other comprehensive income 

R e v a l u a t i o n r e s e r v e 

Total comprehensive income 

- 37, 575 - - 

for the year 7,183,540 3,081,657 7,124,924 3,188,818

FINANCIAL STATEMENT 

Statement of financial position 


Notes 2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

Assets 

Cash and balances with Bank of 

Tanzania 15 3,502,019 3,497,067 3,502,019 3,497,067 

Reverse repurchase agreements 16 - 34,102,192 - 34,102,192 

Balance with other banks 17 9,953,880 5,559,241 9,902,933 5,471,755 

Placements with other banks 18 6,514,649 12,184,328 6,514,649 12,184,328 

Cheques in the course of collection 18,110 18,110 - 

Financial investment held for trading 

Government and corporate securities 

19 193,996 107,004 - - 

held - to - maturity 20 94,466,755 74,932,758 94,466,755 74,932,758 

Loans and advances 22 181,246,256 106,051,982 181,750,408 106,051,982 

Equity investment-available for sale 23 1,000,000 500,000 1,000,000 500,000 

Investment in subsidiary 24 - - 455,653 62,453 

Property and equipment 25 1,699,559 1,894,219 1,662,631 1,849,975 

Leasehold improvements 26 660,149 957,671 660,149 957,671 

Intangible assets 27 683,543 614,687 681,981 612,500 

Tax recoverable 28 2,517,025 1,890,490 2,498,113 1,872,242 

Deferred tax asset 28 1,188,607 - 1,188,607 - 

Grants receivable 29 58,691 25,850 58,691 25,850 

Other assets 30 1,996,419 1,329,442 1,442,468 1,604,356 

Total assets 

Liabilities and equity 

305,699,657 243,646,932 305,803,166 243,725,130 

Deposits 32 184,156,881 129,689,419 184,164,988 129,704,136 

Other liabilities 33 2,979,341 1,715,254 2,904,432 1,549,807 

Deferred tax liability 28 - 148,734 - 148,734 

Deferred Income 31 1,069,319 - 1,069,319 - 

Long-term Borrowing 34 2,062,358 3,845,308 2,062,358 3,845,308 

Total liabilities 

Shareholders’ equity 

190,267,899 135,398,715 190,201,097 135,247,985 

Share capital 35 92,137,661 92,137,661 92,137,661 92,137,661 

Retained earnings 7,281,310 11,126,149 7,489,196 11,392,652 

Other reserves 326,349 326,349 288,774 288,774 

Non distributable reserve 15,686,438 4,658,058 15,686,438 4,658,058 

Total equity 115,431,758 108,248,217 115,602,069 108,477,145 

Total liabilities and equity 305,699,657 243,646,932 305,803,166 243,725,130 

These financial statements were approved by the Board of Directors for issue on______________2012 ______ _ ____ and 

were signed on its behalf by: 

___________ 

______________________ _ ___________ ________________________ _________ 

______________________ 

__ _______________ 

Chai Chairman ai airman 

Director MManaging i Di Director 



Statement of changes in equity 

CONSOLIDATED 

Retained Non - distributable Technical Special 

Other 

Share capital earnings 

reserve assistance reserve reserves Total 

TZS’ 000 TZS’ 000 TZS’ 000 TZS’ 000 TZS’ 000 TZS’ 000 TZS’ 000 

2011 

At 01 January 92,137,661 11,126,149 4,658,058 288,774 - 37,575 108,248,218 

Profit for the year - 7,183,540 - - - - 7,183,540 

Transfer to regulatory reserve - (11,028,380) 11,028,380 - - - - 

At 31 December 92,137,661 7,281,310 15,686,438 288,774 - 37,575 115,431,758 

2010 

At 01 January 42,137,661 10,472,734 1,647,391 288,774 620,000 - 55,166,560 

Additional capital injection 50,000,000 - - - - - 50,000,000 

Special reserve - 620,000.00 - - (620,000.00) - - 



Other Comprehesive income - - - - - 37,575 37,575 

At 31 December 92,137,661 11,126,149 4,658,058 288,774 - 37,575 108,248,217 

35 



Statement of changes in equity 

BANK 

Retained Regulatory Technical Special 

Other 

Share capital earnings reserve assistance reserve reserves Total 

TZS’ 000 TZS’ 000 TZS’ 000 TZS’ 000 TZS’ 000 TZS’ 000 TZS’ 000 

2011 

At 01 January 92,137,661 11,392,652 4,658,058 288,774 - 108,477,145 



At 31 December 92,137,661 7,489,196 15,686,438 288,774 - - 115,602,069 

2010 

At 01 January 42,137,661 10,594,501 1,647,391 288,774 620,000 - 55,288,327 

Additional capital injection 50,000,000 - - - - - 50,000,000 

Special reserve - 620,000 - - (620,000) - - 



At 31 December 2010 92,137,661 11,392,652 4,658,058 288,774 - - 108,477,145 


37 



Statement of cash flows 


Notes 2011 2010 2011 2010 

TZS '000 TZS '000 TZS '000 TZS '000 

Cashflow from operating activities 

Profit before tax 

Adjustments for: 

5,846,199 3,463,750 5,787,583 3,608,486 

Depreciation and amortisation 807,245 655,858 799,159 649,956 

Write off of leasehold improvements 328,792 193,827 328,792 93,827 

Loss on sale of fixed assets 

Impairment losses on loans and 

- 2,026 - 2,026 

advances 

Cashflow from operating profits 

8,219,835 3,668,069 8,219,835 3,668,069 

before working capital changes 

Changes in operating assets and 

liabilities 

Increase in placements with other 

15,202,072 7,983,530 15,135,370 8,122,364 

banks 26,293 (1,383,729) 26,293 (1,013,114) 

Increase in loans and advances (77,909,415) (27,947,276) (77,909,415) (27,947,276) 

(Decrease)/increase in other assets (699,817) (155,334) 129,048 (301,237) 

Increase in deposits 54,467,462 24,160,310 54,460,852 24,163,897 

(Decrease)/Increase in other liabilities 

Increase in Investment securities 

1,264,088 323,410 (2,275,211) (157,963) 

held to maturity (26,198,137) (6,565,585) (26,198,137) (6,565,585) 

(33,847,453) (3,584,674) (36,631,199) (3,698,914) 

Tax paid 

Net cash inflow from operating 

(625,871) (1,500,039) (625,871) (1,500,000) 

activities 

Cash flow used in investing 

activities 

Purchases of leasehold 

(34,473,324) (5,084,713) (37,257,069) (5,198,914) 

properties,Plant and equipments (421,289) (1,475,070) (421,143) (1,473,419) 

Purchases of intangible assets (286,819) (553,477) (286,819) (550,977) 

Additional leasehold improvements (31,270) (948,334) (31,270) (948,334) 

Additional equity investments 

Increase in financial assets held for 

(500,000) (500,000) (500,000) (500,000) 

trade 

Net cash used in investing 

(86,992) (103,380) - - 

activities 

Cash flow from financing activities 

(1,326,370) (3,580,261) (1,239,232) (3,472,730) 

Loan repayments (1,782,950) (1,239,506) (1,782,950) (1,239,506) 

Proceeds from capital injection - 50,000,000 - 50,000,000 

Increase in cash and cash 

(1,782,950) 48,760,494 (1,782,950) 48,760,494 

equivalents 

Cash and cash equivalents 

(37,582,644) 40,095,520 (40,279,252) 40,088,850 

At the beginning of the year 73,003,873 32,908,354 72,916,387 32,827,538 

At the end of the year 21 35,421,229 73,003,873 32,637,135 72,916,387


Notes to the financial statements 

1. BASIS OF PREPARATION 

The financial statements have been prepared on a historical cost basis except where otherwise stated or as 

required by International Financial Reporting Standards and Interpretations to those Standards for assets 

and liabilities to be stated at their fair value as disclosed in the accounting policies hereafter. The financial 

statements are presented in thousands of Tanzania Shillings (TZS ‘000) except where explicitly stated. 


Statement of compliance 

The financial statements of Tanzania Investment Bank Limited have been prepared in accordance with 

International Financial Reporting Standards (IFRS) and Interpretations to those Standards, and in the 

manner required by Tanzanian Companies Act, 2002 and the Banking and Financial Institutions Act, 2006. 

Presentation of financial statements 

The bank presents its statement of financial position broadly in order of liquidity. An analysis regarding 

recovery or settlement within 12 months after the statement of financial position date (current) and more 

than 12 months after the statement of financial position date (non-current) is presented in note 39. 

Offsetting 

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial 

position only when there is a legally enforceable right to offset the recognised amounts and there is an 

intention to settle on a net basis, or to realise the assets and settle the liability simultaneously. Income 

and expense is not offset in the statement of comprehensive income unless required or permitted by any 

accounting standard or interpretation, and as specifically disclosed in the accounting policies of the bank. 

Basis of consolidation 

The consolidated financial statements comprise the financial statements of Tanzania Investment Bank 

Limited and its subsidiary for the year ended 31 December 2011. 

The financial statements of the subsidiary are prepared for the same reporting period as the bank, using 

consistent accounting policies. All intra-group balances, income and expenses and unrealized gains and 

losses resulting from intra-group transactions are eliminated in full. 

Subsidiaries are fully consolidated from the date on which control is transferred to the bank. Control is 

achieved where the bank has the power to govern the financial and operating policies of an entity so as to 

obtain benefits from its activities. 

The consolidated financial statements incorporate the assets, liabilities and operations of Rasilimali Limited 

which was the only investment controlled by the bank. The bank owns 100% shares in Rasilimali Limited. 

2. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURE 

New and amended standards and Interpretations 

The accounting policies adopted are consistent with those of the previous financial year, except for the 

following new and amended IFRS and IFRIC interpretations: 

IFRS 7 Financial Instruments: Disclosures (amendment) 

The IASB issued an amendment to IFRS 7 on 7 October 2010. The amendment provides enhanced disclosures 

regarding ‘Transferred financial assets that are derecognised in their entirety’ and ‘Transferred assets that 

are not derecognised in their entirety’. The effective date is for annual periods beginning on or after 1 July 

2011, but the bank has adopted the amendment early.

39 




2. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURE (Continued) 

IAS 24 Related Party Disclosures (amendment) 

The amendment to IAS 24 is twofold. The amendment clarified the definition of a related party, however, 

without changing the fundamental approach to related party disclosures. It emphasises a symmetrical view 

on related party relationships and clarifies how a person or key management personnel impacts related 

party relationships of an entity (see Note 37). The amendment is effective for financial years beginning on 

or after 1 January 2011. 

While the adoption of the amendment did not have any current impact on the financial position or 

performance or disclosures of the bank, as all required information is currently being appropriately 

captured and disclosed, it is relevant to the application of the bank’s accounting policy in identifying 

future potential related party relationships. 

Other amendments resulting from Improvements to IFRSs to the following standards did not have any 

impact on the accounting policies, financial position or performance of the bank: 

• IFRS 3 Business Combinations (Contingent consideration arising from business combination prior to 

adoption of IFRS 3 (as revised in 2008)) 

• IFRS 3 Business Combinations (Unreplaced and voluntarily replaced share-based payment awards) 

• IAS 27 Consolidated and Separate Financial Statements 

• IAS 32 Financial Instruments: Presentation (amendment) 

• IAS 34 Interim Financial Statements 

• IFRIC 13 Customer Loyalty Programmes (determining the fair value of award credits) 

• IFRIC 14 Prepayments of Minimum Funding Requirement (amendment) 

• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Recognition of income and expenses 

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the bank and 

the revenue can be reliably measured. The following specific recognition criteria must also be met before 

revenue is recognised: 

Interest and similar income and expenses 

For all financial instruments measured at amortised cost and interest bearing financial instruments classified 

as available-for-sale financial investments, interest income or expense is recorded at the effective interest 

rate (EIR), which is the rate that exactly discounts estimated future cash payments or receipts through 

the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying 

amount of the financial asset or financial liability. The calculation takes into account all contractual terms 

of the financial instrument (for example, prepayment options) and includes any fees or incremental costs 

that are directly attributable to the instrument and are an integral part of the effective interest rate, but not 

future credit losses. 

The carrying amount of the financial asset or financial liability is adjusted if the bank revises its estimates of 

payments or receipts. The adjusted carrying amount is calculated based on the original effective interest 

rate and the change in carrying amount is recorded as ‘other operating income’. However, for a reclassified 

financial asset for which the bank subsequently increases its estimates of future cash receipts as a result of 

increased recoverability of those cash receipts, the effect of that increase is recognised as an adjustment 

to the effective interest rate (EIR) from the date of the change in estimate



3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 

Interest and similar income and expenses (Continued) 

Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to 

an impairment loss, interest income continues to be recognised using the rate of interest used to discount 

the future cash flows for the purpose of measuring the impairment loss. 


Fees and commission income 

The bank earns fees and commission income from diverse range of services it provides to its customers. 

Fees income can be divided into the following categories: 

Fee income earned from services that are provided over a certain period of time 

Fees earned for the provision of services over a period of time are accrued over that period. These fees 

include commission income and asset management, custody and other management and advisory 

fees. 

Loan facility fees are apportioned over the life of the loan facility. Loan commitment fees for loans 

that are likely to be drawn down and other credit related fees are deferred (together with any 

incremental costs) and recognised as an adjustment to the effective interest rate (EIR) on the loan. 

When it is unlikely that a loan will be drawn down, the loan commitment fees are recognised over the 

commitment period on a straight line basis. 

Fee income from providing transaction services 

Fees arising from negotiating or participating in the negotiation of a transaction for a third party, 

such as the arrangement of the acquisition of shares or other securities or the purchase or sale of 

businesses, are recognised on completion of the underlying transaction. Fees or components of fees 

that are linked to a certain performance are recognised after fulfilling the corresponding criteria. 

Net operating income and other income 

Results arising from trading activities include all gains and losses from changes in fair value and related 

interest income or expense and dividends for financial assets and financial liabilities held for trading. Other 

income is recognized in the period in which it is earned. 

Dividend income 

Dividend income is recognised when the bank’s right to receive the payment is established. 

Employees’ benefits including post employment benefits 

Short-term employment benefits such as salaries, social security contributions, and leave fare assistance 

are recognized in the profit or loss in the period the employees render the services. 

Post retirement benefits 

The bank operates a defined contribution plan whereby each of its employees and the bank contribute to 

the state owned and managed (statutory) funds namely the Parastatal Pension Fund (PPF), Public Service 

Pension Fund (PSPF) or the National Social Security Fund (NSSF) and Local Authority Pension Fund (LAPF). 

Apart from these monthly contributions, the bank has no further commitments or obligations to the funds 

and it has no other post retirement benefit scheme. The contributions are charged to the profit or loss in 

the year to which they relate.

41 





Other employee benefits 

The bank provides free medical treatment to staff and their dependants. The cost is charged to the profit 

or loss. The estimated monetary liability for employees’ accrued leave entitlement at the reporting date is 

recognized as an expense accrual. 

The bank also has long time service award scheme for employee reaching 10 years and above ,who shall 

be paid equivalent to two-six months basic salary at that particular time and thereafter multiple of five 

years of service, the expense is accrued on eligible employees when the obligation is due in the year the 

employee qualifies for payment. 

Provisions 

Provisions are recognised when the bank has a present obligation (legal or constructive) as a result of a 

past event, and it is probable that an outflow of resources embodying economic benefits will be required 

to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense 

relating to any provision is presented in the profit or loss net of any reimbursement. 

Property and equipment 

Property and equipment (including equipment under operating leases where the bank is the lessor) is 

stated at cost excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated 

impairment in value. Changes in the expected useful life are accounted for by changing the depreciation 

period or method, as appropriate, and treated as changes in accounting estimates. 

Depreciation is calculated using the straight-line method to write down the cost of property and equipment 

to their residual values over their estimated useful lives. Land is not depreciated. The estimated useful lives 

are as follows: 

Description of items Useful lives 

Furniture and Equipment 8 Years 

Machinery and Automation 4 Years 

IT equipment 4 Years 

Motor vehicles 4 Years 

Buildings 25 Years 

Property and equipment is derecognised on disposal or when no future economic benefits are expected 

from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between 

the net disposal proceeds and the carrying amount of the asset) is recognised in ‘Other operating income’ 

in the profit or loss in the year the asset is derecognised. 

The assets residual values, useful lives and methods of depreciation are reviewed at each financial year 

end, and adjusted prospectively if appropriate. 

Leasing 

The determination of whether an arrangement is a lease or it contains a lease, is based on the substance of 

the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent 

on the use of a specific asset or assets and the arrangement conveys a right to use the asset.





Bank as a lessee 

Leases which do not transfer to the bank substantially all the risks and benefits incidental to ownership of 

the leased items are operating leases. Operating lease payments are recognised as an expense in the profit 

or loss on a straight line basis over the lease term. Contingent rental payable are recognised as an expense 

in the period in which they are incurred. 

Bank as a lessor 

Leases where the bank does not transfer substantially all the risk and benefits of ownership of the asset 

are classified as operating leases. Initial direct costs incurred in negotiating operating leases are added to 

the carrying amount of the leased asset and recognised over the lease term on the same basis as rental 

income. Contingent rents are recognised as revenue in the period in which they are earned. 

Leasehold improvements 

Leases of leasehold improvements are classified as operating leases, these includes improvements made 

on leased bank buildings for its head office and branches. The total payments made under operating 

leases are charged to the profit and loss account on a straight-line basis over the life of the lease period. 

When an operating lease is terminated before the lease period has expired, any payment required to be 

made to the lessor by way of penalty is recognized as an expense in the period in which termination takes 

place. 

Leasehold improvements are stated at cost, less accumulated amortisation and accumulated impairment in 

value. Leasehold improvement amortisations are calculated on straight line basis at annual rates estimated 

to write down the carrying values of the assets to their residual value over their expected useful lives. The 

annual amortisation rates in use are: 


Leasehold improvements 3 – 5 Years 

Intangible assets 

The bank’s intangible assets include the value of computer software (license for use of T24 – Core Banking 

System), Credit Quest and Smart Stream, Swift Integrator and Security Systems. 

An intangible asset is recognised only when its cost can be measured reliably and it is probable that the 

expected future economic benefits that are attributable to it will flow to the bank. 

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible 

assets acquired in a business combination is their fair value as at the date of acquisition. Following initial 

recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated 

impairment losses. 

The useful lives of intangible assets are assessed to be either finite or infinite. Intangible assets with finite 

lives are amortised over the useful economic life. The amortisation period and the amortisation method 

for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in 

the expected useful life or the expected pattern of consumption of future economic benefits embodied in 

the asset are accounted for by changing the amortisation period or method, as appropriate, and treated as 

changes in accounting estimates.

43 





Intangible assets (Continued) 

The amortisation expense on intangible assets with finite lives is recognised in the profit or loss in the 

expense category consistent with the function of the intangible asset. Amortisation is calculated using 

3. the straight-line method to write down the cost of intangible assets to their residual values over their 

estimated useful lives as follows: 


Computer Software 4 Years 

Impairment of non-financial assets 

The Bank assesses at each reporting date whether there is an indication that an asset may be impaired. If 

any indication exists, or when annual impairment testing for an asset is required, the bank estimates the 

asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating 

units (CGU) fair value less costs to sell and its value in use 

Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered 

impaired and is written down to its recoverable amount. In assessing value in use, the estimated future 

cash flows are discounted to their present value using a pre-tax discount rate that reflects current market 

assessments of the time value of money and the risks specific to the asset. In determining fair value less 

costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation 

multiples, quoted share prices for publicly traded or other available fair value indicators. 

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any 

indication that previously recognised impairment losses may no longer exist or may have decreased. If 

such indication exists, the bank estimates the asset’s or CGU’s recoverable amount. A previously recognized 

impairment loss is reversed only if there has been a change in the assumptions used to determine the 

asset’s recoverable amount since the last impairment loss was recognised. 

The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor 

exceeds the carrying amount that would have been determined, net of depreciation, had no impairment 

loss been recognised for the asset in prior years. Such reversal is recognised in the profit or loss in the 

statement of comprehensive income. 

Impairment losses relating to goodwill cannot be reversed in future periods. 

Financial instruments - initial recognition and subsequent measurement 

Date of recognition 

All financial assets and liabilities are initially recognised on the trade date, i.e., the date that the bank 

becomes a party to the contractual provisions of the instrument. This includes “regular way trades”: 

purchases or sales of financial assets that require delivery of assets within the time frame generally 

established by regulation or convention in the market place. 

Initial measurement of financial instruments 

The classification of financial instruments at initial recognition depends on their purpose and characteristics 

and the management’s intention in acquiring them. All financial instruments are measured initially at their 

fair value plus transaction costs, except in the case of financial assets and financial liabilities recorded at 

fair value through profit or loss.





Derivatives recorded at fair value through profit or loss 

The bank uses derivatives such as cross-currency swaps, forward foreign exchange contracts and foreign 

currencies and equities. Derivatives are recorded at fair value and carried as assets when their fair value 

is positive and as liabilities when their fair value is negative. Changes in the fair value of derivatives are 

included in ‘Net trading income’. 

Derivatives embedded in other financial instruments are treated as separate derivatives and recorded at 

fair value if their economic characteristics and risks are not closely related to those of the host contract, 

and the host contract is not itself held for trading or designated at fair value through profit or loss. The 

embedded derivatives separated from the host are carried at fair value in the trading portfolio with 

changes in fair value recognised in the profit or loss. 

Financial assets or financial liabilities held-for-trading 

Financial assets or financial liabilities held for trading are recorded in the statement of financial position 

at fair value. Changes in fair value are recognised in ‘Net trading income’. Interest and dividend income or 

expense is recorded in ‘Net trading income’ according to the terms of the contract, or when the right to the 

payment has been established. 

Included in this classification are debt securities, equities and short positions and customer loans that have 

been acquired principally for the purpose of selling or repurchasing in the near term. 

Financial assets and financial liabilities designated at fair value through profit or loss 

Financial assets and financial liabilities classified in this category are those that have been designated by 

management on initial recognition. 

Management may only designate an instrument at fair value through profit or loss upon initial recognition 

when the following criteria are met, and designation is determined on an instrument by instrument basis: 

• The designation eliminates or significantly reduces the inconsistent treatment that would otherwise 

arise from measuring the assets or liabilities or recognising gains or losses on them on a different 

basis. 

• The assets and liabilities are part of a group of financial assets, financial liabilities or both which are 

managed and their performance evaluated on a fair value basis, in accordance with a documented 

risk management or investment strategy. 

• The financial instrument contains one or more embedded derivatives which significantly modify 

the cash flows that otherwise would be required by the contract. 

Financial assets and financial liabilities at fair value through profit or loss are recorded in the statement of 

financial position at fair value. Changes in fair value are recorded in profit or loss on financial assets and 

liabilities designated at fair value through profit or loss. Interest is earned or incurred is accrued in ‘Interest 

income’ or ‘Interest expense’, respectively, using the effective interest rate (EIR), while dividend income is 

recorded in profit or loss when the right to the payment has been established. 

Included in this classification are loans and advances to customers which are economically hedged by 

credit derivatives and do not qualify for hedge accounting, as well as notes issued which are managed on 

a fair value basis.

45 





Day 1’ profit or loss 

When the transaction price differs from the fair value of other observable current market transactions in 

the same instrument, or based on a valuation technique whose variables include only data from observable 

markets, the bank immediately recognises the difference between the transaction price and fair value (a 

‘Day 1’ profit or loss) in ‘Net trading income’. In cases where fair value is determined using data which is 

not observable, the difference between the transaction price and model value is only recognised in the 

income statement when the inputs become observable, or when the instrument is derecognised. 

Available-for-sale financial investments 

Available-for-sale investments include equity and debt securities. Equity investments classified as availablefor 

-sale are those which are neither classified as held-for-trading nor designated at fair value through 

profit or loss. Debt securities in this category are those which are intended to be held for an indefinite 

period of time and which may be sold in response to needs for liquidity or in response to changes in the 

market conditions. The bank has not designated any loans or receivables as available-for-sale. 

After initial measurement, available-for-sale financial investments are subsequently measured at fair value. 

Unrealised gains and losses are recognised in other comprehensive income and accumulated in equity in 

the ‘Available-for-sale reserve’. When the investment is disposed of, the cumulative gain or loss previously 

recognised in equity is recognised in profit or loss in ‘Other operating income’. Where the bank holds more than 

one investment in the same security they are deemed to be disposed off on a first-in first-out basis. Interest 

earned whilst holding available-for-sale financial investments is reported as interest income using the effective 

interest rate (EIR). Dividends earned, whilst holding available-for-sale financial investments are recognised in 

the profit or loss as ‘Other operating income’ when the right of the payment has been established. 

The losses arising from impairment of such investments are recognised in the profit or loss in ‘Impairment 

losses on financial investments’ and removed from the ‘Available-for-sale reserve’. 

Held-to-maturity financial investments 

Held-to-maturity financial investments are non-derivative financial assets with fixed or determinable payments 

and fixed maturities, which the bank has the intention and ability to hold to maturity. After initial measurement, 

held-to-maturity financial investments are subsequently measured at amortised cost using the effective interest 

rate (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on 

acquisition and fees that are an integral part of the effective interest rate (EIR). The amortisation is included in 

‘Interest and similar income’ in the statement of comprehensive income. The losses arising from impairment of 

such investments are recognised in the profit or loss line ‘ Impairment loss expense’. 

If the bank were to sell or reclassify more than an insignificant amount of held-to-maturity investments 

before maturity (other than in certain specific circumstances), the entire category would be tainted and 

would have to be reclassified as available-for-sale. Furthermore, the bank would be prohibited from 

classifying any financial asset as held to maturity during the following two years. 

Due from banks and loans and advances to customers 

‘Due from banks’ and ‘Loans and advances to customers’, include non-derivative financial assets with fixed 

or determinable payments that are not quoted in an active market, other than: 

• Those that the bank intends to sell immediately or in the near term and those that the bank upon 

initial recognition designates as at fair value through profit or loss. 

• Those that the bank, upon initial recognition, designates as available for sale. 

• Those for which the bank may not recover substantially all of its initial investment, other than 

because of credit deterioration.




Due from banks and loans and advances to customers (Continued) 

After initial measurement, amounts ‘due from banks’ and ‘Loans and advances to customers’ are 

subsequently measured at amortised cost using the effective interest rate (EIR), less allowance for 

impairment. 

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and 

costs that are an integral part of the effective interest rate (EIR). The amortisation is included in ‘Interest 

and similar income’ in the profit or loss. The losses arising from impairment are recognised in the profit or 

loss in ‘Impairment loss expense’. 

The bank may enter into certain lending commitments where the loan, on drawdown, is expected to be 

classified as held-for-trading because the intent is to sell the loans in the short term. These commitments 

to lend are recorded as derivatives and measured at fair value through profit or loss. 

Where the loan, on drawdown, is expected to be retained by the bank, and not sold in the short term, the 

commitment is recorded only when the commitment is an onerous contract and it is likely to give rise to a 

loss (for example, due to a counterparty credit event). 

Other borrowed funds 

Financial instruments issued by the bank that are not designated at fair value through profit or loss, are 

classified as liabilities under ‘other borrowed funds’, where the substance of the contractual arrangement 

results in the bank having an obligation either to deliver cash or another financial asset to the holder, or to 

satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a 

fixed number of own equity shares. 

After initial measurement, debt issued and other borrowings are subsequently measured at amortised cost 

using the EIR. Amortised cost is calculated by taking into account any discount or premium on the issue and 

costs that are an integral part of the EIR. A compound financial instrument which contains both a liability 

and an equity component is separated at the issue date. A portion of the net proceeds of the instrument is 

allocated to the debt component on the date of issue based on its fair value (which is generally determined 

based on the quoted market prices for similar debt instruments). The equity component is assigned the 

residual amount after deducting from the fair value of the instrument as a whole the amount separately 

determined for the debt component. The value of any derivative features (such as a call option) embedded 

in the compound financial instrument other than the equity component is included in the debt component. 

An analysis of other borrowed funds is disclosed in Note 34. 

Derecognition of financial assets and financial liabilities 

Financial assets 

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) 

is derecognised when: 

• The rights to receive cash flows from the asset have expired. 

• The bank has transferred its rights to receive cash flows from the asset or has assumed an obligation 

to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ 

arrangement; and either: 

- The bank has transferred substantially all the risks and rewards of the asset, or 

- The bank has neither transferred nor retained substantially all the risks and rewards of the asset, 

but has transferred control of the asset. 


47 





Derecognition of financial assets and financial liabilities (Continued) 

Financial assets (Continued) 

When the bank has transferred its rights to receive cash flows from an asset or has entered into a passthrough 

arrangement, and has neither transferred nor retained substantially all the risks and rewards of 

the asset nor transferred control of the asset, the asset is recognised to the extent of the bank’s continuing 

involvement in the asset. In that case, the bank also recognises an associated liability. The transferred asset 

and the associated liability are measured on a basis that reflects the rights and obligations that the bank 

has retained. 

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the 

lower of the original carrying amount of the asset and the maximum amount of consideration that the 

bank could be required to repay. 

Financial liabilities 

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or 

expires. Where an existing financial liability is replaced by another from the same lender on substantially 

different terms, or the terms of an existing liability are substantially modified, such an exchange or 

modification is treated as a derecognition of the original liability and the recognition of a new liability. 

The difference between the carrying value of the original financial liability and the consideration paid is 

recognised in profit or loss. 

Repurchase and reverse repurchase agreements 

Securities sold under agreements to repurchase at a specified future date are not derecognised from the 

statement of financial position as the bank retains substantially all the risks and rewards of ownership. 

The corresponding cash received is recognised in the statement of financial position as an asset with a 

corresponding obligation to return it, including accrued interest as a liability within ‘Cash collateral on 

securities lent and repurchase agreements’, reflecting the transaction’s economic substance as a loan to 

the bank. The difference between the sale and repurchase prices is treated as interest expense and is 

accrued over the life of agreement using the effective interest rate (EIR). When the counterparty has the 

right to sell or repledge the securities, the bank reclassifies those securities in its statement of financial 

position to ‘Financial assets held-for-trading pledged as collateral’ or to ‘Financial investments availablefor-sale 

pledged as collateral’, as appropriate. 

Conversely, securities purchased under agreements to resell at a specified future date are not recognised 

in the statement of financial position. The consideration paid, including accrued interest, is recorded in 

the statement of financial position, within ‘Cash collateral on securities borrowed and reverse repurchase 

agreements’,reflecting the transaction’s economic substance as a loan by the bank. The difference between 

the purchase and resale prices is recorded in profit or loss and is accrued over the life of the agreement 

using the effective interest rate (EIR). 

If securities purchased under agreement to resell are subsequently sold to third parties, the obligation to 

return the securities is recorded as a short sale within ‘Financial liabilities held-for-trading’ and measured 

at fair value with any gains or losses included in ‘Other operating income’. 

Securities lending and borrowing 

Securities lending and borrowing transactions are usually collateralised by securities or cash. The transfer 

of the securities to counterparties is only reflected on the statement of financial position if the risks and 

rewards of ownership are also transferred. Cash advanced or received as collateral is recorded as an asset 

or liability.





Securities lending and borrowing (Continued) 

Securities borrowed are not recognised on the statement of financial position, unless they are then sold 

to third parties, in which case the obligation to return the securities is recorded as a trading liability and 

measured at fair value with any gains or losses included in profit or loss. 

Determination of fair value 

The fair value for financial instruments traded in active markets at the reporting date is based on their 

quoted market price or dealer price quotations (bid price for long positions and ask price for short 

positions), without any deduction for transaction costs. 

For all other financial instruments not traded in an active market, the fair value is determined by using 

appropriate valuation techniques. Valuation techniques include the discounted cash flow method, 

comparison to similar instruments for which market observable prices exist, options pricing models, credit 

models and other relevant valuation models. 

Certain financial instruments are recorded at fair value using valuation techniques in which current market 

transactions or observable market data are not available. Their fair value is determined using a valuation 

model that has been tested against prices or inputs to actual market transactions and using the bank’s 

best estimate of the most appropriate model assumptions. Models are adjusted to reflect the spread for 

bid and ask prices to reflect costs to close out positions, credit and debit valuation adjustments, liquidity 

spread and limitations in the models. Also, profit or loss calculated when such financial instruments are 

first recorded (‘Day 1’ profit or loss) is deferred and recognised only when the inputs become observable 

or on derecognition of the instrument. 

An analysis of fair values of financial instruments and further details as to how they are measured are 

provided in Note 42. 

Impairment of financial assets 

The bank assesses at each reporting date whether there is any objective evidence that a financial asset 

or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be 

impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has 

occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact 

on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably 

estimated. 

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing 

significant financial difficulty, default or delinquency in interest or principal payments, the probability 

that they will enter bankruptcy or other financial reorganisation and where observable data indicate that 

there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic 

conditions that correlate with defaults. 

Financial assets carried at amortised cost 

For financial assets carried at amortised cost (such as amounts due from banks, loans and advances to 

customers as well as held-to-maturity investments), the bank first assesses individually whether objective 

evidence of impairment exists for financial assets that are individually significant, or collectively for 

financial assets that are not individually significant. If the bank determines that no objective evidence of 

impairment exists for an individually assessed financial asset, it includes the asset in a group of financial 

assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are 

individually assessed for impairment and for which an impairment loss is, or continues to be, recognised 

are not included in a collective assessment of impairment.

49 





Financial assets carried at amortised cost (Continued) 

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured 

as the difference between the asset’s carrying amount and the present value of estimated future cash 

flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of 

the asset is reduced through the use of an allowance account and the amount of the loss is recognised in 

the profit or loss in the statement of comprehensive income. Interest income continues to be accrued on 

the reduced carrying amount and is accrued using the rate of interest used to discount the future cash 

flows for the purpose of measuring the impairment loss. The interest income is recorded as part of ‘Interest 

income’. 

Loans together with the associated allowance are written off when there is no realistic prospect of future 

recovery and all collateral has been realised or has been transferred to the bank. If, in a subsequent year, 

the amount of the estimated impairment loss increases or decreases because of an event occurring after 

the impairment was recognised, the previously recognised impairment loss is increased or reduced by 

adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the 

‘Impairment losses expense’. 

The present value of the estimated future cash flows is discounted at the financial asset’s original effective 

interest rate (EIR). If a loan has a variable interest rate, the discount rate for measuring any impairment loss 

is the current effective interest rate (EIR). If the bank has reclassified trading assets to loans and advances, 

the discount rate for measuring any impairment loss is the new effective interest rate (EIR) determined 

at the reclassification date. The calculation of the present value of the estimated future cash flows of a 

collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining 

and selling the collateral, whether or not foreclosure is probable. 

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of the 

bank’s internal credit grading system, that considers credit risk characteristics such as asset type, industry, 

geographical location, collateral type, past-due status and other relevant factors. 

Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated 

on the basis of historical loss experience for assets with credit risk characteristics similar to those in the 

group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of 

current conditions on which the historical loss experience is based and to remove the effects of conditions 

in the historical period that do not exist currently. 

Estimates of changes in future cash flows reflect, and are directionally consistent with, changes in related 

observable data from year to year (such as changes in unemployment rates, property prices, commodity 

prices, payment status, or other factors that are indicative of incurred losses in the group and their 

magnitude). The methodology and assumptions used for estimating future cash flows are reviewed 

regularly to reduce any differences between loss estimates and actual loss experience. See Note 22 for an 

analysis of the impairment allowance on loans and advances by class. 

Available-for-sale financial investments 

For available-for-sale financial investments, the bank assesses at each reporting date whether there is 

objective evidence that an investment is impaired. In the case of debt instruments classified as availablefor-sale, 

the bank assesses individually whether there is objective evidence of impairment based on the 

same criteria as financial assets carried at amortised cost. 

However, the amount recorded for impairment is the cumulative loss measured as the difference between 

the amortised cost and the current fair value, less any impairment loss on that investment previously





Available-for-sale financial investments (Continued) 

recognised in the profit or loss. Future interest income is based on the reduced carrying amount and is 

accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the 

impairment loss. The interest income is recorded as part of ‘Interest income’. If, in a subsequent period, 

the fair value of a debt instrument increases and the increase can be objectively related to a credit event 

occurring after the impairment loss was recognised in the profit or loss, the impairment loss is reversed 

through the statement of comprehensive income. 

Renegotiated loans 

Where possible, the bank seeks to restructure loans rather than to take possession of collateral. This may 

involve extending the payment arrangements and the agreement of new loan conditions. Once the terms 

have been renegotiated any impairment is measured using the original effective interest rate (EIR) as 

calculated before the modification of terms and the loan is no longer considered past due. Management 

continually reviews renegotiated loans to ensure that all criteria are met and that future payments are 

likely to occur. The loans continue to be subject to an individual or collective impairment assessment, 

calculated using the loan’s original effective interest rate (EIR). 

Collateral valuation 

The bank seeks to use collateral, where possible, to mitigate its risks on financial assets. The collateral comes 

in various forms such as cash, securities, letters of credit/guarantees, real estate, receivables, inventories, 

other non-financial assets and credit enhancements such as netting agreements. The fair value of collateral 

is generally assessed, at a minimum, at inception and based on the bank’s quarterly reporting schedule, 

however, some collateral, for example, cash or securities relating to margining requirements, is valued 

daily. 

To the extent possible, the bank uses active market data for valuing financial assets, held as collateral. 

Other financial assets which do not have a readily determinable market value are valued using models. 

Non-financial collateral, such as real estate, is valued based on data provided by third parties such as 

mortgage brokers, housing price indices, audited financial statements, and other independent sources. 

(See note 38 for further analysis of collateral). 

Collateral repossessed 

The bank’s policy is to determine whether a repossessed asset is best used for its internal operations or 

should be sold. Assets determined to be useful for the internal operations are transferred to their relevant 

asset category at the lower of their repossessed value or the carrying value of the original secured asset. 

Assets that are determined better to be sold are immediately transferred to assets held for sale at their fair 

value at the repossession date in line with the bank’s policy. 

Offsetting financial instruments 

Financial assets and financial liabilities are offset and the net amount reported in the Statement of financial 

position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and 

there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. 

This is not generally the case with master netting agreements, therefore, the related assets and liabilities 

are presented gross in the Statement of financial position. 

Acceptances and letters of credit 

Acceptances and letters of credit are accounted for as items not recognized in the statement of financial 

position and disclosed as part of contingent liabilities off – financial position.

51 





Financial guarantees 

In the ordinary course of business, the bank gives financial guarantees, consisting of letters of credit, 

guarantees and acceptances. Financial guarantees are initially recognised in the financial statements 

(within ‘other liabilities’) at fair value, being the premium received. 

Subsequent to initial recognition, the bank’s liability under each guarantee is measured at the higher of 

the amount initially recognised less, when appropriate, cumulative amortisation recognised, and the best 

estimate of expenditure required settling any financial obligation arising as a result of the guarantee. Any 

increase in the liability relating to financial guarantees is recorded in the profit or loss in ‘Impairment loss’. 

The premium received is recognised in the profit or loss in ‘Other operating income’ on a straight line basis 

over the life of the guarantee. 

Cash and cash equivalents 

Cash and cash equivalents referred in the statement of cashflows comprise cash on hand, non-restricted 

current accounts with Bank of Tanzania, deposits held at call with banks with an original maturity of three 

months or less, due from banks on demand and investments with maturity periods of three months or less 

in money market instruments. 

Borrowing costs 

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily 

takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost 

of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs 

consist of interest and other costs that an entity incurs in connection with the borrowing of funds. 

Foreign currency translation 

The financial statements are presented in Tanzania Shillings (TZS). Items included in the financial statement 

are measured using that functional currency. 

Transactions and balances 

Transactions in foreign currencies are initially recorded at the spot rate of exchange ruling at the date of 

the transaction. 

Monetary assets and liabilities denominated in foreign currencies are retranslated at the spot rate 

of exchange at the reporting date. All differences arising on non–trading activities are taken to ‘Other 

operating income’ in the income statement, with the exception of differences on foreign currency 

borrowings that provide an effective hedge against a net investment in a foreign entity. These differences 

are taken directly to equity until the disposal of the net investment, at which time they are recognised in 

the income statement. 

Non–monetary items that are measured in terms of historical cost in a foreign currency are translated 

using the spot exchange rates as at the date of recognition. Non–monetary items measured at fair value 

in a foreign currency are translated using the spot exchange rates at the date when the fair value was 

determined. 

Taxes 

Current tax 

Current tax assets and liabilities for the current and prior years are measured at the amount expected to be 

recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount 

are those that are enacted or substantively enacted at the reporting date.




Deferred tax 

Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets 

and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are 

recognised for all taxable temporary differences, except: 

• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability 

in a transaction that is not a business combination and, at the time of the transaction, affects neither 

the accounting profit nor taxable profit or loss. 


• In respect of taxable temporary differences associated with investments in subsidiaries, where the 

timing of the reversal of the temporary differences can be controlled and it is probable that the 

temporary differences will not reverse in the foreseeable future. 

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax 

credits and unused tax losses, to the extent that it is probable that taxable profit will be available against 

which the deductible temporary differences, and the carry forward of unused tax credits and unused tax 

losses can be utilised except: 

• Where the deferred tax asset relating to the deductible temporary difference arises from the initial 

recognition of an asset or liability in a transaction that is not a business combination and, at the time 

of the transaction, affects neither the accounting profit nor taxable profit or loss. 

• In respect of deductible temporary differences associated with investments in subsidiaries, deferred 

tax assets are recognised only to the extent that it is probable that the temporary differences will 

reverse in the foreseeable future and taxable profit will be available against which the temporary 

differences can be utilised. 

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent 

that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred 

tax asset to be utilised. 

Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent 

that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when 

the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or 

substantively enacted at the reporting date. 

Current tax and deferred tax relating to items recognised directly in equity are also recognised in equity 

and not in the profit or loss. 

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current 

tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the 

same taxation authority. 

Value added tax 

Revenues, expenses and assets are recognised inclusive of the amount of value added tax except where 

the value added tax incurred on a purchase of assets or services is recoverable from the taxation authority, 

in which case the value added tax is recognised as an asset.

53 





Dividends on ordinary shares 

Dividends on ordinary shares are recognised as a liability and deducted from equity when they are 

approved by the bank’s shareholders. Interim dividends are deducted from equity when they are declared 

and no longer at the discretion of the bank. Dividends for the year that are approved after the reporting 

date are disclosed as an event after the reporting date. 

Capital and revenue grants 

Government grants are recognised where there is reasonable assurance that the grant will be received and 

all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as 

income over the period necessary to match the grant on a systematic basis to the costs that it is intended 

to compensate. When the grant relates to an asset, it is recognised as deferred income and released as 

income in equal instalments over the expected useful life of the related asset. 

When the bank receives non-monetary grants, the asset and the grant are recorded gross at nominal 

amounts and released to the profit or loss over the expected useful life and pattern of consumption of the 

benefit of the underlying asset by equal annual instalments. When loans or similar assistance are provided 

by governments or related institutions with an interest rate below the current applicable market rate, the 

effect of this favourable interest is regarded as additional government grants. 

Grants received from donor agencies and other private organisations of revenue nature are dealt with in 

the profit and loss account over the period in which the related expense is incurred. 

Segment reporting 

The bank’s segmental reporting is based on the integrated nature of its activities and its branches; it is 

reported as one business segment. 

Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying 

amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for 

sale if their carrying amounts will be recovered principally through a sale transaction rather than through 

continuing use. This condition is regarded as met only when the sale is highly probable and the asset or 

disposal group is available for immediate sale in its present condition, management has committed to the 

sale, and the sale is expected to have been completed within one year from the date of classification. 

Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or 

amortised. 

4. SIGNIFICANT ACCOUNTING, ESTIMATES AND ASSUMPTIONS 

In the process of applying the bank’s accounting policies, management has exercised judgment and 

estimates in determining the amounts recognised in the financial statements. The most significant uses of 

judgment and estimates are as follows: 

Going concern 

The bank’s management has made an assessment of the bank’s ability to continue as a going concern and 

is satisfied that the bank has the resources to continue in business for the foreseeable future. Furthermore, 

management is not aware of any material uncertainties that may cast significant doubt upon the bank’s 

ability to continue as a going concern. Therefore, the financial statements continue to be prepared on the 

going concern basis.



4. SIGNIFICANT ACCOUNTING, ESTIMATES AND ASSUMPTIONS (Continued) 


Fair value of financial instruments 

Where the fair values of financial assets and financial liabilities recorded on the statement of financial 

position cannot be derived from active markets, they are determined using a variety of valuation techniques 

that include the use of mathematical models. 

The inputs to these models are derived from observable market data where possible, but where observable 

market data are not available, judgment is required to establish fair values. The judgments include 

considerations of liquidity and model inputs such as volatility for longer dated derivatives and discount 

rates, prepayment rates and default rate assumptions for asset backed securities. The valuation of financial 

instruments is described in more detail in Note 42. 

Impairment losses on loans and advances 

The bank reviews its individually significant loans and advances at each reporting date assess whether an 

impairment loss should be recorded in the profit or loss. In particular, management judgment is required 

in the estimation of the amount and timing of future cash flows when determining the impairment loss. 

These estimates are based on assumptions about a number of factors and actual results may differ, resulting 

in future changes to the allowance. 

Loans and advances that have been assessed individually and found not to be impaired and all individually 

insignificant loans and advances are then assessed collectively, in groups of assets with similar risk 

characteristics, to determine whether provision should be made due to incurred loss events for which 

there is objective evidence but whose effects are not yet evident. The collective assessment takes account 

of data from the loan portfolio (such as levels of arrears, credit utilisation, loan to collateral ratios, etc.), and 

judgments to the effect of concentrations of risks and economic data (including levels of unemployment, 

real estate prices indices, country risk and the performance of different individual groups). The impairment 

loss on loans and advances is disclosed in more detail in Note 22. 

Deferred tax assets 

Deferred tax assets are recognised in respect of tax losses to the extent that it is probable that taxable 

profit will be available against which the losses can be utilised. Judgment is required to determine the 

amount of deferred tax assets that can be recognised, based upon the likely timing and level of future 

taxable profits, together with future tax planning strategies. 

Held to maturity investments 

The bank follows the guidance of IAS 39 on classifying non-derivative financial assets with fixed or 

determinable payments and fixed maturity as held-to-maturity. This classification requires significant 

judgment. In making this judgment, the bank evaluates its intention and ability to hold such investments 

to maturity. If the bank fails to keep these investments to maturity other than for the specific circumstances 

– for example, selling an insignificant amount close to maturity – it will be required to reclassify the entire 

class as available-for-sale. The investments would therefore be measured at fair value not amortised cost. 

5. STANDARDS ISSUED BUT NOT YET EFFECTIVE 

Standards issued but not yet effective up to the date of issuance of the bank’s financial statements are 

listed below. This listing is of standards and interpretations issued, which the bank reasonably expects to 

be applicable at a future date. The bank intends to adopt those standards when they become effective. 

IFRS 9 Financial Instruments: Classification and Measurement 

IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to 

classification and measurement of financial assets and liabilities as defined in IAS 39. The standard is

55 




5. STANDARDS ISSUED BUT NOT YET EFFECTIVE (Continue) 

IFRS 9 Financial Instruments: Classification and Measurement (Continued) 

effective for annual periods beginning on or after 1 January 2013. In subsequent phases, the Board will 

address impairment and hedge accounting. The completion of this project is expected in mid 2011. The 

adoption of the first phase of IFRS 9 will primarily have an effect on the classification and measurement 

of the bank’s financial assets. The bank is currently assessing the impact of adopting IFRS 9, however, the 

impact of adoption depends on the assets held by the bank at the date of adoption, and it is not practical 

to quantify the effect. 

IFRS 10 – Consolidated Financial Statements 

The amendment becomes effective for annual periods beginning on or after 1 January 2013. It replaces the 

requirements of IAS 27 Consolidated and Separate Financial Statements that address the accounting for 

consolidated financial statements and SIC 12 Consolidation – Special Purpose Entities. What remains in IAS 

27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial 

statements. 

The bank is currently assessing the impact of adopting IFRS 10. However, as the impact of adoption 

depends on the nature of relationships between the bank and other entities at the date of adoption, it is 

not practical to quantify the effects. 

IFRS 11 – Joint Arrangements 

The amendment becomes effective for annual periods beginning on or after 1 January 2013. It replaces 

IAS 31 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities – Non-monetary Contributions by 

Venturers. Because IFRS 11 uses the principle of control in IFRS 10 to define control, the determination of 

whether joint control exists may change. The bank is currently assessing the impact of adopting IFRS 11. 

However, as the impact of adoption depends on the nature of relationships between the bank and other 

entities at the date of adoption, it is not practical to quantify the effects. 

IFRS 12 – Disclosure of Involvement with Other Entities 

The amendment becomes effective for annual periods beginning on or after 1 January 2013. It includes all 

of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all 

of the disclosures that were previously included in IAS 31 Interests in Joint Ventures and IAS 28 Investment 

in Associates. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates 

and structured entities. A number of new disclosures are also required. One of the most significant changes 

introduced by IFRS 12 is that an entity is now required to disclose the judgements made to determine 

whether it controls another entity. Many of these changes were introduced by the IASB in response to the 

financial crisis. 

Now, even if the bank concludes that it does not control an entity, the information used to make that 

judgement will be transparent to users of the financial statements to make their own assessment of the 

financial impact were the bank to reach a different conclusion regarding consolidation. 

The nature of the bank’s investment banking business means it could be involved in various transactions 

with structured entities that it may or may not have helped to design. The bank is currently assessing the 

impact of adopting IFRS 12. However, as the impact of adoption depends on the nature of relationships 

between the bank and other entities at the date of adoption, it is not practical to quantify the effect. 

IFRS 13 – Fair Value measurement 

The amendment becomes effective for annual periods beginning on or after 1 January 2013. IFRS 13 does 

not change when an entity is required to use fair value, but rather, provides guidance on how to measure



5. STANDARDS ISSUED BUT NOT YET EFFECTIVE (Continued) 


IFRS 13 – Fair Value measurement (Continued) 

the fair value of financial and non-financial assets and liabilities when required or permitted by IFRS. There 

are also additional disclosure requirements. 

In the past the bank has used various methodologies to measure fair value based on the guidance within 

the requisite standard and/or industry practice for the type of financial or non-financial item. This standard 

will require the bank to review its fair value measurement policies across all asset and liability classes. 

However, it is not practical to quantify the effect of this review on the financial statements. 

IAS 1 Financial Statement Presentation – Presentation of Items of Other Comprehensive Income 

The amendments to IAS 1 change the grouping of items presented in Other Comprehensive Income. Items 

that could be reclassified (or ‘recycled’) to income statement at a future point in time (for example, upon 

derecognition or settlement) would be presented separately from items that will never be reclassified. 

The amendment affects presentation only and has there no impact on the bank’s financial position or 

performance. The amendment becomes effective for annual periods beginning on or after 1 July 2012. 

IAS 12 Income Taxes – Recovery of Underlying Assets 

The amendment clarified the determination of deferred tax on investment property measured at fair value. 

The amendment introduces a rebuttable presumption that deferred tax on investment property measured 

using the fair value model in IAS 40 should be determined on the basis that its carrying amount will be 

recovered through sale. Further, it introduces the requirement that deferred tax on non-depreciable assets 

that are measured using the revaluation model in IAS 16 always be measured on a sale basis of the asset. 

The amendment becomes effective for annual periods beginning on or after 1 January 2012. The bank 

does not hold any investment property and therefore does not expect this change to have any impact. 

IAS 27 Separate Financial Statements (as revised in 2011) 

As a consequence of the new IFRS 10 and IFRS 12, what remains in IAS 27 is limited to accounting for 

subsidiaries, jointly controlled entities, and associates in separate financial statements. The bank does not 

present separate financial statements. The amendment becomes effective for annual periods beginning 

on or after 1 January 2013. 

IAS 28 Investments in Associates and Joint Ventures (as revised in 2011) 

As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed IAS 28 Investments in Associates 

and Joint Ventures, and describes the application of the equity method to investments in joint ventures 

in addition to associates. The amendment becomes effective for annual periods beginning on or after 1 

January 

2013. 

6. SEGMENT INFORMATION 

Owing to the integrated nature of the current activities of the bank and its branches, the presentation of 

operating segment is not considered informative as the bank operates as one business segment.

57 





2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

7 INTEREST INCOME 


Government/Corporate securities - held to maturity 8,046,223 5,801,884 8,046,223 5,801,884 

Reverse repurchase agreements 246,301 97,945 246,301 97,945 

Placements 718,631 1,064,994 718,631 1,064,994 

27,938,528 18,886,916 27,951,750 18,886,916 

8 INTEREST EXPENSE 

Fixed deposits 4,173,967 3,549,480 4,173,967 3,549,480 

Savings deposits 166,688 150,515 166,688 150,515 

Others - notice and borrowings 726,142 629,584 726,142 629,584 

5,066,797 4,329,579 5,066,797 4,329,579 

9 FEES, COMMISSIONS AND OTHER INCOME 

Service charge 164,581 161,321 164,581 161,321 

Teller charges and commissions 91,102 93,531 91,102 93,531 

Cash withdrawal charges 87,542 50,443 87,542 50,443 

Loans appraisal fee 806,513 1,337,188 806,513 1,337,188 

Income from Collections and Agent 19,298 183 19,298 183 

LC Commissions 347,864 91,238 347,864 91,238 

Guarantees commissions 315,831 52,047 315,831 52,047 

ATM commission 21,483 24,917 21,483 24,917 

Comm on Rural Energy Agency 203,991 185,400 203,991 185,400 

Fees income from Flower Projects 501,227 110,256 501,227 110,256 

Fees income from Commodity Import Support 198,918 24,256 198,918 24,256 

Agency fees from Agricultural Window 178,147 182,565 178,147 182,565 

Fees income from THB liquidation 84,110 85,311 84,110 85,311 

Rental income 15,100 18,624 15,100 18,624 

Other income and commisions 426,481 185,508 61,953 9,089 

Commitment and restructuring fees on Loans 78,963 30,727 78,963 30,727 

3,541,152 2,633,515 3,176,624 2,457,096 

10 FOREIGN CURRENCY DEALING AND EXCHANGE INCOME 

Foreign currency dealing 3,181,390 1,288,940 3,181,390 1,288,940 

Translation gains/(loss) (110,975) 110,644 (110,975) 110,644 

Commission on Brokarage FX (1,249) (729) (1,249) (729) 

3,069,165 1,398,855 3,069,165 1,398,855




2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

11 RECOVERIES DURING THE YEAR 

Recoveries from charged off loans 990,356 1,729,714 990,356 1,729,714 

Commission paid on recoveries (12,221) (3,252) (12,221) (3,252) 

978,135 1,726,462 978,135 1,726,462 

12 PERSONNEL EXPENSES 

Wages and salaries 5,294,103 4,310,187 5,143,620 4,159,704 

Social security costs 603,371 453,322 584,453 434,403 

Skills and Development levy 336,007 258,636 326,978 249,607 

Sub-total 6,233,482 5,022,145 6,055,052 4,843,714 


Training cost 638,974 302,612 632,081 302,352 

Staff passage and leave allowances 394,159 348,147 386,983 341,789 

Accrued leave expenses 223,340 - 223,340 - 

Staff bonus 18,683 - 518,683 - 

Staff medical insurance 262,632 227,823 256,832 222,686 

Other employment costs and benefits 307,795 91,419 288,443 46,925 

Sub-total 2,345,583 970,001 2,306,362 913,752 

Total 8,579,065 5,992,146 8,361,414 5,757,466 

The average number of employees during the year and at the end of the year were 170 (2010:154) for the bank and 

7 (2010: 7) for the subsidiary company. 

13 OCCUPANCY COSTS 

Rent bank premises 

Repairs and maintenance bank premises and 

1,864,521 1,848,893 1,864,521 1,848,893 

residential 

Repairs and maintenance office equipment and 

115,803 183,418 113,877 183,418 

automations 37,603 63,524 37,603 63,524 

Repairs and maintenance office furniture & Fittings 4,467 13,333 2,976 11,285 

Water and light 82,289 41,882 82,289 41,882 

Insurance premium on furniture and equipments 12,066 4,053 12,066 4,053 

Other occupancy cost (land rates) 92,419 366 92,419 366 

2,209,168 2,155,469 2,205,751 2,153,421

59 





2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

14 GENERAL AND ADMINISTRATION EXPENSES 

Auditors’ remuneration 118,952 81,619 107,952 70,664 

Directors’ emoluments 24,000 24,000 24,000 24,000 

Board of Directors expenses 142,740 125,285 140,780 120,045 

Correspondent Bank and SWIFT Charges 262,034 248,876 260,075 247,452 

Communication costs 263,471 240,335 253,312 239,101 

Travelling and accommodation 362,244 253,351 361,087 253,351 

Local authority service charges 16,600 16,680 16,348 16,680 

Insurance cost 351,848 228,975 350,560 228,975 

Marketing and advertising cost 724,630 623,324 719,820 623,324 

Printing, computer consumables and stationeries 162,144 152,705 156,194 152,705 

Repairs motor vehicles 177,996 149,250 177,996 149,250 

Security cost 193,679 155,165 192,464 155,165 

Transformation costs 106,466 243,220 106,466 243,220 

Umoja switch expenses 259,452 74,235 259,452 74,235 

System management fees and licence 289,824 347,924 288,194 345,844 

Consultancy expenses 72,195 221,452 62,155 211,912 

Regional integration costs 95,802 53,933 95,802 53,933 

Subscription and contribution 56,500 35,537 56,500 35,537 

Loss on disposal of fixed assets 

Impairments/(release of impairment) on sundry 

- 10,274 - 10,274 

debtors 417,376 133,321 417,376 133,321 

Asset write off 299,876 - 299,876 - 

Decrease in value of bond - 695,575 - 695,575 

Other operating expenses 72,046 72,014 59,930 23,962 

4,469,878 4,187,050 4,406,342 4,108,525 

15 CASH AND BALANCES WITH BANK OF TANZANIA 

Cash 

Cash in hand-Local currency 1,300,918 1,688,490 1,300,918 1,688,490 

Cash in hand-Foreign currency 860,734 416,574 860,734 416,574 

Balance with Bank of Tanzania 

2,161,652 2,105,064 2,161,652 2,105,064 

Balance in local currency 307,121 1,087,307 307,121 1,087,307 

Balance in foreign currency 1,033,246 304,696 1,033,246 304,696 

1,340,367 1,392,003 1,340,367 1,392,003 

3,502,019 3,497,067 3,502,019 3,497,067 

16 REVERSE REPURCHASE AGREEMENT WITH BANK OF TANZANIA 

Balance with Bank of Tanzania - 34,000,000 - 34,000,000 

Accrued interest - 102,192 102,192 

- 34,102,192 - 34,102,192



17 BALANCE WITH OTHER BANKS 



2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

Balance in local currency 347,081 1,006,501 296,134 919,015 

Balance in foreign currency 9,606,799 4,552,740 9,606,799 4,552,740 

9,953,880 5,559,241 9,902,933 5,471,755 

18 PLACEMENTS WITH OTHER BANKS 

Maturity period within three months 5,793,475 11,436,861 5,793,475 11,436,861 

Maturity period of more than three months 721,174 747,467 721,174 747,467 

6,514,649 12,184,328 6,514,649 12,184,328 

19 FINANCIAL INVESTMENT HELD - FOR TRADING 

These are share held by Rasilimali Limited (a subsidiary company) for trading purposes as at 31 December 2011 and 

2010 

CRDB Bank Limited: 378,000 Shares @ TZS 172.50 

(2011): 665,000 Shares @TZS 110.35 (2010) 

65,291 76,475 - - 

DCB Limited: 93,100 Shares @ TZS 640 (2011): (2010: 

3,000 Shares @TZS 280) 

59,584 843 - - 

SWISSPORT: 40,767 Shares @ TZS 820 (2011): (2010: 

40,767 Shares @TZS 601.79) 

33,429 24,533 - - 

SIMBA: 12,212 Shares TZS 2380 29,065 - - - 

TWIGA Limited: 40Shares @ TZS 2080 (2011),(2010: 

40 Shares @TZS 1800) 

83 72 - - 

National Microfinance Bank Limited: 7,699 Shares @ 

TZS 850 (2011), (2010:7,699 Shares @ TZS 660) 

6,544 5,081 - - 

193,996 107,004 - 

20 GOVERNMENT AND CORPORATE SECURITIES HELD - TO - MATURITY 

Treasury bills-held to maturity 

Maturity period within three months or less 18,891,536 28,342,076 18,891,536 28,342,076 

Maturity of over three months 35,853,884 12,877,790 35,853,884 12,877,790 

54,745,420 41,219,866 54,745,420 41,219,866 

Treasury and corporate bonds-held to maturity 

Maturity period within two years 20,703,114 13,280,748 20,703,114 13,280,748 

Maturity period above two years 19,018,221 20,432,144 19,018,221 20,432,144 

39,721,335 33,712,892 +39,721,335 33,712,892 

Total 94,466,755 74,932,758 94,466,755 74,932,758 

The bank holds various government fixed income securities issued by the Government. Treasury bills,Treasury and 

Corporate bonds issued at face value, discount or premium and are held to maturity. Treasury bonds are issued at a 

fixed coupon rate and the bank has ability to hold to maturity. As at year end, a total of TZS 10.6 bilions were pledged 

as collateral with NMB Bank for short term inter-bank borrowing. (In 2010: TZS 7.5 billion were pledged as collateral)

61 





2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

21 CASH AND CASH EQUIVALENTS 

Cash and balances with Bank of Tanzania 3,502,019 3,497,067 3,502,019 3,497,067 

Reverse repurchase agreements - 34,102,192 - 34,102,192 

Balance with other banks 9,953,880 5,559,241 9,902,933 5,471,755 

Cheques in the course of collection 18,110 - 18,110 - 

Placements with other banks 

Government securities held to maturity (Maturity 

5,793,475 11,436,861 5,793,475 11,436,861 

within of 3 months) 

Placements due to other banks maturing and 

21,677,936 28,342,076 21,677,936 28,342,076 

payable within 3 months (5,524,191) (9,933,564) (8,257,338) (9,933,564) 

35,421,229 73,003,873 32,637,135 72,916,387 

22 LOANS AND ADVANCES 

Advances to customers (gross) 179,440,432 109,376,275 179,940,432 109,376,275 

Accrued interest 5,389,728 2,079,186 5,393,880 2,079,186 

Less: Allowances for losses on loans and advances (5,548,478) (7,160,707) (5,548,478) (7,160,707) 

Advances to customers net 179,281,682 104,294,754 179,785,834 104,294,754 

Loans and Advances to staff 1,962,199 1,755,040 1,962,199 1,755,040 

Accrued interest on staff loans 2,375 2,188 2,375 2,188 

Net loans and advances 

Maturity analysis (gross loans) 

181,246,256 106,051,982 181,750,408 106,051,982 

Repayable on demand 58,539,811 23,452,760 58,539,811 23,452,760 

With maturity of 3 months or less 186,112 93,951 186,112 93,951 

With maturity of between 3 months and 1 year 4,525,189 5,143,533 5,025,189 5,143,533 

With maturity of more than 1 year 123,547,774 84,522,445 123,547,774 84,522,445 

186,798,886 113,212,689 187,298,886 113,212,689 

Out of the total loans and advances an amount equivalent to TZS 55,504 million is denominated in foreign 

currencies (2010: TZS 36,516 million was denominated in foreign currencies) 

Movement in allowance for impairment losses on loans and advances: 

At 01 January 7,160,707 5,681,584 7,160,707 5,681,584 

Charge for the year 8,219,835 3,668,069 8,219,835 3,668,069 

Charged off loans (9,832,064) (2,188,946) (9,832,064) (2,188,946) 

At 31 December 5,548,478 7,160,707 5,548,478 7,160,707 

22 LOANS AND ADVANCES (Continued) 

Non - performing loans 

Non-performing loans and advances on which interest has been suspended amount to TZS 38,135 million 

(2010: TZS 29,055million), net of specific provisions. Interest on these accounts is not being recognised as these 

advances are classified as doubtful in accordance with the Bank of Tanzania guidelines. In the opinion of 

directors credit enhancement in respect of these loans and advances fair values are TZS 60,950 million (2010: 

TZS 42,114 million) and such collaterals the bank has the right to sell.




Lending concentration 

Economic sector risk concentrations within the customers loan and advances portfolio as at 31 December 

2011 and 2010 were as follows: 


2011 2010 2011 2010 

TZS '000 TZS '000 TZS '000 TZS '000 

Agriculture and Agro processing 84,118,454 31,664,624 84,118,454 31,664,624 

Oil Company /Lease and Gas 14,583,717 12,321,799 14,583,717 12,321,799 

Electricity 6,557,164 8,646,997 6,557,164 8,646,997 

Manufacturing 5,061,162 5,540,727 5,061,162 5,540,727 

Real Estate 5,840,942 1,144,762 5,840,942 1,144,762 

Building ,Construction 1,070,368 1,354,533 1,070,368 1,354,533 

Transport and communication 7,164,872 13,849,219 7,164,872 13,849,219 

Forestry 637,432 1,010,201 637,432 1,010,201 

Tourism 12,316,249 9,222,866 12,316,249 9,222,866 

Trade 16,432,563 4,272,519 16,432,563 4,272,519 

Mining and Quarrying 4,458,695 4,093,175 4,458,695 4,093,175 

Health 3,184 3,215 3,184 3,215 

Education 1,727,020 1,872,840 1,727,020 1,872,840 

Hotel & Restaurants 13,574,035 8,866,136 13,574,035 8,866,136 

Financial Intermidiaries 1,620,645 1,129,306 1,620,645 1,129,306 

Individuals and SMEs 3,996,545 3,401,951 3,996,545 3,401,951 

Fishing 224,592 1,197,196 224,592 1,197,196 

Other Services 7,911,247 3,620,623 7,911,247 3,620,623 

187,298,886 113,212,689 187,298,886 113,212,689 

Total loans and advances (Individuals and SMEs, include staff Loans and advances) amounting to TZS 1,965 million 

(2010: TZS 1,757 million) 

23 EQUITY INVESTMENT - AVAILABLE - FOR - SALE 

Equity Investment in Tanzania Mortgage 

Refinancing (TMRC) 1,000,000 500,000 1,000,000 500,000 

1,000,000 500,000 1,000,000 500,000 

The Bank has been alloted 1,000,000 shares of Tanzania Mortgage Refinancing Co. Ltd of TZS 1,000 each. As at year 

end the bank has subscribed for 1,000,000 shares of TZS 1,000 each. 

24 INVESTMENT IN SUBSIDIARY 

Investment in Subsidiary (Rasilimali Limited) - - 455,653 62,453 

- - 455,653 62,453 

The Bank owns 100% of the issued and paid up ordinary share capital of Rasilimali Limited, a company 

incorporated in Tanzania under the Tanzanian Companies Act, 2002. The principal activities are securities 

dealing and Investment advisory services.

63 




25 PROPERTY AND 

EQUIPMENT 

CONSOLIDATED 

Office 

machinery 

Office 

Motor and 

IT 

furniture and 

Buildings vehicles automation Equipments equipments Total 

2011 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

Cost/Valuation 

At 01 January 252,000 898,725 251,729 978,306 879,807 3,260,566 

Additions - 176,306 77,529 108,518 58,937 421,289 

Transfers - - 103,710 (150,838) (59,507) (106,635) 

Write offs - - - (68,865) - (68,865) 

At 31 December 252,000 1,075,031 432,968 867,120 879,236 3,506,355 

Depreciation 

At 01 January 141,120 445,898 184,840 444,110 150,378 1,366,347 

Charge for the year 10,080 204,605 75,995 41,290 106,117 538,087 

Transfers - (1,249) 20 (31,898) (22,313) (55,440) 

Write offs - - - (42,198) - (42,198) 

At 31 December 151,200 649,254 260,855 511,304 234,183 1,806,796 

Net book value 

At 31 December 100,800 425,776 172,113 355,817 645,054 1,699,559 

2010 

Cost/Valuation 

At 01 January 252,000 580,676 225,897 696,256 336,841 2,091,670 

Revaluation Surplus - - - 7,296 27,779 35,075 

Additions - 344,434 49,719 447,680 633,238 1,475,070 

Revaluation adjustment 

on subsidiary 

- - - (16,767) (13,287) (30,054) 

Disposal - (26,385) (23,887) (156,159) (104,764) (311,195) 

At 31 December 252,000 898,725 251,729 978,306 879,807 3,260,566 

Depreciation 

At 01 January 131,040 310,123 154,616 471,618 187,798 1,255,194 


Revaluation adjustment 

on subsidiary 

- - - (16,767) (13,287) (30,054) 

Disposal - (26,385) (23,887) (156,159) (100,148) (306,579) 

At 31 December 141,120 445,898 184,840 444,110 150,378 1,366,347 


At 31 December 110,880 452,826 66,889 534,196 729,428 1,894,219



25 PROPERTY AND EQUIPMENT (Continued) 


BANK 

Office 

Office 

machinery 

furniture 

Motor and 

IT 

and 

Buildings vehicles automation Equipments equipments Total 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

2011 

Cost 

At 01 January 252,000 898,725 251,729 966,485 843,866 3,212,804 

Additions - 176,306 77,529 108,518 58,791 421,143 

Transfers - - 103,710 (150,838) (59,507) (106,635) 

Write offs - - - (68,865) - (68,865) 

At 31 December 252,000 1,075,031 432,968 855,300 843,150 3,458,448 

Depreciation 

At 01 January 141,120 445,898 184,840 442,839 148,132 1,362,829 


Transfers - (1,249) 20 (31,898) (22,313) (55,440) 

Write offs - - - (42,198) - (42,198) 

At 31 December 151,200 649,254 260,855 507,078 227,430 1,795,817 


At 31 December 100,800 425,776 172,113 348,222 615,720 1,662,631 

2010 

Cost 

At 01 January 252,000 580,676 225,897 676,615 315,392 2,050,580 

Additions - 344,434 49,719 446,029 633,238 1,473,420 

Disposal - (26,385) (23,887) (156,159) (104,764) (311,195) 

At 31 December 252,000 898,725 251,729 966,485 843,866 3,212,804 

Depreciation 

At 01 January 131,040 310,123 154,616 455,873 175,560 1,227,211 


Disposal - (26,385) (23,887) (156,159) (100,148) (306,579) 

At 31 December 141,120 445,898 184,840 442,839 148,132 1,362,829 


At 31 December 110,880 452,826 66,889 523,646 695,735 1,849,975

65 





2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

26 LEASEHOLD IMPROVEMENTS 

Cost 

At 1 January 1,151,498 203,164 1,151,498 203,164 

Additions 31,270 948,334 31,270 948,334 

As at 31 December 1,182,768 1,151,498 1,182,768 1,151,498 

Amortisations 

At 1 January 193,827 - 193,827 - 

Amortisation during the year 328,792 193,827 328,792 193,827 

As at 31 December 


522,619 193,827 522,619 193,827 

As at 31 December 660,149 957,671 660,149 957,671 

The bank moved its head office from Consolidated Holding Corporation Building, Samora Machel Avenue/ 

Zanaki Street Dar es Salamm in February 2010 to Mlimani City Office Park, Building No.3 Sam Nujoma Road. 

The bank also incurred additional cost on offices ralocation within head office and branches. 

27 INTANGIBLE ASSETS 

Cost 

At 1 January 1,936,217 1,394,453 1,933,717 1,389,953 

Additions 286,819 553,477 286,819 550,977 

Transfers 106,635 - 106,635 - 

Write off - (11,713) - (7,213) 

As at 31 December 2,329,671 1,936,217 2,327,171 1,933,717 

Amortisations 

At 1 January 1,321,530 1,125,049 1,321,217 1,120,549 

Amortisation during the year 269,158 208,072 268,533 207,759 

Transfers 55,440 - 55,440 - 

Write off - (11,591) - (7,091) 

As at 31 December 1,646,129 1,321,530 1,645,191 1,321,217 


As at 31 December 683,543 614,687 681,981 612,500




2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

28 TAX 

a} Tax expense 

Current year income tax - 211,675 - 211,675 

Deferred tax liability (1,337,341) 207,993 (1,337,341) 207,993 

(1,337,341) 419,668 (1,337,341) 419,668 


b} Reconciliation of tax expense to tax based on accounting profit: 

Accounting profit before taxation 5,846,199 3,463,750 5,787,583 3,608,486 

Tax applicable rate of 30% (2010: 30%) 1,753,860 1,039,125 1,736,275 1,082,546 

Deductible expenditure not charged 

to profit or loss 

(3,308,514) (903,200) (3,308,514) (903,200) 

Permanently disallowed expenditure 371,170 4,638 371,170 4,638 

Original and reversal of temporary (153,857) 279,106 (136,272) 235,685 

Tax (income)/expense (1,337,341) 419,668 (1,337,341) 419,668 

c} Deferred taxation 

Accelerated depreciation for tax 

purposes 

236,584 647,857 236,584 647,857 

Adjusted tax losses (3,629,154) - (3,629,154) - 

General provisions (569,454) (152,077) (569,454) (152,077) 

(3,962,024) 495,780 (3,962,024) 495,780 

Deferred tax (assets)/ liability thereon 

at 30% 

(1,188,607) 148,734 (1,188,607) 148,734 

Less: opening deferred tax 148,734 (59,259) 148,734 (59,259) 

Deferred tax (asset) / liability release (1,337,341) 207,993 (1,337,341) 207,993 

d} Tax recoverable 

Tax payable brought forward (1,890,490) (602,126) (1,872,242) (583,917) 

Tax charge for the year - 211,675 - 211,675 

Tax payments during the year (626,535) (1,500,039) (625,871) (1,500,000) 

Tax (recoverable)/ Payable (2,517,025) (1,890,490) (2,498,113) (1,872,242) 

29 GRANTS RECEIVABLE 

Opening balance 25,850 - 25,850 - 

Received during the year- BOT & REA (110,872) (23,923) (110,872) (23,923) 

Utilised during the year 143,713 49,774 143,713 49,774 

Grants Receivable 58,691 25,850 58,691 25,850 

Revenue grant receivable represents funds for training and capacity buildings activities donated by Rural 

Energy Agency -REA in 2011: TZS 26.6 million (2010: 12.8 million) and Bank of Tanzania, 2011: TZS 97.0 million 

(2010: 11.12 million) to TIB of which the bank finances the scheduled activities after being approved for 

reimbursement.

67 





2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

30 OTHER ASSETS 

Advanced towards share Capital - 

Rasilimali 

- - - 393,200 

Accounts receivable 2,331,698 1,105,538 1,800,253 1,018,221 

Prepaid expenses 234,175 267,881 211,669 236,912 

Receivable on future and forward 

contracts 

- 108,101 - 108,101 

2,565,872 1,481,519 2,011,921 1,756,433 

Less: Allowances for losses (569,454) (152,077) (569,454) (152,077) 

1,996,419 1,329,442 1,442,468 1,604,356 

Movement in allowance for losses on accounts 

receivable 

At 01 January 152,077 81,919 152,077 81,919 

Charge for the year 417,376 133,321 417,376 133,321 

Recoveries - (63,163) - (63,163) 

At 31 December 569,453 152,077 569,453 152,077 

As at 31 December, the ageing analysis of accounts receivable is as follows: 

Neither past due nor impaired 1,307,678 348,647 776,233 261,330 

Past due but not impaired 

Less than 30 days 406,057 108,868 406,057 108,868 

Within 30 - 60 days 39,884 394,879 39,884 394,879 

Within 60 - 90 days 25,227 123,055 25,227 123,055 

Over 90 days 552,852 130,090 552,852 130,090 

2,331,698 1,105,538 1,800,253 1,018,221 

31 DEFERRED INCOME 

Deferred income 1,069,319 - 1,069,319 - 

1,069,319 - 1,069,319 - 

Deferred Income represents amount received as appraisal fee on long term loans, being 1% on approvals, which 

is non refundable, the amount is being amortised over the period of the loan facility. The amortization based on 

straight line or equal installment.




2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

32 DEPOSITS 

Interest bearing deposits 

Customer accounts 131,126,943 98,662,982 131,126,943 98,662,982 

Banks and other financial institutions 26,101,408 15,158,853 26,101,408 15,158,853 

157,228,350 113,821,835 157,228,350 113,821,835 


Non interest bearing deposits 

Customer accounts 26,928,530 15,867,584 26,936,637 15,882,301 

184,156,881 129,689,419 184,164,988 129,704,136 

Maturity analysis as at 31 December 

Repayable on demand 81,150,157 37,939,817 81,158,264 37,954,534 

With maturity of 3 months or less 43,094,867 48,497,752 43,094,867 48,497,752 

With maturity over 3 months 59,911,857 43,251,850 59,911,857 43,251,850 

184,156,881 129,689,419 184,164,988 129,704,136 

33 OTHER LIABILITIES 

Accruals 1,471,933 971,319 1,415,127 843,277 

Accounts payable and other liabilities 1,507,408 743,935 1,489,305 706,530 

2,979,341 1,715,254 2,904,432 1,549,807 

Movement in account payable 

Carrying amount at the beginning of the 

period 

1,865,641 1,083,741 1,549,807 1,026,551 

Addition made during the period 1,893,385 1,096,484 1,893,385 945,268 

Amount used during the period (460,327) (396,620) (219,402) (353,661) 

Amount reversed during the period (319,358) (68,351) (319,358) (68,351) 

Carrying amount at the end of the period 2,979,341 1,715,254 2,904,432 1,549,807 

34 OTHER BORROWING 

At the beginning of the period 3,845,308 5,084,814 3,845,308 5,084,814 

Repayment during the period (1,782,950) (1,239,506) (1,782,950) (1,239,506) 

At the end of the period 2,062,358 3,845,308 2,062,358 3,845,308 

On 29 March 2007, the bank entered into an agreement with NORSAD Agency on behalf of NORSAD Fund for 

a total loan facility of USD 5,000,000.00 at a fixed interest rate of 6.5% for 5 years inclusive grace period of 1.25 

years. The loan facility was disbursed or received in four installments inclusive disbursement fee and interest, of 

which 1st disbursement was made on 7 June 2007 of USD 1,316,830 , 2nd disbursement of USD 1,432,475 on 17 

September 2007 , 3rd disbursement of USD 1,913,522 on 31 March 2008 and 4th disbursement of USD 337,175 

on 10 July 2008 .

69 




As at end of 2011 the NORSAD facility had an outstanding balance of equivalent TZS 2,062,358 (2010: 

TZS 3,845,308 ) of which TZS 688,020,371repayable within one year (current liabilities) 


2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

35 SHARE CAPITAL 

Authorised share capital 

The total authorised share capital of the bank 

is 500,000,000 shares of TZS 1,000 each. 

Authorised, called up and fully paid 

92,137,661 ordinary shares of TZS 1,000 each 

500,000,000 500,000,000 500,000,000 500,000,000 

(2010: 92,137,661 million ordinary shares) 92,137,661 92,137,661 92,137,661 92,137,661 

36 REGULATORY CAPITAL 

The bank complied with minimum capital requirements as required by sections 16 and 17 of the Banking and 

Financial Institutions Act, 2006 and the Bank of Tanzania Capital Adequacy Regulations 2008. The bank’s capital is 

computed in accordance with these regulations as follow: 

Share capital - - 92,137,661 92,137,661 

Retained earning - - 7,489,196 11,392,652 

- - 99,626,857 103,530,313 

Less: 

Prepaid expenses - - 211,669 236,912 

Deferred charges - - 1,188,607 - 

Intangible assets - - 681,981 612,500 

- - 2,082,256 849,412 

Core capital (Tier 1) - - 97,544,601 102,680,901 

Add: Supplimentary capital (Tier 2) - - - - 

Tier 1 Capital & Tier 2 Capital - - 97,544,601 102,680,901 

Required capital * 2,500,000 2,500,000 

*Note that the required capital threshhold benchmark is for a financial institutions. Tanzania Investment Bank is in a 

transformation to a Development Financial Institution (DFI) of which its regulations are under-development. 

Risk - weighted assets 

On financial position - - 190,317,138 114,583,505 

Off financial position - - 12,071,879 31,349,310 

Total risk - weighted assets - - 202,389,017 145,932,815




2011 2010 2011 2010 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

36 REGULATORY CAPITAL (Continued) 

Bank Ratios Required Required Actual Actual 

2011 2010 2,011 2,010 


Tier 1 (BoT Minimum) 10% 10% 48% 70% 

Tier 1 + Tier 2 (BoT Minimum) 12% 12% 48% 70% 

37 RELATED PARTY DISCLOSURES 

A number of banking transactions are entered into with related parties in the normal course of business. These 

include loans, deposits and foreign currency transactions. The volumes of related party transactions, outstanding 

balances at the year end and the related expenses and income for the year are as follows: 

Directors and key management personnel: Loans 

Loans: 

At the beginning of the year 425,308 280,421 425,308 280,421 

Loans issued during the year 133,120 290,253 133,120 290,253 

Loan repayments during the year (208,427) (145,366) (208,427) (145,366) 

As at the end of the year 350,001 425,308 350,001 425,308 

Interest income earned 

Related companies: 

Loans to Rasilimali 

549 549 439 549 

Loans issued during the year - - 500,000 - 

Loan repayments during the year - - - - 

As at the end of the year - - 500,000 - 

Interest income earned - - 1,322 - 

Deposits: 

At the beginning of the year - - 550,102 11,130 

Deposits received during the year - - - 538,972 

Deposits repaid during the year - - (13,246) - 

As at the end of the year - - 536,856 550,102 

Interest expense - - 46,728 47,334 

Directors and key management personnel: Deposits 

Key management compensation 

Salaries and other short-term benefits 1,362,081 1,656,344 1,301,763 1,598,624 

Post employment benefits 20,243 15,888 - - 

1,382,324 1,672,232 1,301,763 1,598,624

71 




Key management comprise of Managing Director, Ag General Manager of the subsidiary company and Divisional 

Directors of the bank. 

Directors’ remuneration 

Made up of: 

Directors’ emoluments (Note 14) 24,000 24,000 24,000 24,000 

Board of Directors expenses (Note 14) 142,740 125,285 140,780 120,045 

166,740 149,285 164,780 144,045 

Transactions entered into with the related parties are at an arm’s length in the ordinary course of 

business. These transactions are carried out on normal commercial terms and at prevailing market rates. 

38. CAPITAL MANAGEMENT 

The Bank of Tanzania sets and monitors capital requirements for the banking industry as a whole. The 

Bank of Tanzania has set among other measures, the rules and ratios to monitor adequacy of a bank’s 

capital. In implementing current capital requirements, the Bank of Tanzania requires the bank to maintain 

a prescribed ratio of total capital to total risk-weighted assets. 

The bank objectives when managing capital, which is a broader concept than the ‘equity’ on the face of 

statement of financial position, are: 

• To comply with the capital requirements as a set out under the banking and Financial Institutions Act, 

2006 this is monitored by the Bank of Tanzania, The regulator of the banking sector in Tanzania. The 

Act requires that: 

a) Every bank shall commence operations with and maintain at all times the minimum of core 

capital of not less than two billion shillings for non bank financial institution or such higher 

amount as the bank of Tanzania may prescribe by order published in the Gazette; 

b) Every bank shall at all times maintain a core capital of not less than ten percent of its total riskweighted 

assets and off financial position exposure; and 

c) Every bank shall at all times maintain total capital of not less than twelve per cent of its total risk 

weighted assets and off financial position exposure. 

• To safeguards the bank’s ability to continue as a going concern so that it can continue to provide 

returns to shareholders and benefits on other stake holders; and 

• To maintain a strong capital base to support the development of the group’s business. 

The bank’s regulatory capital is analyzed in two tiers: 

• Tier 1 capital, which includes ordinary share capital, share premium, retained earnings, after 

deductions for goodwill and intangible assets, and other regulatory adjustments relating to items 

that are included in equity but are treated differently for capital adequacy purposes. 

• Tier 2 capitals, which includes qualifying subordinated liabilities, collective impairment allowances 

and the element of fair value reserve relating to unrealized gains on equity instruments classified as 

available for sale. 

Various limits are applied to elements of the capital base; qualifying tier 2 capital cannot exceed tier 1 

capital; and qualifying term subordinated loan capital may not exceed 50 percent of tier 1 capital. There 

are also restrictions on the amount of collective impairment allowances that may be included as part of 

tier 2 capitals. Tier 1capital (Core capital) are also subjected to various limits like limitation in risk weighted 

assets by 10%, premises investments are not supposed to exceed 50% of core capital and movable assets 

are subjected to 20% limitation of core capital.



The bank’s policy is to maintain a strong capital base so as to maintain investor, creditor and market 

confidence and to sustain future development of the business. The impact of the level of capital on 

shareholders’ return is also recognized in addition to recognizing the need to maintain a balance between 

the higher returns and that may be possible with greater gearing and the advantages and security afforded 

by sound capital position. 

The bank has complied with capital regulatory requirement, the capital position at 31 December 2011 and 

2010 is disclosed on note 36. 

39. RISK MANAGEMENT 

The Board of Directors is ultimately responsible for all risks taken by the bank. Risk taking is an integral part 

of business. In the course of conducting its business, the bank is exposed to a variety of risks, including 

credit, market, operational, strategic and reputation risk. 

The bank’s risk management approach is that: 

• All risks must be identified and managed, and that the returns must be commensurate with the risks 

taken, relative to the bank’s risk appetite; 

• The effectiveness of risk management processes is ensured through formal governance and 

comprehensive regular reporting processes in a well-defined control environment; and 

• It is the responsibility of each individual, relative to their position, to identify themselves with the 

declared priority of risk management, to recognise real or anticipated risk and to take appropriate 

action. 


Risk management is guided by several principles, the most important being: 

• The assignment of appropriate responsibility and accountability for all risks and resulting returns; 

• The adoption of a Risk Management Framework for integrated risk management which applies across 

all business units and all risk types for the protection of the bank’s reputation; 

• Comprehensive risk assessment, measurement, monitoring and reporting; 

• Independent review; and 

• Formal risk governance processes. 

Our strategic and operating changes initiated in 2011 have been consistent with the economic and financial 

situation obtained in Tanzania. The impending restructuring of TIB into a two tier organization, comprised 

of a Development Finance Institution (DFI) and a subsidiary Corporate Commercial Bank, shall assist in 

effective deployment of resources and skills in both the development financing role and the supporting 

commercial bank. 

The impending reforms in the regulatory regime of development financing institutions shall create a more 

realistic measure of the bank’s risk management profile, measured against both the development finance 

mandate of the bank and the sustainability factor of its operations. 

Higher capital levels are required, not merely as a regulatory buffer, but also as a key factor in attracting 

potential partners to team up with in funding more development-impacting initiatives, and more attractive 

funding options and costs. 

Risk management structure 

As a development finance institution, the bank has been constantly evaluating its internal capacities to 

ensure a good balance between its corporate results and its mandate. In 2011, two decisions were made 

which are pivotal in the strengthening of the bank’s risk management capabilities. These are the creation 

of a structure ensuring more proactive involvement of the risk management department in the credit 

approval process.

73 




39. RISK MANAGEMENT (Continued) 

Risk management structure (C0ntinued) 

Another key process change is the embrace of team oriented approach in the credit process. This shall 

ensure full deployment of the bank’s technical skills in the evaluation of projects at the appraisal stage. 

Risk is inherent in the bank’s activities but is managed through a process of ongoing identification, 

measurement and monitoring, subject to risk limits and other controls. 

This process of risk management is critical to the bank’s continuing profitability and each individual within 

the bank is accountable for the risk exposures relating to his or her responsibilities. The bank is exposed to 

credit risk, liquidity risk and market risk, the latter being subdivided into trading and non-trading risks. It is 

also subject to various operating risks. 

The independent risk control process does not include business risks such as changes in the environment, 

technology and industry. The bank’s policy is to monitor those business risks through the bank’s strategic 

planning process. 

Board of Directors 

The Board of Directors is responsible for the overall risk management approach and for approving the risk 

management strategies and principles. 

Board Audit and Risk Committee 

This is the Board’s committee responsible for risk management issues. The committee receives periodic 

risk management reports and provides guidance to the management as well as advising the full Board on 

risk management and related issues. 

Risk Management Department 

The Risk & Compliance department is responsible for implementing and maintaining risk related procedures 

to ensure an independent control process is maintained. The Risk Management Framework prescribes the 

periodic reports to be submitted to both the Management and the Board to ensure that these two organs 

execute their oversight responsibilities related to the risk management function in the bank. 

Bank Treasury 

The Treasury department function is responsible for managing the bank’s assets and liabilities and the 

overall financial structure. It is also primarily responsible for the funding and liquidity risks of the bank. 

Internal Audit 

The bank’s policy is that risk management processes throughout the bank are audited annually by the 

internal audit function, which examines both the adequacy of the procedures and the bank’s compliance 

with the procedures. Internal Audit discusses the results of all assessments with management, and reports 

its findings and recommendations to the Audit and Risk Committee of the Board. 

The bank’s activities expose it to a variety of financial risks including credit risk, liquidity risk, market 

risks, operational risks and interest rate risks. The bank’s overall risk management programme focuses on 

the unpredictability of financial markets and seeks to minimize potential adverse effects on the bank’s 

financial performance. 

The bank’s risk management policies are established to identify and analyses the risks faced by the bank, 

to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management 

policies and systems are reviewed regularly to reflect changes in market conditions, products and services





Internal Audit (Continued) 

offered. The bank, through its training and management standards and procedures, aims to develop a 

disciplined and constructive control environment, in which all employees understand their roles and 

obligations. 

a) Credit risk 

Credit risk is the risk of financial loss to the bank if a customer or counterparty to a financial instrument fails 

to meet its contractual obligations and arises principally from the bank’s loans and advances to customers 

and other banks and investment securities. For risk management reporting purposes, the bank considers 

and consolidates all elements of credit risk exposure. 

Management of Credit Risk 

The Board has delegated responsibility for the management of credit risk to the the Development Finance 

division which is responsible for appraisal function and Portfolio Management division responsible for 

follow up of credit are two key divisions in the Credit committee which, among others, is responsible for: 

1. Formulating credit policies, covering collateral requirements, credit assessment, risk grading, 

documentary and legal procedures, and compliance with regulatory and statutory requirements; 

2. Ensure that the appraisal process is effective and informed. 

3. Establishing the authorization structure for the approval and renewal of credit facilities. 

Authorisation limits are allocated to various officers at different levels with higher facilities 

requiring Board approval. Reviewing and assessing credit risk. Credit Department assesses 

all credit exposures prior to facilities being committed to customers concerned. Renewals and 

reviews of facilities are subject to the same review process; 

4. Limiting concentrations of exposure. The Board approved delegated authority restricts exposure 

for any group/sector; 

5. Reviewing compliance of business units with agreed exposure limits, including those for selected 

industries and product types. Regular reports are provided to Credit Committee/Board in respect 

of the quality of loan portfolio; 

6. Providing advice, guidance and specialist skills to business units to promote best practice in the 

management of credit risk. 

Regular audits of both Development Finance and Portfolio Management divisions are undertaken by 

Internal Audit Department. Loans and advances graded 3, 4 and 5 in the banks’ internal credit risk grading 

system are impaired. These are advances for which the bank determines that it is probable that it will be 

unable to collect all principal and interest due according to the contractual terms of the loan agreements. 

Specific impairment losses are made on these grades. 

Loans and advances renegotiated 

Restructuring activities include extended payment arrangements, approved external management plans, 

modification and deferral of payments. Following restructuring, a previously overdue customer account is 

reset to a normal status and managed together with other similar accounts. 

Restructuring policies and practices are based on indicators or criteria which, in the judgment of 

management, indicate that payment will most likely continue. These policies are kept under continuous 

review. Restructuring is most commonly applied to term loans, in particular project finance loans. 

Regardless of their performance, all rescheduled loans have been assigned a classification of substandard 

or worse as per Bank of Tanzania directive hence they form part of non-performing loans unless prior 

approval is given by the Bank of Tanzania.

75 





a) Credit risk (Continue) 

Loans and advances renegotiated (Continued) 

The internal rating scale assists management to determine whether objective evidence of impairment 

exists under IAS 39, based on the following criteria set out by the bank: 

• Delinquency in contractual payments of principal or interest; 

• Cash flow difficulties experienced by the borrower; 

• Breach of loan covenants or conditions; 

• Initiation of bankruptcy proceedings; 

• Deterioration of the borrower’s competitive position; 

• Deterioration in the value of collateral. 

The bank’s policy requires the review of individual financial assets regularly and grading of accounts is 

done every month where provision on non performing loans is raised based on the guidelines of the Bank 

of Tanzania. 

Excessive risk concentration 

Concentrations arise when a number of counterparties are engaged in similar business activities, or 

activities in the same geographical region, or have similar economic features that would cause their 

ability to meet contractual obligations to be similarly affected by changes in economic, political or other 

conditions. Concentrations indicate the relative sensitivity of the bank’s performance to developments 

affecting a particular industry or geographical location. 

In order to avoid excessive concentrations of risk, the bank’s Credit policy and accompanying Manuals 

include specific guidelines to focus on maintaining a diversified portfolio with limits set for each sector. 

Identified concentrations of credit risks are controlled and managed accordingly. 

Risk limit control and mitigation policies 

The exposure to any one borrower including banks is further restricted by limits approved by the Board as 

set in the Credit Policy and ALCO approvals. Actual exposures against limits are monitored daily. Exposure 

to credit risk is also managed through regular analysis of the ability of borrowers and potential borrowers 

to meet interest and capital repayment obligations and by changing lending limits appropriate. 

Maximum exposure to credit risk before collateral held or other credit enhancements





Risk limit control and mitigation policies (Continued) 

Credit exposure relating to recognized financial assets in the statement of financial position are as follows: 


2011 2010 

TZS ‘000 TZS ‘000 

Amount due from banks: 

Placements with other banks 6,514,649 12,184,328 

Reverse repurchase agreements - 34,102,192 

Investment in Government securities held - to - maturity 94,466,755 74,932,758 

Sub-total 100,981,404 121,219,278 

Loans and advances to customers(Gross) 

Loan to individual customers 

Overdraft facilities 1,183,772 997,699 

Term loans 2,850,022 1,111,060 

Sub-total 4,033,794 2,108,759 

Loan to corporate customers (Gross) 

L a r g e co r p o r a t e c u s t o m e r s 174 , 28 9, 8 87 10 8 , 439,9 6 0 

Small and Medium Enterprises (SMEs) 8,975,205 2,661,835 

Sub-total 183,265,092 111,101,795 

Total loans and advances 187,298,886 113,212,614 

Loans and advances past due but not impaired 

Loans and advances more than 90 days past due are considered impaired, unless other information is 

available to indicate the contrary. Gross amount of loans and advances by class of customers that were past 

due but not impaired were as follows: 

2011 

Details 

Individual 

customers 

Corporate 

customers 

Small and Medium 

Enterprises (SMEs) Total 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

Past due up to 30 days 67,680 13,660,170 840,251 14,568,101 

Past due 30 – 60 days 28,813 16,324,164 606,520 16,959,497 

Past due 60 – 90 days 500 6,654,180 - 6,654,680 

Total 96,993 36,638,514 1,446,771 38,182,278

77 






Loans and advances past due but not impaired (Continued) 

2010 

Details Individual Corporate Small and Medium 

Total 

customers customers Enterprises (SMEs) 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

Past due up to 30 days 207,313 11,244,445 41,460 11,493,218 

Past due 30 – 60 days 8,555 134,205 2,667 145,427 

Past due 60 – 90 days 10,431 95,012 - 105,443 

Total 226,299 11,473,662 44,127 11,744,088 

Upon initial recognition of loans and advances, the fair value of collateral if any is based on valuation 

techniques commonly used for the corresponding assets. In subsequent periods, the fair value is updated 

by reference to market price or a valuation by professional valuers. 

Collateral and other credit enhancements 

The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. 

Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters. 

The main types of collateral obtained are as follows: 

• For securities lending and reverse repurchase transactions, cash or securities 

• For commercial lending, charges over real estate properties, inventory and trade receivables 

• For retail lending, mortgages over residential properties 

The bank also obtains guarantees from Bank of Tanzania for loan issued to special project. Management 

monitors the market value of collateral, requests additional collateral in accordance with the underlying 

agreement, and monitors the market value of collateral obtained during its review of the adequacy of the 

allowance for impairment losses. It is the policy of the bank to require a security cover not less than 1.25 

times. 

It is the bank’s policy to dispose of repossessed properties in an orderly fashion. The proceeds are used 

to reduce or repay the outstanding claim. In general, the bank does not occupy repossessed properties 

for business use. The bank also makes use of master netting agreements with counterparties with 

whom a significant volume of transactions are undertaken. Such an arrangement provides for a single 

net settlement of all financial instruments covered by the agreement in the event of default on any one 

contract. Master netting arrangements do not normally result in an offset of financial position assets and 

liabilities unless certain conditions for offsetting apply. 

Although master netting arrangements may significantly reduce credit risk, it should be noted that: 

• Credit risk is eliminated only to the extent that amounts due to the same counterparty will be settled 

after the assets are realised; 

• The extent to which overall credit risk is reduced may change substantially within a short period 

because the exposure is affected by each transaction subject to the arrangement.





Charged off loans 

During the year non - performing loans and advances amounting to TZS 9,832,064,057.67 were charged 

off (2010: TZS 2,188,946,000) and thus they do not form part of loan portfolio reported in the statement of 

financial position. For follow up purposes, charged off loans are maintained in a separate memorandum 

records. As at 31 December 2011 the commulative balance of charged off accounts was TZS 19,038 million 

(2010: TZS 8,840 million) this excludes TZS 990 million recovered during the year (2010: TZS 1,726 million). 


Write-off policy 

The bank writes off loans as and when the Board reviews and accepts the recommendations by the 

management that the loans are irrecoverable. This determination is reached after considering information 

such as the occurrence of significant changes in the borrower’s financial position such that the borrower 

can no longer pay the obligation or that proceeds from collateral will not be sufficient to pay back the 

entire exposure. 

Debt securities, treasury bills and other eligible bills 

The only investment securities held by the bank are treasury bills and bonds issued by the Government of 

the United Republic of Tanzania and from private companies. 

Collateral 

Repossessed assets are sold as soon as practicable, with the proceeds used to reduce the outstanding 

indebtedness. 

During the year, the bank has not obtained any assets by taking possession of collateral held as security.

79 




39 RISK MANAGEMENT (Continued) 

a) Credit risk (Continued) 

Geographical analysis Tanzania Europe America Others Total 

2011 


TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 

Cash and balances with Bank of Tanzania 3,502,019 - - - 3,502,019 

Balance with other banks 4,278,281 916,073 4,621,439 87,140 9,902,933 

Placements with other banks 5,692,533 822,116 - - 6,514,649 

Cheques in the course of collection 18,110 - - - 18,110 

Government securities held to maturity 94,466,755 - - - 94,466,755 

Loans and advances 181,750,408 - - - 181,750,408 

Equity investment available for sale 1,000,000 - - - 1,000,000 

290,708,106 1,738,189 4,621,439 87,140 297,154,875 


Deposits 183,356,817 - - 808,171 184,164,988 

Other borrowings - - - 2,062,358 2,062,358 

183,356,817 - - 2,870,529 186,227,345 

2010 



Reverse repurchase agreements 34,102,192 - - - 34,102,192 

Balance with other banks 2,182,996 1,079,885 2,137,638 71,236 5,471,755 

Placements with other banks 10,976,952 - - 1,207,376 12,184,328 

Government securities held to maturity 74,932,758 - - - 74,932,758 

Loans and advances 106,051,982 - - - 106,051,982 

Equity investment available for sale 500,000 - - - 500,000 

232,243,947 1,079,885 2,137,638 1,278,612 236,740,082 


Deposits 100,530,787 - - 29,173,349 129,704,136 

Longterm Borrowing - - - 3,845,308 3,845,308 

100,530,787 - - 33,018,657 133,549,444




a) Credit risk (Continued) 

Industry analysis Financial Agriculture Government Consumers Retail and Manufacturing Building and Transport and Services Total 

Services and Fishing 

Wholesale 

Construction Communication 

TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 

2011 



2,161,652 - 1,340,367 - - - - - - 3,502,019 

Tanzania 

Balance with other banks 9,902,933 - - - - - - - - 9,902,933 

Placements with other banks 6,514,649 - - - - - - - - 6,514,649 

Cheques in the course of collection 18,110 - - - - - - - - 18,110.00 

Government /Corporate securities held 

- - 90,323,421 - - 4,143,333 - - - 94,466,755 

- to - maturity 

Loans and advances 1,620,645 84,343,046 6,557,164 3,996,545 36,112,407 5,061,162 6,911,310 7,164,872 35,531,735 187,298,886 

Equity investment available for sale 1,000,000 - - - - - - - - 1,000,000 

21,217,989 84,343,046 98,220,953 3,996,545 36,112,407 9,204,495 6,911,310 7,164,872 35,531,735 302,703,352 


Deposits 78,493,579 12,119,101 29,722,796 27,048,346 556,719 - - - 36,224,446 184,164,988 

Longterm Borrowing 2,062,358 - - - - - - - - 2,062,358 

80,555,937 12,119,101 29,722,796 27,048,346 556,719.33 - - - 36,224,446 186,227,345 

2010 



2,105,064 - 1,392,003 - - - - - - 3,497,067 

Tanzania 



Reverse repurchase agreements 34,102,192 - - - - - - - - 34,102,192 

Government /Corporate securities held 

- - 70,893,947 - - 4,038,810.61 - - - 74,932,758 

- to - maturity 

Loans and advances 1,129,306 32,861,820 8,646,997 3,401,951 21,697,694 5,540,727 2,499,295 13,849,219 23,585,680 113,212,689 

Equity investment available for sale 500,000 - - - - - - - - 500,000 

259,040,497 32,861,820 80,932,948 3,401,951 21,697,694 9,579,538 2,499,295 13,849,219 23,585,680 243,900,789 


Deposits 69,916,381 8,538,648 13,532,606 13,524,968 907,837 - - - 23,284,391 129,704,831 

Longterm Borrowing 3,845,308 - - - - - - - - 3,845,308 

73,761,689 8,538,648 13,532,606 13,524,968 907,837 - - - 23,284,391 133,550,139 




39 RISK MANAGEMENT (continued) 

a) Credit risk (continued) 

Credit quality by class of transactions 

The credit quality of financial assets is managed by the bank using internal credit ratings. The table below shows the credit quality by class of financial assets exposed to credit 

risk, based on the bank's internal credit rating system. The amount presented are gross of impairment allowances. 

Neither past due nor impaired 

Especially Past due but not Individually 

2011 Current 

mentioned 

impaired 

impaired Total 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 


Balance with other banks 9,902,933 - - - 9,902,933 

Placements with other banks 6,514,649 - - - 6,514,649 

Cheques in the course of collection - - 18,110 - 18,110 

Government and corporate securities held - to - maturity 94,466,755 - - - 94,466,755 

Loans and advances 145,358,100 5,840,372 31,167,870 4,932,544 187,298,886 

Equity investment-available for sale - - 1,000,000 - 1,000,000 

Total 259,744,456 5,840,372 32,185,980 4,932,544 302,703,352 

2010 


Reverse repurchase agreements 34,102,192 - - - 34,102,192 

Balance with other banks 5,471,755 - - - 5,471,755 

Placements with other banks 12,184,328 - - - 12,184,328 

Government and corporate securities held - to - maturity 74,932,758 - - - 74,932,758 

Loans and advances 87,331,928 7,640,236 11,079,818 7,160,707 113,212,689 

Equity investment-Available for sale - - 500,000 - 500,000 

Total 217,520,028 7,640,236 11,579,818 7,160,707 243,900,789 

81 




Maximum exposure to credit risk - Type of collateral or credit enhancement 

Fair value of collateral and credit enhancements held 

Maximum 

Letter of 

exposure to 

credit/BOT 

Netting Surplus 

credit risk Cash Security guarantee Property Stock agreements collateral Net collateral Net exposure 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 

December 31, 2011 


Due from banks: 



16,468,528 - - - - - - - - 16,468,528 

Reverse repurchase agreements - - - 

- - - - - - - - - - 

Loans and advances to customers: - - - 

Individual - - 

-overdraft 1,183,772 52,000 - - - - - - 52,000 1,131,772 

-term loans 2,850,022 3,056,580 - - - - - - 3,056,580 (206,558) 

Corporate customers - - 

-large corporate customers 174,289,887 523,863 24,539,474 459,956,632 17,260,489 - - 502,280,458 (327,990,571) 

-Small and Medium Enterprises (SME’S) 897,521 

179,221,202 3,632,443 - 24,539,474 459,956,632 17,260,489 - - 505,389,038 (327,065,357) 

Financial investments: 

Financial investments available for sale 193,996 - - - - - - - - - 

Government/security held to maturity 94,466,755 - - - - - - - - - 

290,350,481 3,632,443 - 24,539,474 459,956,632 17,260,489 - - 505,389,038 (310,596,828) 

Commitments and guarantees: 

Financial guarantees 11,025,930 - - - - - - - - - 

Letters of credit for customers 5,229,743 (1,933) - - - - - - - - 

Other commitments 50,760,006 - - - - - - - - - 

357,366,160 3,630,510 - 24,539,474 459,956,632 17,260,489 - - 505,389,038 (310,596,828) 


83 





b) Liquidity risk 

Liquidity risk is defined as the risk that the bank will encounter difficulty in meeting obligations associated 

with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises 

because of the possibility that the bank might be unable to meet its payment obligations when they fall 

due under both normal and stress circumstances. To limit this risk, management has arranged diversified 

funding sources in addition to its core deposit base, and adopted a policy of managing assets with liquidity 

in mind and of monitoring future cash flows and liquidity on a daily basis. The bank has developed internal 

control processes and contingency plans for managing liquidity risk. This incorporates an assessment of 

expected cash flows and the availability of high grade collateral which could be used to secure additional 

funding if required. 

The bank maintains a portfolio of highly marketable and diverse assets that assumed to be easily liquidated 

in the event of an unforeseen interruption of cash flow. In accordance with the bank’s policy, the liquidity 

position is assessed and managed under a variety of scenarios, giving due consideration to stress factors 

relating to both the market in general and specifically to the bank. The most important of these is to 

maintain limits on the ratio of net liquid assets to customer liabilities, to reflect market conditions. Net 

liquid assets consist of cash, short- term bank deposits and liquid debt securities available for immediate 

sale, less deposit for banks and other issued securities and borrowings due to mature within the next 

month. The ratios during the year were as follows: 

As a lender of long term loans, the bank depends on long term sources of funds. Currently the government 

has committed to increase the capital of the bank through budgetary allocation from time to time. 

Net liquid assets are liquid assets less all funds maturing in the next 30 days from wholesale market sources 

and from customers who are deemed to be professional. The bank defines liquid assets for the purposes of 

the liquidity ratio as cash balances, short-term interbank deposits and highly rated debt securities available 

for immediate sale and for which a liquid market exists. 

Management of liquidity risk 

The bank’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient 

liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring 

unacceptable losses or risking damage to the bank’s reputation. 

Treasury department maintains a portfolio of short-term liquid assets, largely made up of short-term liquid 

investment securities, loans and advances to institutions and other inter-bank facilities, to ensure that 

sufficient liquidity is maintained within the bank as a whole. All liquidity policies and procedures are subject 

to review and approval by the Board of Directors or Assets and Liabilities Committee. The bank manages 

the liquidity structure of assets, liabilities and commitments so that cash flows are appropriately matched 

to ensure that all funding obligations are met when due. Banking operations are such that mismatch 

of assets and liabilities according to their maturity profiles cannot be avoided. However, management 

ensures that the mismatch is controlled in line with allowable risk levels. 

Analysis of financial assets and liabilities by remaining contractual maturities 

The table below summarises the maturity profiles of the undiscounted cash flows of the bank’s financial 

assets and liabilities as at 31 December 2011 based on the remaining period to the contractual maturity 

date. Deposits from customers shown as maturing within 90 days relate to savings, call and fixed account 

balances. Although classified in this band, previous experience has shown these to be stable and of a long 

term nature.




b) Liquidity risk (Continued) 

Up to Up to Up to Up to Above 

1 month 3 months 6 months 12 months 1 year Total 

TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 

At 31 December 2011 


Cash and balances with Bank of Tanzania 3,502,019 - - - - 3,502,019 

Balance with other banks 9,902,933 - - - - 9,902,933 

Placements with other banks 5,587,426 206,049 207,179 513,995 - 6,514,649 

Cheques in course of collection 18,110 - - - - 18,110 

Government securities held to maturity 9,778,454 11,899,482 6,692,580 39,177,202 26,919,037 94,466,755 

Loans and advances 58,545,493 180,429 2,928,363 2,096,826 117,999,297 181,750,409 

Equity investment available for sale - - - - 1,000,000 1,000,000 

Total undiscounted financial assets 87,334,435 12,285,961 9,828,122 41,788,024 145,918,334 297,154,875 


Deposits 6,007,568 64,023,937 24,215,613 30,066,668 59,851,202 184,164,988 

Other borrowings 372 - 261,432 426,588 1,373,965 2,062,357 

6,007,940 64,023,937 24,477,045 30,493,256 61,225,167 186,227,345 

Net liquidity gap 81,326,495 (51,737,976) (14,648,923) 11,294,767 84,693,167 110,927,530 

Cumulative gap 81,326,495 29,588,519 14,939,596 26,234,363 110,927,530 - 





b) 

Liquidity risk (Continued) 

Up to Up to Up to Up to Above 

1 month 3 months 6 months 12 months 1 year Total 

TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 

At 31 December 2011 


Cash and balances with Bank of Tanzania 3,497,067 - - - - 3,497,067 

Reverse repurchase agreements 4,006,028 30,096,164 - - - 34,102,192 

Balance with other banks 5,471,755 - - - - 5,471,755 

Placements with other banks 401,031 11,035,830 747,467 - - 12,184,328 

Cheques in the course of collection - - - - - - 

Government securities held to maturity 2,612,467 25,729,609 4,777,686 10,587,533 31,225,463 74,932,758 

Loans and advances 5,041,325 51,020 2,213,628 2,929,782 95,816,227 106,051,982 

Equity investment-Available for sale - - - - 500,000 500,000 

Total undiscounted financial assets 21,029,673 66,912,623 7,738,781 13,517,315 127,541,690 236,740,082 


Deposits 22,595,577 48,497,752 20,504,802 9,792,250 28,313,755 129,704,136 

Other borrowings 77,740 475,847 505,847 621,920 2,166,853 3,848,207 

Total liabilities 22,673,317 48,973,599 21,010,649 10,414,170 30,480,608 133,552,343 

Net liquidity gap (1,643,644) 17,939,024 (13,271,868) 3,103,145 97,061,082 103,187,739 

Cummulative gap (1,643,644) 16,295,380 3,023,512 6,126,657 103,187,739 - 

85 






The table below shows the analysis of assets and liabilities analysed according to when they are expected 

to be recovered or settled. 


As at 31 December 2011 

Less than 12 

months 

Over 12 months Total 

TZS '000 TZS '000 TZS '000 

Assets 

Cash and balances with Bank of Tanzania 3,502,019 - 3,502,019 

Balance with other banks 9,902,933 - 9,902,933 

Placements with other banks 6,514,649 - 6,514,649 

Cheques in the course of collection 18,110 - 18,110 


held to maturity 

67,547,718 26,919,037 94,466,755 

Loans and advances 63,751,112 117,999,297 181,750,409 

Equity investment available for sale - 1,000,000 1,000,000 

Investment in subsidiary 455,653 455,653 

Property and equipment - 1,662,631 1,662,631 

Leasehold improvements - 660,149 660,149 

Intangible assets - 681,981 681,981 

Tax recoverable - 2,498,113 2,498,113 

Deferred tax asset - 1,188,607 1,188,607 

Grants receivable 58,691 - 58,691 

Other assets 716,677 725,790 1,442,467 

Total assets 152,011,909 153,791,257 305,803,166 

Liabilities 

Deposits 94,175,195 89,989,792 184,164,988 

Other liabilities 2,280,728 623,704 2,904,432 

Deferred Income 267,342 801,977 1,069,319 

Other borrowings 688,020 1,374,338 2,062,358 

Total liabilities 97,411,285 92,789,811 190,201,097 

Net 54,600,623 61,001,446 115,602,069

87 






The table below shows the analysis of assets and liabilities analyzed according to when they are expected 

to be recovered or settled. 


Assets 

Cash and bank balances with Bank of Tanzania 3,497,067 - 3,497,067 

Reverse repurchase agreements 34,102,192 - 34,102,192 

Balance with other banks 5,471,755 - 5,471,755 

Placements with other banks 12,184,328 - 12,184,328 

Government securities held to maturity 41,219,866 33,712,892 74,932,758 

Loans and advances 10,235,755 95,816,227 106,051,982 

Equity investment available for sale - 500,000 500,000 

Investment in Subsidiary 62,453 62,453 

Property and equipment - 1,849,975 1,849,975 

Leasehold improvements - 957,671 957,671 

Intangible assets - 612,500 612,500 

Tax recoverable - 1,872,242 1,872,242 

Grants receivable 25,850 - 25,850 

Other assets 1,498,916 105,441 1,604,357 

Total assets 108,235,729 135,489,401 243,725,130 

Liabilities 

Deposits 100,084,117 29,620,019 129,704,136 

Other liabilities 1,387,679 162,127 1,549,806 

Deferred tax liability - 148,734 148,734 

Other borrowings 1,886,100 1,959,208 3,845,308 

103,357,897 31,890,088 135,247,984 

Net 4,877,832 103,599,313 108,477,146




c) Market risk 

The bank takes on exposure to market risks, which is the risk that the fair value or future cash flows of 

a financial instrument will fluctuate because of changes in market prices. Market risks arise from open 

positions in interest rates and foreign currencies, all of which are exposed to general and specific market 

movements and changes in the level of volatility of market rates or prices such as interest rates, credit 

spreads, and foreign exchange rates. The bank separates exposures to market risk into either trading or 

non-trading portfolios. 

The market risks arising from trading and non-trading activities are concentrated in the bank’s treasury 

department and monitored regularly. Regular reports are submitted to the Board of Directors and ALCO. 

Trading portfolios include those positions arising from market-making transactions where the bank acts as 

principal with clients or with the market. 

Non-trading portfolios primarily arise from the interest rate management of the entity’s retail and 

commercial banking assets and liabilities. 


Interest rate risk 

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate 

because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial 

instrument will fluctuate because of changes in market interest rates. 

Management sets limits on the level of mismatch of interest rate re-pricing that may be undertaken, which 

is monitored daily and reports to ALCO monthly. The table below summarizes the bank’s exposure to 

interest rate risks. It includes the bank’s financial instruments at carrying amounts, categorised by the 

earlier of contractual re-pricing or maturity dates. The bank does not bear any interest rate risk on off 

financial position item 

The exposure to interest rates fluctuations on assets and liabilities denominated in currencies other than 

US dollar is minimal. 

Interest risk exposure 

The bank is exposed to various risks associated with the effects of fluctuations in the prevailing levels of 

market interest rates on its financial position and cash flows. Interest margins may increase as a result of 

changes in the prevailing levels of market rates but may also decrease or create losses in the event that 

unexpected movements arise. The Board sets limits on the level of mismatch of interest re-pricing that may 

be undertaken. Consequently, the interest sensitivity effect on profit or loss would not be significant given 

the re-pricing frequency. 

The table below summarizes the exposure to interest rates risks. Included in the table are the bank’s assets 

and liabilities at carrying amounts categorized by the earlier of contractual re-pricing or maturity dates. 

The bank does not bear an interest rate risk on off financial position items.




c) Market risk (Continued) 

Interest risk exposure (Continued) 

Up to 1 - 3 3 - 6 6 - 12 Over Non-interest 

1 month months months months 1 year Bearing Total 

TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 


Assets 

Cash and bank balances with Bank of Tanzania - - - - - 3,502,019 3,502,019 

Balance with other banks 9,902,933 - - - - - 9,902,933 

Placements with other banks 5,587,426 206,049 207,179 513,995 - - 6,514,649 

Cheques in the course of collection - - - - - 18,110 18,110 

9,778,454 11,899,482 6,692,580 39,177,202 26,919,037 - 94,466,755 

Government and corporate securities held - to 

- maturity 

Loans and advances 5,682 180,429 2,928,363 2,096,826 117,999,297 58,539,811 181,750,409 

Equity investment available for sale - - - - - 1,000,000 1,000,000 


Property and equipments - - - - - 1,662,631 1,662,631 

Leasehold improvements - - - - - 660,149 660,149 

Intangible assets - - - - - 681,981 681,981 

Tax recoverable - - - - - 2,498,113 2,498,113 

Deferred tax asset - - - - - 1,188,607 1,188,607 

Grant receivable - - - - - 58,691 58,691 

Other assets - - - - - 1,442,468 1,442,468 

Total assets 25,274,495 12,285,961 9,828,122 41,788,024 144,918,334 71,708,231 305,803,166 

Liabilities 

Deposits 6,007,568 37,087,300 24,215,613 30,066,668 59,851,202 26,936,637 184,164,988 

Other liabilities - - - - 2,904,432 2,904,432 

Deferred tax liability - - - - - - - 

Deferred grants - - - - - 1,069,319 1,069,319 

Other borrowings 372 - 261,432 426,588 1,373,965 - 2,062,358 

Shareholder's funds - - - - - 115,602,069 115,602,069 

Total liabilities and equity 6,007,940 37,087,300 24,477,045 30,493,256 61,225,167 146,512,458 305,803,166 

89 


Interest sensitivity gap 19,266,555 (24,801,339) (14,648,923) 11,294,767 83,693,167 (74,804,227) -



Interest risk exposure (Continued) 

Up to 1 - 3 3 - 6 6 - 12 Over Non-interest 

months months months months 1 year Bearing Total 

TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 TZS '000 


Assets 

Cash and bank balances with Bank of 

Tanzania - - - - - 3,497,067 3,497,067 

Reverse repurchase agreements 4,006,028 30,096,164 - - - - 34,102,192 

Balance with other banks 5,471,755 - - - - - 5,471,755 

Placements with other banks 401,031 11,035,830 747,467 - - - 12,184,328 


held - to - maturity 2,612,467 25,729,609 4,777,686 10,587,533 31,225,463 - 74,932,758 

Loans and advances 3,998,772 51,020 2,213,628 2,929,782 95,816,227 1,042,553 106,051,982 

Equity investment available for sale - - - - - 500,000 500,000 


Property and equipments - - - - - 1,849,975 1,849,975 

Leasehold improvements - - - - - 957,671 957,671 

Intangible assets - - - - - 612,500 612,500 

Tax recoverable - - - - - 1,872,242 1,872,242 

Grant receivable - - - - - 25,850 25,850 

Other assets - - - - - 1,604,356 1,604,356 

Total assets 16,490,053 66,912,623 7,738,781 13,517,315 127,041,690 12,024,668 243,725,130 

Liabilities 

Deposits 22,595,577 48,497,752 20,504,802 9,792,250 12,431,454 15,882,301 129,704,136 

Other liabilities - 0 - - - 1,549,807 1,549,807 

Deferred tax liability - - - - - 148,734 148,734 

Other borrowings - - - 1,886,100 1,959,208 - 3,845,308 

Shareholder's fund - - - - - 108,477,145 108,477,145 

Total liabilities 22,595,577 48,497,752 20,504,802 11,678,350 14,390,662 126,057,987 243,725,130 

Interest sensitivity gap (6,105,524) 18,414,871 (12,766,021) 1,838,965 112,651,028 (114,033,319) 






Foreign currency exchange risk exposure 

The Bank maintains trade with the customers and other correspondent banks which its foreign currency exposure as at 31 December 2011 was TZS 1,744 

million (2010: TZS3,528 million). The various currencies to which the bank is exposed at 31 December 2011 are summarised in the table below (All amounts 

expressed in millions of Tanzania Shillings). 

TZS USD GBP Euro Others Total 

Assets 

Cash and balances due from banks 1,913,267 9,666,362 179,768 1,558,414 87,141 13,404,952 

Reverse repurchase agreements - - - - - - 

Placements with other banks 927,791 5,586,858 - - - 6,514,649 

Loans and advances 126,246,688 55,218,745 - 284,976 - 181,750,409 

Tax recoverable 2,498,113 - - - - 2,498,113 

Deferred tax asset 1,188,607 - - - - 1,188,607 

Other assets 1,251,118 191,350 - - - 1,442,468 

134,025,584 70,663,314 179,768 1,843,390 87,141 206,799,198 

Liabilities 

Deposits 106,915,184 74,960,611 295,392 1,993,801 - 184,164,988 

Other liabilities 2,877,500 26,932 - - - 2,904,432 

Deferred Income 1,069,319 - - - - 1,069,319 

Other borrowings - 2,062,358 - - - 2,062,358 

Total liabilities 

110,862,003 77,049,901 295,392 1,993,801 - 190,201,097 

23,163,581 (6,386,586) (115,624) (150,411) 87,141 16,598,101 

Net financial position 

Exchange rate during the year were as follows: 

USD GBP Euro 

On 01 January 2011 1,509 2,343 2,020 

On 31 December 2011 1,588 2,448 2,055 

91 





d) Operational risk 

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the 

bank’s processes, personnel, technology and infrastructure and from external factors other than credit, 

market and liquidity risks such as those arising from legal and regulatory requirements and generally 

accepted standards of corporate behavior. Operational risks arise from all of the bank’s operations and 

are faced by all business units. The bank’s objective is to manage operational risk so as to balance the 

avoidance of financial losses and damage to the bank’s reputation with overall cost effectiveness and to 

avoid control procedures that restrict initiative and creativity. 

The primary responsibility for the development and implementation of controls to address operational risk 

is assigned to divisional heads under co-ordination of Risk & Compliance department. This responsibility 

is supported by the development of overall bank standards for the management of operational risk in the 

following areas: 

• Requirements for appropriate segregation of duties, including the independent authorization of 

transactions; 

• Requirement for the reconciliation and monitoring of transactions; 

• Compliance with regulatory and other legal requirements 

• Documentation of controls and procedures; 

• Requirements for the yearly assessment of operational risk faced, and the requirements of controls 

and procedures to address the risk identified; 

• Requirements for the reporting of operational losses and proposed remedial action; 

• Development of contingency plans; 

• Training and professional development; 

• Ethical and business standards; and 

• Risk mitigation, including insurance where this is effective. 

40. CONTINGENT LIABILITIES AND COMMITMENTS 

Contingent liabilities and commitments arise in the normal course of the bank’s business activities. To meet 

the financial needs of customers, the bank enters into various irrevocable commitments and contingent 

liabilities. These consist of financial guarantees, letters of credit and other un-drawn commitments to lend. 

Even though these obligations may not be recognised on the statement of financial position, they do 

contain credit risk and are therefore part of the overall risk of the bank. Letters of credit and guarantees 

(including standby letters of credit) commit the bank to make payments on behalf of customers in the 

event of a specific act, generally related to the import or export of goods. Guarantees and standby letters 

of credit carry a similar credit risk to loans. 

Legal claims 

Litigation is a common occurrence in the banking industry due to the nature of the business undertaken. 

The bank has formal controls and policies for managing legal claims. Once professional advice has been 

obtained and the amount of loss reasonably estimated, the bank makes adjustments to account for any 

adverse effects which the claims may have on its financial standing. 

At year end, the bank had claims from various parties with estimated exposure worth TZS 2,423 million 

which were under litigation as at 31 December 2011 related to claim filed by unsuccessful employment 

applicant compared to ( 2010: TZS 652 million). On the other hand the bank had claims amounting to TZS 

9,206 million in court cases against (2010: TZS 560 million) related to defaulting customers whom the bank 

is executing recovery measures from third parties. 


93 




40. CONTINGENT LIABILITIES AND COMMITMENTS (Continued) 

Legal claims (Continued) 

However the bank does not expect the final outcome of any such case to have a material adverse effect on 

its financial position as the bank has strong defense. 

Off – statement of financial position items 

To meet the financial needs of customers, the bank enters into various irrevocable commitments and 

contingent liabilities. Even though these obligations may not be recognized on the statement of financial 

position, they do contain credit risk and are therefore part of the overall risk of the bank. 

The total outstanding contingent liabilities and commitments as at 31 December are as follows: 

Contingent liabilities 

2011 2010 

TZS’000 TZS’000 

Outstanding sight letters of credit : 

- Foreign currency 5,229,743 2,561,992 

Outstanding guarantees and indemnities: 

- Foreign currency 6,922,951 716,718 

- Local currency 4,102,979 881,151 

Total 16,255,673 4,159,853 

Letters of credit, guarantees (including standby letters of credit) commit the bank to make payments on 

behalf of customers in the event of a specific act, generally related to the import or export of goods. 

Guarantees and standby letters of credit carry the same credit risk as loans. 

Commitments: 

2011 2010 

TZS ‘000 TZS’000 

Commitments to extend credit – undrawn balance 50,760,006 29,239,043 

Capital commitments 

Capital expenditure that has been approved by the Board but 

not contracted for 

4,496,000 1,445,064 

Commitments to extend credit represent contractual commitments to make loans and revolving credits. 

Commitments generally have fixed expiry dates, or other termination clauses. Since commitments may 

expire without being drawn upon, the total contract amounts do not necessarily represent future cash 

requirements. However, the potential credit loss is less than the total unused commitments since most 

commitments to extend credit are contingent upon customers maintaining specific standards. The bank 

monitors the term to maturity of credit commitments because longer-term commitments generally have 

a greater degree of credit risk than shorter-term commitments. Capital commitments comprise capital 

expenditure for fixtures and equipment, computers and motor vehicles.



40. CONTINGENT LIABILITIES AND COMMITMENTS (Continued) 


Operating lease commitments 

The bank has entered in commercial leases on premises for its head office and branches. These leases have 

an average life of between three to five years with renewal option included in the contracts. There are no 

restrictions placed upon the lessee by entering into these leases. Future minimum lease payments under 

non-cancelable operating leases as at 31 December are as follows: 

2011 2010 

TZS ‘000 TZS’000 

Within one year-Rent 1,846,674 1,848,893 

After one year but not more than five years 7,386,696 9,743,178 

More than five years 2,033,308 2,808,943 

Total 11,266,678 14,401,014 

41. MANAGED GOVERNMENT FUNDS REPORTED OFF – STATEMENT OF FINANCIAL 

POSITION 

Among the principal activities of the bank is to administer Government funds disbursed for special projects 

on behalf of the Government. Establishment, design and approval of special projects rests with the 

Government under the Ministry of Finance. All risks and rewards arising from special projects are directly 

channeled to the Ministry of Finance. The bank receives management fees and urgency fees from these 

projects at agreed rates depending on the nature and complexity of projects. 

As at 31 December the position of amounts disbursed from the Government and spend on various special 

projects were as follows: 

Summary of amount disbursed by the Government to Tanzania Investment Bank Limited stood as follows: 

2011 2010 Total 

TZS ‘000 TZS’000 TZS’000 

1. Agricultural Financing Window projects 20,000,000 22,000,000 42,000,000 

2. Floriculture projects - 50,749,000 50,749,000 

3. Rural Energy Agency (REA) 44,852,918 36,694,563 81,547,481 

4. Artumas Gas Project - 10,000,000 10,000,000 

5. Sumbawanga Animal Food industries (SAAFI) 

Limited 

- 14,950,000 14,950,000 

Total 64,852,918 134,393,563 235,770,481

95 




41. MANAGED GOVERNMENT FUNDS REPORTED OFF – STATEMENT OF FINANCIAL 

POSITION (Continued) 

Summary of amount disbursed by Tanzania Investment Bank Limited to various projects and debt collection 

stood as follows: 

2011 2010 Total 

TZS ‘000 TZS ‘000 TZS’000 

1. Agricultural Financing Window projects 9,225,089 8,980,000 18,205,089 

2. Floriculture projects - 50,474,000 50,474,000 

3. Rural Energy Agency (REA) 44,876,499 36,604,000 81,480,499 

4. Artumas Gas Project - 9,996,774 9,996,774 

5. Sumbawanga Animal Food industries (SAAFI) 

Limited 

- 14,950,000 14,950,000 

Total 54,101,588 121,004,774 175,106,362 

Amount set aside at the Bank of Tanzania during the year ended 31 December 2011 for disbursement to 

Tanzania Investment Bank Limited once TEDAP projects are approved was TZS 36, 524, million which is still 

under custody at the Bank of Tanzania. 

Summary of amount collected by Tanzania Investment Bank from various projects is as follows: 

2011 2010 Total 

TZS ‘000 TZS’000 TZS ‘000 

1 Tanzania Housing Bank (THB) 16,155 16,025 32,360 

2 Commodity Import Support (CIS) 227,460 64,832 292,292 

Total 243,615 80,857 324,652 

42. FAIR VALUE OF FINANCIAL INSTRUMENTS 

The bank uses level 2 hierarchies based on similar transactions in determining and disclosing the fair value 

of financial instruments held to maturity and the values approximates the values reported in the statement 

of financial position. 

Set out below is a comparison, by class of the carrying amounts and the fair values of the bank’s financial 

instruments that are not carried at fair value in the financial statements. This table does not include the fair 

value of non-financial assets and non-financial liabilities.



42. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) 

2011 2011 2010 2010 

Carrying amount Fair value Carrying amount Fair value 

TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000 


Cash and balances with Bank 

of Tanzania 3,502,019 3,502,019 50,225,231 50,225,231 

Balance with other banks 

Cheques in the course of 

9,902,933 9,902,933 8,323,293 8,323,293 

collection 18,110 18,110 - - 

Placements with other banks 6,514,649 5,384,819 28,245,755 27,115,925 


Government securities 25,304,400 24,838,236 8,872,125 8,605,961 


162,779,212 161,183,218 192,629,575 191,233,581 


Deposits 184,164,988 183,035,158 177,042,981 177,042,981 

Other liabilities 6,027,417 6,027,417 3,804,428 3,804,428 

190,122,405 189,062,575 180,847,409 180,847,409 

Fair value of financial assets and liabilities not carried at fair value 

The following describes the methodologies and assumptions used to determine fair values for those 

financial instruments which are not already recorded at fair value in the financial statements: 

For financial assets and financial liabilities that have a short term maturity (less than three months) it is 

assumed that the carrying amounts approximate to their fair value. This assumption is also applied to 

demand deposits, and savings accounts without a specific maturity. 

Fixed rate financial instruments 

The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by 

comparing market interest rates when they were first recognised with current market rates for similar 

financial instruments. The estimated fair value of fixed interest bearing deposits is based on discounted 

cash flows using prevailing money-market interest rates for debts with similar credit risk and maturity. 

For quoted debt issued the fair values are determined based on quoted market prices. For those notes 

issued where quoted market prices are not available, a discounted cash flow model is used based on a 

current interest rate yield curve appropriate for the remaining term to maturity and credit spreads. For 

other variable rate instruments an adjustment is also made to reflect the change in required credit spread 

since the instrument was first recognized.

97 




43. EVENTS AFTER REPORTING DATE 

a) Corporate Structure 

As a development financial institution, Tanzania Investment Bank Limited is envisaged to change its 

Corporate Structure from the current setting into a two tier structure comprising of TIB Development 

Finance Institution and TIB Corporate bank. Appointment of a Consultant for doing the separation was 

completed in March 2012, and the fieldwork started. It is expected that the exercise will be completed in 

three months period to June 2012. 

b) Development Finance Institution (DFI) Prudential Guidelines and Regulations 

As a development bank, Tanzania Investment Bank Limited is being regulated by the Bank of Tanzania 

using existing prudential guidelines and regulations which are suitable for operations of the Commercial 

Banks. Meanwhile, BOT in consultation with other stakeholders, have formulated DFI prudential guidelines 

and regulations and the same have been forwarded to Attorney General for Gazzeting before official use. 

44. COMPARATIVES 

Where necessary, comparative figures have been adjusted to conform with changes in presentation in the 

current year. 

45. COUNTRY OF INCORPORATION AND REGISTERED OFFICE 

The bank is incorporated in Tanzania under the Companies Act No. 12 of 2002 and is domiciled in Tanzania. 

The address of its registered office is: 

TANZANIA INVESTMENT BANK LIMITED 

P.O. Box 9373 Dar es Salaam. Tanzania

2011 

ANNUAL REPORT 

TANZANIA INVESTMENT BANK LIMITED 

P.O. Box 9373 Dar es Salaam. Tanzania

TIB Final Annual Report 2011.pdf - Tanzania Investment Bank

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