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BUSINESS PERFORMANCE SOCIAL RESPONSIBILITY GOVERNANCE INFORMATION STATEMENTS ADDRESSES 1

Annual
Report
2019
REPEAT
Agility Diligence Repeat
The Spirit of Great Banking!
Annual
Report
2019
REPEAT
CONTENT INSIDE
OUR BUSINESS

Financial Highlights 2
Share Performance 5
Value Added Statement 6
Awards and Recognition 7
Mission, Vision & Values 9

STRATEGY AND PERFORMANCE

Chairman’s Report 13
Managing Director’s Report 17
Chief Financial Officer’s Review 21
Business and Operational Review 26

SUSTAINABILITY AND CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility 42

CORPORATE GOVERNANCE

Risk Report 46
Board of Directors 50

CORPORATE INFORMATION

Executive Management 58
AGM Notice 2020 63
Whistle Blowing 64
FINANCIAL STATEMENTS

Report of Directors 66
Statement of Director’s Responsibilities 81
Declaration of the Chief Financial Officer 82
Independent Auditor’s Report 83
Statement of Profit or Loss and other 89
Comprehensive Income
Statement of Changes in Equity 93
Statement of Cash Flows 96
Notes to the Financial Statements 98

ADDRESS CONTACTS AND DETAILS

Company Information and Key Contacts 212

Network Distribution 213
LIST OF ABBREVIATIONS

AGM Annual General Meeting LC Letter of Credit

ALCO Assets and Liabilities Committee LDR Loans to Deposits Ratio

ALM Assets and Liabilities Management LGD Loss Given Default

BARCC Board Audit, Risk and Compliance Committee LIBOR London Bank Offered Rate

BIA Basic Indicator Approach LTFR Long-term Funding Ratio

BOT Bank of Tanzania MSE Micro and Small Enterprises

CSR Corporate Social Responsibiliy NHIF National Health Insurance Fund

DSE Dar es Salaam Stock Exchange OCI Other Comprehensive Income

EAD Exposure at Default PD Probability of Default

ECL Expected Credit Losses POCI Purchased or Originated Credit Impaired

EIB European Investment Bank QR Quick Response

EPS Earnings per Share SICR Significant Increase in Creadit Risk

Financierings-Maatschappij voor
FMO SME Small and Medium Enterprises
Ontwikkelingslanden N.V

Fair Value through Other

FVOCI SMR Statutory Minimum Reserve
Comprehensive Income

FVTPL Fair Value through Profit or Loss SPPI Solely Payments of Principal and Interest

IASB International Accounting Standards Board SPV Special Purpose Vehicles

ICT Information and Communication Technology SWL Salaried Workers’ Loan

International Ethics Standards Board for Tanzania Mortgage Refinance

IESBA TMRC
Accountants Company Limited

IFC International Finance Corporation TZS Tanzanian Shillings

IFRS International Financial Reporting Standards UJVC Upanga Joint Venture Company

ISA International Standards on Auditing USD United States Dollars

YoY Year on Year USSD Unstructured Supplementary Service Data

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Our Business
Our resilience and commitment to
delivering the best sustainable results
remains evident through the years.
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FINANCIAL HIGHLIGHTS FOR THE YEARS 2015 - 2019

Net Interest Income Non Interest Income

TZS Billions TZS Billions
600 250

500
200

400
150
300

100
200 TZS TZS

100 Billions 50 Billions

Year 2019 Year 2019

Impairment Loss on Loans & Advances Profit after tax

TZS Billions TZS Billions
180

140 160

140
120
120
100
100
80
80
60
TZS 60 TZS
40
40
20 Billions Billions
20
Year 2019 Year 2019

Cost to Income Ratio NPL Ratio

% %
9

70 8

7
60
6
50
5
40
4
30
3
20

10
2 . %
Year 2019 1 Year 2019

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Loans and Advances Customer Deposits

TZS Billions TZS Billions

3500

3000

2500

2000

1500
TZS TZS
1000
Billions
,
Billions
500
Year 2019 Year 2019

Total Assets Shareholders’ Fund

TZS Billions TZS Billions
7 1200

6 1000

5
800
4
600
3
TZS TZS
2 400

Billions Billions
1 200
Year 2019 Year 2019

Total Capital Adequacy Ratio Loans to Deposit Ratio

25
% 80 %
78

20 76

74
72
15
70

68
10
66
64

5 Year 2019 62 Year 2019

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FINANCIAL HIGHLIGHTS FOR THE YEARS 2015 - 2019

2015 2016 2017 2018 2019

Profitability
Total Income Tzs Million 608,477 716,132 744,243 797,514 858,383
Operating expenses Tzs Million 299,358 348,516 355,053 408,953 410,552
Tax Tzs Million 67,040 67,599 44,409 43,978 68,921
Net profit Tzs Million 150,288 153,825 93,494 97,663 142,167
Solvency
Total Assets Tzs Million 4,580,091 4,951,075 5,506,359 5,680,984 6,556,015
Tier 1 capital Tzs Million 592,195 664,960 694,490 711,199 854,360

Risk Weighted Assets (RWA) Tzs Million 2,932,574 3,519,618 4,114,144 4,321,532 4,988,790

Other
Customers 2,100,000 2,178,700 2,710,328 3,129,367 3,546,114
Branches 175 188 212 223 224
ATMs 595 670 770 776 794
Wakala 476 1,600 3,785 6,800 5,980
Staff 3,162 3,432 3,371 3,450 3,450
Selected Ratios 2015 2016 2017 2018 2019

Return on average
23% 20% 12% 11% 15%
shareholders’ equity

Return on average assets 4% 3% 2% 2% 2%

Cost to income ratio 57% 59% 58% 59% 60%
Capital Adequacy Ratio
Tier 1 Capital Ratio 20% 19% 17% 17% 17%
Tier1 + Tier2 Capital Ratio 22% 20% 18% 19% 19%

2018 2019

3,129,367 223 3,546,114 224

Customers Branches Customers Branches

6,800 5,980

Agents Agents

776 3,450 794 3,450

ATM ATM

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SHARE PERFORMANCE

Share performance Formulae 2015 2016 2017 2018 2019

Basic and diluted PAT/Number of
Tzs 300 308 187 195 284
earnings per share shares in issue
Total dividend/
Dividend per share Number of shares Tzs 104 104 64 66 96
in issue

Closing share price as per DSE Tzs 2,500 2,750 2,750 2,340 2,340

Number of shares in
Millions 500 500 500 500 500
issue
Basic diluted
earnings per
Dividend cover (times) Times 2.89 2.96 2.92 2.95 2.96
share/dividend per
share
Net assets/
Net asset value per
Number of shares Tzs 1,331 1,534 1,618 1,726 1,944
share
issue
Dividend per
Dividend yield :
share/closing price % 4% 4% 2% 3% 4%
ordinary dividend
at DSE

Earnings yield : ordinary PAT/closing of

% 12% 11% 7% 8% 12%
dividend share price

Closing share
Price to Book ratio price/Net asset Times 1.88 1.79 1.70 1.36 1.20
value per share

Closing share
Price: Earnings ratio:
price/Basic diluted Times 8.3 8.9 14.7 12.0 8.2
ordinary shares
earnings per share

Closing share price

Tzs
Market capitalisation times No. shares in 1,250,000 1,375,000 1,375,000 1,170,000 1,170,000
Millions
issue

Tzs
Net Assets Audited financials 665,429 767,208 808,769 863,054 972,389
Millions

Volume of shares
DSE Millions 3.9 33.1 0.3 0.1 0.2
transacted

PAT - Profit After Tax

DSE - Dar es Salaam Stock Exchange
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VALUE ADDED STATEMENT

Value added is the wealth the bank has been able to create by providing clients with a quality, value added service.

Tzs ‘Millions 2019 2018

Value added
Income earned by providing banking services 905,046 834,235
Interest expense paid to third party funding (24,454) (23,895)
Other depositors (111,879) (85,720)
Fee and commission expense (46,663) (36,721)
Impairment (100,410) (137,305)
Total cost of banking service (283,406) (283,641)
Value added by banking services 621,640 550,594
Other operating income and expenditures (108,171) (150,778)
Value added from banking services 513,469 399,816
Value allocated
To employees:
Salaries and other benefits 137,910 124,228

To Shareholders:
Dividend to other shareholders 32,745 22,512
Government 15,255 10,488
To Government:
Corporate Tax 68,921 43,978
PAYE 37,901 35,543
Skills development levy 6,768 6,378
Excise Duty 23,576 20,292
VAT on services 43,733 36,062
Other taxes 2,461 2,031
Total Taxes 183,360 144,284
To expansion and growth
Depreciation, deferred tax and retained earnings 144,199 98,304
513,469 399,816

2018 2019

31% 8% 27% 9%

Employees Shareholders Employees Shareholders

Dividend Dividend

36% 25% 36% 28%

Total Tax Expansion Total Tax Expansion

and Growth and Growth

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Awards and
Recognition
The Bank continues to grow from
strength to strength. Reflecting on the
milestones being made in delivering
superior banking experiences across the
country, and positively impacting the
lives of Tanzanians.

For seven years in a row the Bank has

been a proud winner of the Euromoney
Awards for Excellence being awarded
the prestigious ‘Best Bank in Tanzania
2018’ Award.

The Bank is also proud to have yet again

been awarded by the National Board of
Accountants and Auditors (NBAA) for the
‘Best presented financial statements
2018’.
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REPEAT

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 OUR STRATEGY & SUSTAINABILITY& CORPORATE CORPORATE CORPORATE FINANCIAL CONTACT &
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Our Vision
To be the preferred financial
services partner in Tanzania

Our Mission
Through innovative distribution and our
extensive branch network, to offer affordable
customer focused financial services to the
Tanzanian community, in order to realise
sustainable benefits for all our stakeholders

Our Core Values

WHAT DRIVES US
Eagerness & Ownership

WHAT BINDS US
Customer focus & Teamwork

WHAT GUIDES US
Integrity & Compliance
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INTERNAL INFORMATION

red O Auditor Lawyers

pa
ny Secret ste
m
a gi c
Re

e
ry
Co

Lilian R. PricewaterhouseCoopers CSB Law Chambers East Africa Law Chamber

Komwihangiro Ohio/Ali Hassan Certified Public P.O.Box 375 P.O.Box 7439
Mwinyi Road Accountants (Tanzania) Morogoro Dar es Salaam
P.O.Box 9213
369 Toure Drive,
Dar es Salaam
Oyster Bay CRB Africa Legal Legis Advocates
P.O. Box 45 P.O. Box 79958 P. O. Box 3750
Dar es Salaam Dar es Salaam Dar es Salaam

AMMIC Advocates
Maleta & Ndumbaro
P.O.Box 718
Advocates
Kahama
P.O.Box 79944
Dar es Salaam
Vertex Law Chambers
P.O. Box 31985
Dar es Salaam Galati Law Chambers
Advocates
Vigilance Attorneys P.O.Box 11317
P.O. Box 785 Mwanza
Arusha
Kasimbazi And Co.
Mbwilo Advocates Advocates
P.O.Box 1854 P.O. Box 1075
Mbeya Iringa

Law Associates Derost Attorneys & Law

P.O. Box 11133 Counsellors
Dar es Salaam
P.O. Box 1481
Mtwara
Goldmark Attorneys
P.O. Box 1605
Rweyemamu Advocate
Dodoma
Chambers
K & M Advocates P.O. Box 1746,
P.O. Box 71394 Bukoba
Dar es Salaam
Brickhouse Law Associates
FB Attorneys P.O. Box 80512
P.O. Box 19813 Dar es Salaam
Dar es Salaam

REPEAT
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Strategy and
Performance
Our refreshed strategic priorities
continued to build on our purpose
of efficiently providing affordable
customer focused financial services to
realise sustainable benefits for all our
stakeholders.
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Margaret Ikongo
Interim Board Chairman

Following the review of the

assumptions underlying our
medium term plan, Vision 2020 in
2018, the focus in 2019 was more
on revenue generation and cost
efficiency. Our results for the year
confirm that the strategy review
and reprioritization of initiatives
was both timely and successful.

REPEAT
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CHAIRMAN’S REPORT

It is both an honor and a great privilege to present to you the NMB Bank PLC (the Bank or NMB) Annual Report and Financial
Statements for the year ended December 2019.

The achievements outlined in this report would not have been possible without the commitment and dedication of our staff.
On behalf of the Board of Directors I thank the teams at the head office and branches across the country for their unwavering
dedication and contributions in making 2019 a great year for the Bank.

I would also like to thank the Banking Regulator for the constructive manner in which they engage with banks and financial
institutions, and for their oversight of the sector. Last but not least, I would like to extend special thanks to the Government of the
United Republic of Tanzania for their steadfast support and cooperation.

According to the World Bank report, the economic recovery in Sub-Saharan Africa lost momentum, with growth in 2019 estimated
to have moderated to 2.4%, lower than the initially forecasted 2.9%.

Tanzania’s economy slowed down in the year but remained amongst the best performing in the region with a real GDP growth
of 6.8% compared to 7% in 2018. In the year, headline inflation declined to an average of 3.4% from 3.5% in 2018, well below
the medium-term target of 5%. There was a significant improvement in liquidity during the year with the spread between the
one year deposit rate and the one year lending rate narrowing down to 7.59% from 10.12% in 2018. This was partly attributed
to accommodative monetary policy and on-going reforms by the Government to improve business environment. Consequently,
growth in credit to the private sector reached 11.1% in December 2019 compared to 4.9% in December 2018.

Following the review of the assumptions underlying our medium term plan, Vision 2020 in 2018, the focus in 2019 was more on
revenue generation and cost efficiency. Our results for the year confirm that the strategy review and reprioritization of initiatives
was both timely and successful. The ground work for the next medium and long term plan commenced in 2019 and is expected
er share
to be completed in time for 2021 planning and budgeting.
D 2018

2018
TZS 142
Billion
I am pleased with good financial results that the Bank
has delivered. Profit Before Tax (PBT) grew by 49% to
TZS 211 billion from TZS 142 billion in 2018. Our share

142
TZS

2,340
PROFIT BEFORE price averaged at TZS 2,340 in the year and the bank
TZS TAX (PBT)
remains amongst the best capitalized in the market.
Billion Share Price Average

PROFIT BEFORE
TAX (PBT)

2019

211
TZS

2,340 2019 TZS

211
Billion
SHARE PRICCE
AVERAGE TZS PROFIT BEFORE
TAX (PBT)

Billion
PROFIT BEFORE
TAX (PBT)
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The search for the bank’s Managing Director continued in the year and is still ongoing. After holding fort for the best part of the
reporting year as the Interim Managing Director, Mr. Albert Jonkergouw left Tanzania for the Netherlands in August 2019. Since
then, Mrs. Ruth Zaipuna the Bank’s Chief Financial Officer took over as the Acting Managing Director and will continue to do so
until a substantive Managing Director is on board.

The NMB Board upholds high standards of management and corporate governance which we believe are key to delivering
sustainable shareholder value and the Bank’s long term success.

In 2019, the Board continued to provide leadership through oversight of the Bank’s strategy execution, internal controls, risk
management and people management. We worked closely with relevant stakeholders to ensure that our internal governance
standards meet the expectations of the Bank of Tanzania (BOT) and the Capital Markets & Securities Authority (CMSA).

During the year, the Board underwent a number of changes with the appointment of two new directors, the re-appointment of
one director and retirement of one director. We remain committed to ensuring that shareholders’ interests are represented by
experienced and qualified directors. During the year, we welcomed Mr. Rik Reisinger and Mr. George Mandepo onto the Board.
Both directors are well accomplished in their fields: Mr. Reisinger is a renowned economist and banker and Mr. Mandepo is a
seasoned lawyer and arbitrator.

Mr. Leonard Mususa was re-appointed for another term of three years. After serving on the board for eleven years, Mr. Jos Van
Lange retired from the Board in the year. I thank Director Jos Van Lange for his devotion and selfless service during his tenure and
wish the incoming directors success and God’s guidance in their execution of duty.

After eight years as the Chairman of the Board, Professor Semboja retired in February 2020. On behalf of the Board of Directors,
I thank him for his dedication and commitment to the Bank’s prosperity; significant milestones were under his leadership. I wish
him the very best in his future endeavors.

The Board has recommended maintenance of the

dividend payout ratio of a third of Profit After Tax that
2019 2018

96 66
has been used in previous periods; for the year ended
31 December 2019 a dividend of TZS 96 per share will be
paid, equivalent to TZS 48 billion. A dividend of TZS 66 TZS per share

TZS per share to TZS 33 billion.

per share was paid for 2018, equivalent DIVIDEND 2018
DIVIDEND
48 Billion
33 Billion
TZS 142
Billion
2019
PROFIT BEFORE
TAX (PBT)

TZS
TZS 96
DIVIDEND
per share

765 7 2Bi
TZS 48 Billion

Billion Growth 2,340 TZS

LOANS & CUSTOMER SHARE PRICCE PROF

ADVANCES DEPOSITS AVERAGE TA
REPEAT TZS
TZS
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Beyond formulating the next medium term plan, the Board will continue to closely support the execution of initiatives set out
for the year 2020 to grow and diversify revenue lines as well as continue to promote cost efficiency. In the midst of the Corona
Virus Disease (Covid-19) outbreak, the Bank is stable and we will continue to build strong, value adding relationships with our
employees, customers, stakeholders and the communities in which we operate.

I would like to express my profound appreciation to our shareholders, Government, customers, and partners for their longstanding
support to the Bank. I also thank my fellow Directors for their insights and counsel as well as their commitment to their roles on
the Board and to the affairs of the Bank. It is a true honor to lead such a team.

Margaret Ikongo
Interim Board Chairman
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Ruth Zaipuna
Ag. Managing Director

The achievements during the year

demonstrate further the Bank’s
resilience in outperforming the
market amidst a competitive
business environment.

REPEAT
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MANAGING DIRECTOR’S REPORT

In 2019 NMB Bank Plc maintained its leading position in the banking industry with a great financial performance in comparison
to the previous year. The achievements during the year demonstrate further the Bank’s resilience in outperforming the market
amidst a competitive business environment.

Industry Developments
The Bank of Tanzania (“BOT”) continued to implement a sound monetary policy regime throughout the year, resulting in adequate
levels of liquidity in the financial sector. In 2019, the Central Bank reviewed downward the statutory minimum reserve (SMR)
rate on non-central government deposits and borrowings held by banks from 8% to 7%. Moreover, the BOT improved the SMR
averaging framework to allow banks to utilize up to 20% of their required SMR during the 14-day maintenance period up from
10% that had been previously operational. These revisions eased liquidity in the market to support credit extension to the private
sector by banks which grew by 11.1% in December 2019 from 4.9% in December 2018. The overnight market was also fairly liquid
throughout the year with interbank rates averaging at 4.8% in 2019 compared to 1.9% in 2018.

In 2019, the banking sector remained sound, stable and well capitalized. The sector’s average NPL ratio decreased from 10.7% in
December 2018 to 9.8% in December 2019. The drop is a result of the BOT’s continuous effort to ensure that NPLs remain on a
decreasing trend towards 5%.

In addition to the improved overall credit performance, the banking sector remained adequately capitalized with average core
Capital Adequacy Ratio (CAR) of 17% as at the end December 2019, well above the 12.5% regulatory requirement, while the
Liquid Asset Ratio (LAR) during the same period was 32.4%, higher than the 20% regulatory minimum.

To safeguard the industry, the Central Bank continued to strengthen risk management practices in the sector by implementing
various policies and regulatory reforms. A number of new regulations were issued in the year including The Bank of Tanzania
Financial Consumer Protection Regulations 2019 which requires financial service providers to ensure effective implementation
of consumer protection.

Bank Performance Overview

Despite the changing market dynamics and growing competition, NMB delivered a strong set of results in the year. The Bank’s
balance sheet grew by 15% year on year to TZS 6, 556 billion in 2019. The significant growth in assets was funded by a 14% year
on year increase in customer deposits to TZS 4,992 billion in 2019 and a 14% annual growth in other liabilities. During the year,
the Bank raised TZS 83.3 billion from the public through the issuance of a retail bond. This third tranche issuance is part of the
Bank’s Medium-Term Note (MTN) program and in line with the Bank’s strategy to diversify its funding sources.

Year on year Loans and Advances exhibited a healthy growth of 11% to TZS 3,596
billion from TZS 3,252 billion in 2018.
TZS
TZS
This resulted into a 5% growth of Net Interest
Income from TZS 492 billion in 2018 to TZS 518 billion in 2019 with total operating
income growing by 49% from TZS 142 billion to TZS 211 billion. More context on
the Bank’s financial performance is provided in the Chief Financial Officer’s review
on the financial statements.
Billion Growth
TOTAL DIVIDEND TOTAL OPERATING
PAYMENT INCOME
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Strategy Implementation
Our business performance and operations continue to be guided by goals outlined in our five year strategic plan, Vision 2020. The
plan has three key focus areas namely deposit mobilization which entails acquiring sticky and affordable deposits, operational
efficiency where we seek to improve the experience of both our internal and external customers whilst optimizing costs and
revenue generation which aims to reduce our reliance on interest income by diversifying our revenue streams.

Deposit Mobilization
In addition to the aforementioned Retail Bond, a number of deposit campaigns were held during the year. The Bank was also
able to provide banking solutions to strategic crop farmers of cashew nuts, cotton, tobacco and coffee which also resulted in an
increase of affordable deposits.

Operational Efficiency
Customer Service Transformation across the Bank commenced with process reviews, including centralizing support for branch
customer queries/ complaints which enabled faster resolution.

In an effort to improve operational efficiency, a number of tasks were redistributed and digital solutions rolled out.

Cost efficiency continued to be a key focus for the year. Significant savings were achieved on rent, associated facilities-related
services contracts, corporate security, CIT services and system licenses.

In an effort to further improve management’s relationship with staff, an employee engagement forum, SIKIKA, was established
during the year as a means to connect management to staff, champion employee engagement, receive new business ideas from
staff and find best ways to resolve staff and business matters proactively.

Revenue Generation
A number of new products were launched during the year. These include the Fanikiwa loan for Micro and Small Enterprises
(MSEs) and Afya Loans for Health facilities in the country. The Bank also further reinforced its position as the innovative market
leader by partnering with MasterCard to launch a cashless payment solution for bodaboda riders.

Additionally, the Bank revamped its mobile application NMB Klik to NMB MKONONI to enhance the customers’ experience and
transactional income. The trade financing proposition was expanded by establishing trading limits with banks in Turkey and
China.

As Vision 2020 comes to an end, the process to curate the next Medium Term Plan that will continue to position NMB as the
industry leader is already underway.

Outlook for 2020

Good progress was achieved in 2019. The Bank’s aspiration for 2020 are to maintain its position as the most profitable Bank in
Tanzania, maintain a high quality loan book and offer the best in services and products. With the recent outbreak of the Covid-19
virus, we have had to conduct a number of assessments to determine the impact the pandemic will have on our customers,
operations and our 2020 aspirations as a whole. We are optimistic that the Bank will withstand the pressures that will arise.

Now more than ever, we will continue to play our part in facilitating and contributing to Tanzania’s growth by supporting our staff,
customers and the communities in which we operate. The Bank commits to continue supporting the Government of Tanzania in
the implementation of its strategic projects.

REPEAT
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Word of Thanks
I take this opportunity to thank our entire staff team for their continued resilience, hard work and commitment throughout the
year towards the commendable performance the Bank has achieved.

I would also like to thank our customers and business partners for their unwavering support in the year. We are optimistic that
NMB will reach new heights in 2020.

Lastly, I would like to express my sincere gratitude to the Bank’s Board of Directors under the Chairmanship of Professor Joseph
Semboja for their support, guidance and oversight. As we bid the Professor farewell, I would like on behalf of NMB’s management
and staff, to thank him for his leadership over the years in transforming the bank to the industry leader it is today.

Ruth Zaipuna
Ag. Managing Director
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Benedicto M. Baragomwa, CPA,CISA

Ag. Chief Financial Officer

We have had strong balance sheet

growth, improved Non Funded
Income performance especially
in the second half of the year
2019, demonstrated efficiency in
managing costs, and made positive
strides on impairment management
contributing to improvement overall
strong performance.

REPEAT
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CHIEF FINANCIAL OFFICER’S REVIEW

Performance summary

The Bank’s Profit before Tax increased by 49% to TZS 211 billion in 2019 from TZS 142 billion in 2018. This growth in the Bank’s
profitability in 2019 is a result of increase in both net interest income and non-funded income, including Foreign exchange
and other income. Impairment was controlled with 27% reduction YoY from TZS 137 billion in 2018 to TZS 100.4 billion in 2019.
Furthermore, costs were well managed to deliver a flat YoY cost performance. However, it remains pertinent that management
continues to work on generating more fees & commission income, diversification of services offered, and optimization of
alternative channels for improved service delivery and sustained growth in profitability.

Total operating income before impairment charges is up by 5% YoY to TZS 722 billion from TZS 688 billion recorded in 2018. The
growth is a result of increase in net interest income by 5% benefiting from good growth in the Retail loans and advances. The
growth was however partly offset by an increase in interest expense by 24% YoY mainly driven by an increase in fixed deposits.
In addition, total operating income increased due to growth in net fees and commissions, foreign exchange and other income
as follows:
• Net fees and commission income increased by 2% mainly attributed to loan related fees, following the good growth
in Retail loans and advances and growth in other fees and commission from ATM Service, MNO collaboration and
Agency banking due to increased use.

• Foreign exchange increased by 17% YoY following a countrywide closure of Bureau de change by the Government
in early 2019 which led to an increase in foreign exchange transaction volume for banks.

Bad debt recoveries increased significantly from TZS 6.7 billion in 2018 to TZS 8.6 billion in 2019 or 28%. This was attributed to
a more proactive recovery strategy that allowed long outstanding debts to be negotiated with a view of allowing reasonable
discount on written off debts.

Credit Impairment charge of TZS 100.4 billion was 27% down year on year due to better management of Loans portfolio
particularly Corporate loans.

Operating expenses remained relatively flat year-on-year driven by cost saving initiatives in new technological investment and
office expenses. Management will continue with the cost efficiency initiatives to further reduce costs and enable the Bank to
continue investing in technology, staff and products in order to continue delivering improvements in productivity and customer
experience.

The Bank is well capitalized with a Core Capital Ratio of 17% and had good levels of liquidity as at 31 December 2019. Customer
loans and advances grew 11% in the year funded by growth of customer deposits by 14% and Issuance of retail bond worth TZS
83 billion.

Due to improved performance and strong capital position, the Board has recommended payment of a dividend of TZS 96 per
share, a 45% increase compared to TZS 66 per share paid in the previous year.
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Performance

2019 2018 Change Better/

TZS’ Millions TZS’ Millions TZS’ Millions (Worse)%

Net interest income 517,641 492,023 25,618 5

Net fees and commission income 169,153 166,282 2,871 2
Foreign exchange and other income 35,256 29,594 5,662 19
Operating income before impairment charge 722,050 687,899 34,151 5
Impairment charge (100,410) (137,305) 36,895 (27)
Operating income after Impairment 621,640 550,594 71,046 13
Operating expenses (410,552) (408,953) (1,599) -
Profit before tax 211,088 141,641 69,447 49
Income tax expense 68,921 (43,978) (24,943) 57
Profit for the year 142,167 97,663 44,504 46

Return on equity (%) 15 11

Return on assets (%) 2 2
Cost to income ratio (%) 60 59
Non-interest income to gross income (%) 28 28
Earnings per share (TZS) 284 195
Dividend per share (TZS) 96 66
Tier I Capital (%) 17 17
Total Capital (%) 19 19

Summary

2019 2018 Change Better/

TZS’ Millions TZS’ Millions TZS’ Millions (Worse)%

Retail 545,918 505,983 39,271 8

Wholesale 63,743 67,508 (2,212) (3)
Treasury 112,388 114,408 (2,908) (3)
Total 722,049 687,899 34,151 5

Operating Income by Segments

Retail Banking operating income was up by 8% year on year driven by increase in net interest income from growth of loans and
advances and increase in non-funded income. Retail loans and advances increased by TZS 414 billion or 16% year on year, with
significant increase being from SWL/Personal loans which increased by TZS 373 billion or 13%.

REPEAT
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Wholesale banking net income decreased by 3% year on year. The focus was on high quality loans and advances, which resulted
to slow growth in loans. This was compensated by a reduction in impairment charge by TZS 22billion. Interest expense increased
by TZS 3.3billion due to increase of customer’s deposits particularly Call and FDR accounts.

Treasury total net income dropped by 3% year on year due to increase in interest expense by TZS 3.7 billion, largely attributed to
full impact of interest on subordinated debt in 2019 against 9 months in 2018. Income from Foreign exchange dealings increased
by 17% while Bond Trading income increased by 6% year on year, offsetting the lower net interest income.

Loan Impairment Charge

2019 2018 Change Better/

TZS’ Millions TZS’ Millions TZS’ Millions (Worse)%

Wholesale Banking 35,530 57,447 (21,917) (35)

Retail Banking 63,320 77,809 (14,489) 2
- Consumer Banking 44,919 40,157 4,762 82
- Business Banking 18,401 37,652 (19,251) (51)
Off Balance Sheet items 1,560 2,049 (489) 13
Total Impairment Charge 100,410 137,305 (36,895) -

Loan impairment charge for the year of TZS 100.4 billion was down by 27% year on year. On segment basis, wholesale and retail
loan impairments were lower year on year. Despite the decrease in loan impairment, our NPL ratio increased slightly to 6.7%
compared to 6% recorded in preceding year. The Bank’s target is to maintain NPL ratio below 5%, BOT’s recommended threshold.

The Bank remains alert to the various challenges affecting businesses and will continue to be prudent in granting new loans
while deploying rigorous recovery measures in respect of the impaired loans.

Operating Expenses

Operating expenses summary

2019 2018 Change Better/

TZS’ Millions TZS’ Millions TZS’ Millions (Worse)%

Employee Benefit Expense 182,579 166,149 16,430 10

Other Operating Expenses 154,365 188,871 (34,506) (18)
Depreciation and amortization 73,608 53,933 19,675 36
Total Operating eExpenses 410,552 408,953 1,599 0

Staff numbers (full number) 3,450 3,450 -

Cost to Income Ratio (%) 60 59

Operating expenses remained flat year on year with small increase of TZS 2 billion YoY, of while cost to income ratio increased by
1%. Staff costs continue to be a significant part of overall costs, recording staff cost to total cost ratio of 44% in 2019 compared to
41% in 2018, the ratio is up by 3% YoY.
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Balance Sheet and Capital

Balance Sheet Summary

2019 2018 Change Better/

TZS’ Millions TZS’ Millions TZS’ Millions (Worse)%

Cash and Balances with Bank of Tanzania 1,341,140 1,070,422 270,718 25

Placements and balances with other banks 264,326 174,391 86,935 52
Investments in Government Securities 761,554 740,185 21,369 3
Loans and advances to customers 3,595,688 3,251,794 343,894 11
Other Assets 593,307 444,192 149,115 34
Total Assets 6,556,015 5,680,984 875,031 15

Balances due to other banks 33,446 20,770 12,676 61

Deposits from customers 4,922,278 4,327,607 594,671 14
Other Liabilities 627,902 469,553 158,349 34
Total Liabilities 5,583,626 4,817,930 765,696 16
Total Equity 972,389 863,054 109,335 13
Total Liabilities and Equity 6,556,015 5,680,984 875,031 15

Gross Loans and Advances to Deposits (%) 72 78

Core Capital Ratio (%) 17 17
Total Capital Ratio (%) 19 19
Risk Weighted Assets 4,988,790 4,321,532 15

Net loans and advances to customers were up 11% year-on-year to TZS 3,595 billion with strong and broad-based growth across
a range of products. Customer deposits of TZS 4,922 billion were up by 14% year-on-year as the Bank continued to focus on
improving the quality and mix of its liabilities. The Bank’s loans and advances to customer deposits ratio improved to 72% in 2019
compared to 78% recorded in 2019.

Capital Ratios

The Bank is well capitalized with a Core Capital Ratio of 17%, well above the Regulatory requirement of 12.5% while Total Capital
ratio stands at 19%.

REPEAT
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Summary

Good progress is being made in transforming the Bank. We have had strong balance sheet growth, improved Non Funded
Income performance especially in the second half of the year 2019, demonstrated efficiency in managing costs, and made
positive strides on impairment management contributing to improvement overall strong performance.

We have experienced the outbreak of the COVID 19 pandemic which is expected to cause disruptions to many businesses.
However, our initial analysis provides comfort that the bank is adequately resourced to withstand the anticipated shocks.
Furthermore, there are no immediate material shocks to our business that require adjustments or disclosures in the financial
statements for the year ended 31 December 2019.

It is encouraging to see the improvement in operating income and the increased balance sheet momentum but there is work to
be done to further improve performance. The ongoing work on improving the quality of the loan portfolio, focus on recoveries,
business diversification, and cost efficiency will continue. We remain true and committed to our 2020 mantra i.e NMB 2020,
REACHING NEW HEIGHTS.

Benedicto M. Baragomwa, CPA, CISA

Ag. Chief Financial Officer
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BUSINESS AND OPERATIONAL REVIEW

1. Retail Banking
The Retail Banking Department consists of Consumer Banking (individuals and groups, including
civil servants), Business Banking (micro, small & medium sized enterprises), Retail Agri-Business,
Bancassurance, Card business, Network, Retail Products and Channels. The department offers a broad
range of financial services and products including Transactional accounts, Savings accounts, Mortgage,
Vehicle Financing, Unsecured and Secured Lending as well Payments Solutions to Personal, Business
Banking and Agri-Business Customers.

In 2019, Retail Banking’s loan portfolio grew by 16%, whilst interest income grew by 10%. There was a concerted effort in the year
to grow customer deposits which grew by 18% to TZS 3.4 trillion. The growth can be attributed to our successful deposit focused
initiatives as well as the Retail bond issuance.

Consumer lending increased by 19% to TZS 2.35 trillion from TZS 1.97 trillion in 2018. The micro, small and medium enterprises
(MSME) portfolio grew by 1% from the previous year to TZS 586 billion. Portfolio quality continued to be a prime focus area for
Business Banking, with the team carrying out different initiatives aimed at improving portfolio quality. Retail Agri-Business also
had a stellar year; the Agri-Business loan book increased by TZS 17 billion from the previous year.

In line with our strategic agenda of diversifying the asset portfolio which is largely composed of Salaried Worked Loans (SWL), a
number of new products were rolled out in the year.

These include:

• Wakala loans (Floti-Fasta) - This is an unsecured facility for NMB agents

• Salary Advance - a one-month advance cash facility to our pre- approved customers
• Pensioner Loan and Pre-Pensioners Loans (a lending solution to pre-retirees) and sales
• Construction mortgage loan which allows our customers to borrow for construction of their homes secured by land
that has a title deed.

Our digitization strategy is based on customer centricity, evidenced by our newly re-launched mobile App
NMB
Mkononi
from Klik to NMB Mkononi which gives customers greater control and freedom in managing their bank
accounts from their mobile phones.

In 2019, Our digital and self-services alternative channels

such as Internet Banking (NMB Direct), Mobile Banking
(NMB Mkononi), Agency Network and Point of sale devices
continued to see strong growth in transaction volumes and NMB Direct
NMB Wakala NMB Mkononi
(Internet Banking)
values.

REPEAT
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In-line with ensuring that NMB is always ‘Close to You’, we continued expanding our distribution network by increasing the
number of branches from 223 to 224. This was in addition to the completion of the refurbishment of existing branches. We also
increased our ATM footprint from 776 ATMs in 2018 to 794 ATM in 2019. Merchant acquisition from 161 on 2018 to 487 in 2019
which is 102% growth.

In 2020, we will continue to place emphasis on usage of our digital channels and focus on deposit
mobilization initiatives aimed at driving acquisition of low cost and sticky deposits. We will also
launch new and innovative products and services aimed at aiding customers in meeting their
personal and business goals.
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2. Wholesale Banking

The Wholesale Banking (WB) unit is dedicated to ensuring our clients have access to a wide range of high
value services and products.

These services range from working capital financing, trade and cash management solutions, supply
chain financing, structured financing in the form of syndications or club deals, as well as collection and
payment services.

Wholesale Banking serves top clients that cut across various industries through our unparalleled network of more than 220+
branches, strategically deployed 790+ ATMs, and 5980+ Agents.

Some of these industries include:

Manufacturing Commodities Telecommunications
Oil and Gas Metals and Mining Tourism
Energy and Materials Fast Moving Consumer Goods Healthcare

In 2019, Wholesale Banking continued to strengthen its support to key government projects to the tune of more than TZS 1.2
Trillion (USD 450 million).

The department also had a hand in providing solutions

to the Agriculture sector by financing cotton, tobacco
and cashew buyers, supporting importation of cashew
Standard Gauge
jute bags and providing training to a number of Railway Construction

Agricultural Marketing Cooperative Societies (AMCOs)

for various commodities through the NMB Foundation Supported
Water Pipeline
Construction
for Agricultural Development. implementation
of REA projects and
& Rehabilitation
of Water treatment
supply of spare parts plants
for TANESCO
During the year under review, Trade Finance played
a pivotal role in facilitating transactions owing to its
increased visibility in the market following the awareness
campaigns in 2017 and 2018. To further support our 
clients, strategic trade limits were established with Trillion Financed procurement
Structured financing
of terminal equipment
financial institutions in Turkey, China and other Global for TARURA contractors
for TPA
Banks . This resulted in even higher utilization of related
products such as Import and Export Letters of Credit,
Financed procurement
Post Import Loans, Bank Guarantees, Documentary of pharmaceuticals
and medical equipment
Collections and Pre-Shipment Financing.

REPEAT
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Our business model takes advantage of innovative digital channels to deliver cutting edge products and services to customers. In
2019, the WB team made strides by executing key milestone integrations with a number of Government entities, providing much
needed electronic payment solutions. These integrations supported collections for Government hospitals, connected over 160
local Government authorities, provided 24 hours collections for TRA at border posts and for ports and immigration departments.
The unit also provided payment solutions to Government institutions and enabled host-to-host capabilities with TANAPA & NCAA
strengthening collections from Tourism. The internet banking platform NMB Direct was updated and relaunched in the year.

In the year, the loans and advances book shrunk by 1% from TZS
TZS
795 billion in 2018 to TZS 785 billion. Through closer engagements TZS

785 7
with our clients, a 7% growth in customer deposits was achieved,
closing the year with TZS 1,444 billion.
Billion Growth
LOANS & CUSTOMER
ADVANCES DEPOSITS

TZS

37.8
Billion
28
Growth
Year-on-Year, Non-Funded Income grew 15% reaching TZS
37.8 billion at the end of 2019 compared to TZS 32.9 billion at
NON-FUNDED TRADE BUSINESS
the end of 2018. The trade business book closed at TZS 667
INCOME
billion, up 28% from 2018.

The department managed to minimize risk through efficient portfolio management and further responded to deteriorating
asset quality environment that was witnessed in 2018 through focused engagements with clients to better understand their
challenges and offer appropriate solutions.

In 2020, the WB aims to continue strengthening its foot print with high value large customers by
further developing capabilities in project financing to deliver optimal structured solutions, trade
finance to cater to the entire value chain of our customers and leveraging technology to simplify
collections and payments for our customers while automating our internal processes for even
faster delivery of our services.
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3. Treasury
For the year 2019, the Treasury division recorded TZS 111.4 billion in revenues whereby, Foreign
Exchange (FX) income stood at TZS 24.5 Billion, 17% higher than the previous year. Main driver for the
increase was growth in retail foreign exchange transactions for banks during the first quarter of the year
owing to closure of bureaus. Other contributors to this increase was income growth in the Telecom and
Manufacturing sectors as well as the Energy, Construction & Mining sectors which experienced. After
initially experiencing significant volatility during the first quarter, the local currency was for most of the
remaining part of the year trading in a tight 10-shilling range around the USD TZS 2300 psychological
level. Major contributors for this stability was a balance between demand for forex to finance imports of capital goods with
healthy inflows from exports of cash crops and tourist activities in addition to Bank of Tanzania (BOT) acting as a net buyer of
foreign exchange as part of its operational support the market.

USD/TZS EXCHANGE RATE GRAPH FROM Q1 2019- Q4 2019

Line, TZS=, 1/8/2020, 2,300.00, +1.00, (+0.04%)

Price
/USD

2,350
2,340

2,330
2,320

2,310

2,300

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Q4 18 Q1 2019 Q2 2019 Q3 2019 Q4 2019

Source: Bank of Tanzania and Reuters

Asset Liability Management (ALM) income for the year declined by 6% year-on-year to TZS 87.6 Billion. The decline was a result
of a shift in investment mix from high yielding long term to low yielding short term government securities investments during
the first three quarters of the year. This was done for liquidity management purposes to allow growth in loans especially the SWL
that witnessed favourable changes in its parameters resulting into high demand. Coupled with this, is higher interest expense
incurred from Tier 2 capital from January 2019.

Overall, the overnight market was fairly liquid across the year with credit extension to the public by banks continuing to show a
positive year-on-year growth in 2019 standing at 8.9% in November 2019 in comparison to 5% year-on-year growth recorded in
November 2018 (BOT Monthly Economic Report, December 2019). In addition, government securities auctions saw a total over-
subscription for both T-bills and T-bonds throughout the year standing at 50.5% and 31%, respectively as at end 31st December
2019.

This has then led to a downward pressure on interest rates causing the rates to either remain flat or slightly decrease. However,
overnight lending rates increased from 3.09% levels in December 2018 to 3.88% levels in December 2019. This is ascribed to the
higher demand in overnight interbank borrowings by banks in 2019 as compared to 2018, having experienced a growth of 24%
year-on-year.

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TZS INTEREST RATES: DECEMBER 2018 & 2019

20.00

18.00

16.00

14.00

12.00

10.00

8.00

6.00
2018
4.00
2019
2.00

0.00

0/N 35D 91D 182D 364D 2Y ........... 5Y 7Y 10Y 15y 20y

Source: Bank of Tanzania and Reuters

Liquidity

The liquidity ratio closed the year strong with a 38% LAR. This is well above the minimum regulatory requirement of 20% providing
the bank with a solid base to meet customers’ needs in 2020 and beyond.

In achieving the Bank’s Vision 2020 of diversifying its revenue streams, the bank successfully
completed setting up the Securities Services and Transaction Advisory units during the year. The
unit has since on-boarded customers as well as worked with the Capital Markets and Securities
Authority (CMSA) to raise public awareness on its services. Moreover, the Transaction Advisory
unit together with the retail team successfully raised TZS 83.4 billion during the third tranche
issuance of the NMB Bond in June 2019; the bond achieved a subscription level of 333%. The bank
has also been an active player in the secondary market at the Dar es Salaam Stock Exchange
through the Bond Trading desk.
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4. Technology & Digital Transformation

Innovation & Development

Our customers are the inspiration behind everything that we do. We use Human Centred Design to
recognize that every individual and every business has different needs and aspirations. This allows us
to discover and empathize with our customers by exploring, conceptualizing, researching and clearly
understanding their needs. Our innovative products and services across the spectrum leverage technology
to serve these different needs. At the core of this endeavour to constantly innovate and transform is our
driving philosophy to be ready not only to embrace but also to shape the future.

Bancassurance platform
A fully fledged platform which facilitates banc-assurance services including: insurance products and insurance benefits.
The platform will serve both NMB & non-NMB customers. Modules implemented include: customer onboarding, claims,
underwritings, commission collections & payment

Host to Host
Is an automated solution for secure electronic data transfer between banks and their corporate clients. This solution
secures the transactions that the clients do and eliminates manual interventions. In 2019, TZS 551 billion was channeled
via host to host.

IFRS 9 & CREDIT platform

The platform allows automation of credit related processes and calculation of NPL/PAR which results into improvement in
provisions, loan history recording and impairment accuracy. Modules developed include: Collateral management,
Customer unique Identifier (CIF) merging, and NPL/PAR calculator.

Integrations with banking payment system

We have continued to be on the forefront to ensure we offer integration solutions to a number of our clients for them to
enable their customers do payments in our platforms.

Fanikiwa Loan
To extend our product offering we developed a solution for our micro & small entrepreneurs called Fanikiwa Loan, which
allows customers to access loans ranging from TZS 500,000 up to TZS 5 million.

REPEAT
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Technology Services, Channels & Applications

To support our digital strategy and enhance our customers banking experience, NMB embarked on the implementation of
various digital banking technologies to provide 24/7 banking services.

One of the major digital initiatives in the year was launching a new Internet Banking platform (NMB Direct) to replace the old
internet banking application. NMB Direct offers secure and convenient features for both retail and corporate customers which
allows them to perform exclusive banking activities that are accessible within our banking halls, such as Trade finance, Global
Banking, Standing Instructions, Online Bills payments and various fund transfer services to Mobile Network Operators (MNOs) ,
Banks, and other international financial institutions.

To further support the Government payments and revenue collection, NMB introduced flexible payments of government’s bills
in all the self-service channels, and recently the bank enabled bills payment on Point of Sales (POS), where physical cards are used
for paying bills against issued control numbers. This aims to extend a cashless and seamless service experience at all our touch
points.

Technology Infrastructure & Cybersecurity

In embracing digital transformation, the bank continued to enhance its state of the art technology infrastructure including a tier
3 Data Centre responsible for delivering 99.99% uptime services to customers as well as supporting the bank in delivering new
digital products and services. This is in line with a properly designed, well-tested and implemented Disaster Recovery strategy
of the bank through a secondary Data Centre.

The bank optimized operational efficiency in 2019 using Unified Communication System (UCS) in all branches and zonal offices
enabling communication among staff and customers. Technology has also been used to improve seamless service provision to
customers using self-service calls in the contact centre.

Operating in a cost efficient manner was also a major focus in 2019, and the bank managed to operate efficiently and realized
significant cost savings from technology infrastructure.

Following the recent global cyber threats, Cybersecurity has been an important agenda to the bank. In 2019, the cybersecurity
processes and technologies implemented by the bank were able to detect and prevent all the attempted cyber-attacks, ensuring
customers’ trust whilst complying with International Standards.

The annual independent reviews conducted by both the regulator and external auditor and particularly the technical penetration
testing conducted by PWC provides reasonable assurance in the cybersecurity state of the bank.

The bank optimized operational efficiency

in 2019 using Unified Communication
System (UCS) in all branches and zonal
offices enabling communication among
staff and customers.

UCS
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5. Credit

After a number of challenges in year 2016 through 2018 which included the impact of adopting new
International Financial Reporting Standard number 9 (IFRS 9), the bank started experiencing relief in
terms of loan book quality especially on impairment in 2019.

Credit Department in collaboration with other stakeholders implemented a number of initiatives geared
towards improving the quality of our loan book. Implementation of IFRS 9 system, Collateral Management
Tool, PAR/NPL tool and intensive collateral remediation exercise have been a game changer having significantly reduced our
impairment number year on year.

Although the NPL ratio increased from 5.9% in 2018 to 6.7% in 2019, it remains well below the industry average of 10.7% but
above the recommended limit of 5%. The increase in NPL ratio is partly due to legacy issues from as far as 2017, general market
conditions and purposeful slow pace of portfolio growth (especially Corporate). Our objective is to improve the NPL ratio to below
the 5% benchmark.

The task ahead is to capitalize on the good performance, with continued improvement in credit structuring, evaluation and
monitoring, supported by a robust automated end to end credit processing system and customer risk rating system.

The Special Assets Management (SAM) department has been restructured with a ‘fit for purpose’ structure and headcount during
the year to effectively manage and provide focused attention to clients under financial difficulties. As a result, improvements
have been noted in collections from bad and doubtful debts; collectively surpassing the previous year’s performance by 21%.
The new structure was completed towards the end of the third quarter and all strategies are set to take year 2020 performance
to new heights.

Our Loan Centre department remained stable and focused on its core roles of centralized mass-market loans,
monitoring and control as well as collections thereof.

The centre manages consumer loans which represent

62% of the total loan book.

SWL loan portfolio in particular has reported a much better quality (PAR and NPL) in the year under review
compared to 2018.

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6. Human Resources

Employee Engagement Forums (SIKIKA Forums) were launched during the year to fill the gap left by the
absence of a trade union. These forums have provided a consultation platform for both, unionized and
non-unionized staff. They also facilitate two-way communication between employees and management
where both people and business related matters can be discussed. Numerous people and business issues
have been resolved through the forums hence fostering a good environment for staff and the business
to flourish.

In August 2019, the Bank approved the operationalization of new Human Resources Policies following comprehensive
management review of the previous Human Resources Policies. Substantial changes were made which further entrenched a
performance driven culture by re-defining key aspects that drive business performance and increase staff and line manager
accountability that in turn promote overall business growth and profitability.

The flexible working hour’s guideline was approved and implemented during the year. The guideline was developed to provide
flexible working arrangements that suits the changing business demands whilst addressing flexibility for enhancement of the
Bank’s business growth and productivity. It will also allow employees to achieve a better work-life balance which results to
improved productivity.

Through capacity building of internal (local) staff and recruiting new staff with required competence, we were able to reduce
the number of consultants in the Bank. A total of five consultant positions were dissolved during the year which resulted into a
significant cost saving.

In line with the Bank’s strategy of having a transformed culture that fosters innovation, embraces technology and creating
conducive environment for staff development and growth, leadership training was rolled out to all Line Managers during the
year.

The following frameworks were put in place to ensure that the Bank’s employees are equipped with competencies, skills and
knowledge; and that talents and successors are nurtured in the right path to support individual goals and the Bank’s vision:

• Talent Management Framework – to facilitate and promote the achievement of the Bank’s objectives by identifying,
attracting, developing, optimizing and retaining talents across the Bank. This helps the Bank to save time and costs
involved in the hiring process.

• Succession Planning Framework - to foster and promote the continual development of employees and ensure that key
positions maintain measure of stability, thus enabling the Bank to achieve business objectives.

• Competency Management Framework (A Guide for the Branch Network) – to link individual employee performance
and the Bank’s goals. It helps to identify the required knowledge, skills and attributes that employees need in order to
perform their jobs effectively.

• Mentorship Framework – This is a valuable tool in the development of our people. It is useful whether an individual wants
to enhance a specific business skill or to improve a personal objective such as increasing self-confidence, improving
assertiveness etc. It helps the Bank to get the best from employees, which in turn boosts overall performance
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7. Risk and Compliance

2019 was a busy year for the Risk and Compliance functions respectively. A lot of key milestones were
achieved during the course of the year that heralded further progress for the bank on its journey to a higher
maturity level of its Enterprise Risk Management (ERM) framework. These milestones were financial as well
as non-financial in nature, with the common thread between them being the achievement of enhanced
regulatory compliance and the creation of more value for our various stakeholders i.e. customers, staff,
and shareholders.

The following are some of the key achievements that were recorded in 2019:
Driving Efficiency and Automation:

1. Completion of the IFRS 9 Automation project

2. Completion of the acquisition of a robust Operational Risk system for the bank
3. Completion of the new fraud monitoring system installation project which allows for more real-time interventions to detect
and interdict suspected fraudulent transactions

Providing Enhanced Risk Insights

1. Implementation of a Data Cleanup and Management Program

2. The doubling of our stress-testing frequency to a semi-annual instead of an annual basis to allow the Bank to take stock of its
capital and resiliency buffers on a more frequent basis
3. The 2019 revision of our Risk Appetite Statement – in close consultation with the Board, Management and Business Units –
saw improvements in our risk acceptance, tolerance and monitoring framework
4. The Risk and Compliance Function was also responsible for conducting a number of training clinics both at HQ and within
the branch network aimed at enhancing increasing risk awareness and reducing operational losses

Strengthening Governance and Improving our Focus on NMB Values

1. The review of the Bank’s governance framework to streamline and improve efficiencies, reduce overlap and redundancy
between the various governance committees in the bank, and push greater decision making authority to mid-level
management as and where appropriate. A new framework was ultimately proposed and approved by Management with
real gains to show as a result.
2. Another area of focus for 2019 was refreshing our NMB Code of Conduct for staff, including a refresher of the Insider Trading
policy and procedures. Ongoing efforts are underway to also improve the various Whistle-blowing Channels and processes
as part of our NMB Tokomeza Fraud initiative.
3. Another area of focus for 2019 was in the area of staff mandatory trainings and annual declarations. We continue to see an
impressive number of improvements in this sphere.

REPEAT
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Strengthening Regulatory Compliance

Regulatory Compliance is always high on the bank’s agenda and 2019 was no different and we managed to make additional strides
in this space with regards to how we adhere to various local and extraterritorial regulations and requirements. Achievements
include:

1. Implementation of new European Union General Data Protection Requirements (GDPR) –which is a project that NMB
implemented to ensure that the bank is compliant with data protection requirements for EU individuals and entities.
2. Recertification from our correspondent banking partners of fully compliant Volcker Rule status as per TOTUS exemption
requirements.
3. Timely implementation of over 15 new Regulatory changes that occurred within the year. Additional enhancements were
also made to our sanctions screening and KYC processes for all risk categories of customers and non-customers as well (walk-ins).
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8. Internal Audit

Positioning
The Internal Audit Function (IAF) has dual reporting lines; functionally it reports to the Board of Directors
and administratively to the Managing Director. The Function is led by the Chief Internal Auditor who is
supported by 34 auditors. The IAF team is well diversified in terms of professional qualifications, age and
gender. The IAF helps NMB Bank Plc to accomplish its objectives by independently bringing a systematic
and disciplined approach to evaluate and improve the effectiveness of risk management, internal controls,
and governance processes. The Function provides assurance and consulting activities to the Board and
Senior Management through execution of risk based audit work and continuous business monitoring.

Internal Audit Mission

The mission of NMB Internal Audit is to enhance and protect NMB Bank Plc value by providing risk-based and objective assurance,
advice, and insight.

Internal Audit Process and 2019 Performance

The NMB Internal Audit Function has adopted a Risk-Based Audit approach where the Annual Audit Plan is driven by a robust risk
assessment. The Annual Audit Plan takes into consideration the results of risk assessment, expectations of the key stakeholders,
NMB business strategy, emerging risks, and regulatory requirements. In addition, the plan remains flexible to ensure that
emerging risks are taken into consideration and incorporated into the assurance activities.

The IAF performed the audits in 2019 based on the Annual Audit Plan approved by the Board of Directors and in line with
the International Professional Practice Framework (Standards) issued by the Institute of Internal Auditors (IIA). The IAF reported
to the Board and the Bank of Tanzania (BOT) on the progress made on the execution of the audit plan and significant audit
issues identified on a quarterly basis. The Internal Audit Function continued to utilize technology and Data Analytics in the audit
process in order to remain relevant and provide more insight to the Board and Management. The Function continued to play a
commendable role in the provision of assurance and improvement of control environment within the bank. The IAF completed
ALL audits planned for the year 2019 and provided value add and insightful recommendations to Management and the Board.

Summary of Insights on Data Analytics

1. Customer Information (KYC) 4. Tax Computation

• KYC mandatory information • Enhanced tax computation

2. Income Computation 5. Fund transfer

TZS
• Recovery of uncollected revenue • Regulatory compliance
• Revenue collection

3. Reconciliation Process

• Process re-design and increased efficiency

• Identification of fraudulent transactions

REPEAT
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9. Marketing

The department focuses on providing marketing strategies which are in line with NMB’s business goals
by emphasizing on deposit mobilization, revenue generation while ensuring operational efficiency.
Focusing on key areas such as campaigns, ensuring customer engagements through various platforms
and providing the branch network with the appropriate tools to serve customers in various touch points.

Marketing enforces NMB’s brand image in the market by ensuring the bank is positioned as a Tanzanian
bank that is evolving and striving to meet customers’ needs through digital solutions. NMB’s brand
perception has changed from being perceived as a payment factory into a fully-fledged commercial bank
that provides quality financial services and enables customers to do banking conveniently through various NMB channels.

Part of the brand image focus is to increase visibility of the NMB brand in the market at all customer touch points such as branches,
Wakalas, Cash Collection Points across Tanzania including airports and borders. We continue to improve the branches’ look and
feel by conducting frequent checks and replacements as well as ensure the branding is up to standard.

In 2019, the department continued to provide various platforms for the business to sell products and services and connect
with customers. These key activities also include training seminars for SME/MSE customers, small miners and wakalas in various
regions. These engagements give us the opportunity to receive feedback from customers and learn of their challenges first hand
which enables us to provide better financial solutions and improved services.

Key campaigns launched

Floti Fasta (Wakala loan): A tailor-made credit facility designed to

Floti Fasta support NMB Wakala float needs. It enables agents to access float
instantly through their mobiles phones. Through this easy loan access,
NMB Wakalas across the country can now continue to seamlessly and
conveniently service their customers better.

LIPA
Government Revenue collection (Lipa Ulipo): Create awareness of
the various NMB channels where customers can make government
payments.

Customers are able make payments for Tax Immigration Agriculture Land
Produce Levies Payments

fast and easy through

LIPA NMB Wakala
NMB Direct
(Internet Banking) NMB Mkononi
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TZS 83.3 2,303

Billion Applications
Over & Beyond
NMB Bond: NMB Bond sought to raise at least TZS 25 Billion with a green shoe
option of up to TZS 15 Billion as approved by the Capital Markets Securities
Authority (CMSA). The campaign was promoted in various media channels
and supported by the network in the branches whereby 2,303 applications
were received worth TZS 83.3 Billion and oversubscribed by 333%.

KAMILIKA WITH
AFYA LOAN Afya Loan: In partnership with the Medical Credit Fund (MCF), the bank
launched a loan product for private health care facilities that allows them
to access working capital and capex facilities of up to TZS 5 Billion for the
purpose of providing improved health care services to the public efficiently
and effectively.

MastaBoda: In partnership with Mastercard, the payment solution was

introduced and launched to enable customers to make payments for
bodaboda transportation conveniently on their mobile phones, while
promoting a cashless society and providing financial inclusion for bodaboda
riders.

NMB Mkononi: The bank repositioned its mobile banking platform; making
it more relevant in the market by rebranding NMB Mobile and KLIK to NMB
Mkononi. The rebranding was launched with a digital campaign aimed to
educate customers on the mobile banking platform and drive usage on both
USSD and the App.

REPEAT
Corporate Social
Responsibility
With established strong alliances and
amplified sustainability to impact both
within and outside the bank, leading
to the realization of first-of-many
sustainability initiatives.
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CORPORATE SOCIAL RESPONSIBILITY

Overview
Our Corporate Social Responsibility (CSR) continues support and serve the diverse community in Tanzania. We have streamlined
and embedded CSR processes and action plans in our operations. In 2019, the CSR Committee approved a comprehensive CSR
standard guideline procedure and Terms of Reference to improve compliance, accountability and elevate our commitments and
ensure that we are in line with our strategic goals.

Over the years, our strategic approach to community matters has evolved as our business has grown. Today our approach is
sharpened through extensive assessment, active engagement with stakeholders and the community that we serve, a commitment
that ultimately enhances the value of our business.

The CSR Committee has expanded the quorum of the Committee members to ensure that we have more diversity and engagement
in CSR issues. The Committee continues to review, enhance our strategic plans and ensure alignment of NMB Bank’s CSR policies,
practices, and activities with NMB Bank’s CSR Strategy.

Our CSR is deeply engaged in creating community values and dedicated to embracing goals which demonstrate our sustainability
commitment, that are aligned with three pillars: education, health, and financial inclusion through the allocated 1% of profit after
tax for CSR.

Key focus in 2019

We have a longstanding partnership with the community and the Government in general by being involved in a diverse range of
social and economic activities that serve broad community audiences. Our aim is to continuously strengthen our performance
and create our sustainability strategy anchored in three pillars-financial inclusion, education and health.

EDUCATION
Overall goal: To help create and enhance conducive learning environments for children to access
education and stay engaged in schools so that they can fulfil their future goals and dreams.

In 2019, CSR focused on education programs and initiatives that made a positive impact in Primary and Secondary schools across
the country addressing challenges of inadequate school desks and laboratory stools. Students with disabilities were supported
with learning aid devices as one of our approach in creating the right conditions and promoting equal access to education for all.

Key results in 2019

• Over TZS 1 billion spent on providing over 12,000 school desks to 207 primary and secondary schools in the
country benefiting over 49,000 students countrywide
• Provision of laboratory stools as well as gas systems for 9 secondary schools
• 165 classrooms constructed to roofing level

HEALTH
Overall goal: To ensure health facilities are available for our customers, stakeholders and our
communities by providing complete set of hospital beds, delivery beds, and medical kits.

REPEAT
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The provision of health services in Tanzania is a joint responsibility and it is important for the bank to work together with the
government to improve the health sector and ensure delivery of quality health services. As a good partner, NMB Bank has always
believed in touching and making a difference in people’s lives by providing hospital beds, delivery beds and medical kits to
health facilities that are in need especially in rural areas.

Key results in 2019

• Over TZS 210 million spent on complete sets of hospital and delivery beds to 42 hospitals
• 45M was spent to support 5 special ICU beds for Neonatal Intensive Care Unit at Muhimbili National Hospital and
10 normal hospital beds for Mloganzila Hospital
• Heart Medical kits for 5 kids from poor families in need of open heart surgery at Jakaya Kikwete Cardiac Institute

COMPUTERS

In this era of science and technology, Government Institutions are moving towards digitization and automation of processes
through use of computers. Based on existing business relationship with the government and its related institutions, the bank
donated 40 computers to the Ministry of Lands, Housing and Human Settlements Developments, President Office, Regional
Administration and Local Government to improve service delivery, effectiveness and work efficiency. We however continue
to delivery computers to primary and secondary schools in an effort to strengthen the learning of ICT subjects to schools we
committed.

FINANCIAL CAPABILITY
Overall goal: To foster financial knowledge, skills, attitudes and behaviours of children/youth helping
them to understand the importance of saving and equiping them to act with confidence in financial
management through Wajibu program.

Financial Capability is a priority for the Government and the Bank as stipulated in the National Financial Education Framework
(2018-2022) with objective to boost industrialization, improve people’s wellbeing to their families and increase investment
opportunities and grow the economy. NMB continues to not only implement financial capability initiatives and complementary
services through Jifunze, Jipange and Wajibika sessions that promote the uptake of Wajibu products (NMB Mtoto Account, NMB
Chipukizi Account and NMB Mwanachuo Account) but also building the financial cornerstone and resilience for customers by
promoting financial inclusion to all segments.

Key results in 2019

Since inception to-date the Wajibu proposition has reached more than 60,000 young people across the network and
over 600 facilitators have signed up as Wajibu facilitators to help deliver the sessions in schools.

The following initiatives were implemented in 2019:

• Saba Saba Exhibition: The bank participated at the Saba Saba exhibition and had a Wajibu corner providing financial
capability sessions to parents and youth, offered free account opening of NMB Mtoto and NMB Chipukizi accounts.

• Financial inclusion for All: NMB Bank works to make financial products and services accessible and affordable to all
segments regardless of their economic background. The bank is currently developing a financial management guideline to
help customers manage their finances and make informed financial decisions.

• CSR Campaign: From 2015 to date, NMB Bank has invested more than TZS 4 billion in community projects particularly
on education, health, financial Capability and recovery on natural disasters. At the end of 2019, a CSR campaign was
launched with the intention to inform both internal and external stakeholders on how our CSR has made a difference in
the community, raise awareness of our CSR programs and educate the community at large on the importance of promoting
financial capability.
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Natural Disaster Recovery

In 2019, NMB Bank supported recovery efforts for the oil tank explosion in Morogoro by contributing
mattresses, bedsheets, gloves, blankets and assorted medicines to support the victims.

Through our disaster relief partner (SUKOS Foundation) we provided camping tents to victims of floods
in Sumbawanga and Tanga, tents were also used during the cholera outbreak in Dar es Salaam to support victims who were
admitted at Mnazi mmoja and Amana hospitals.

The SUKOS Foundation- a Risk Reduction NGO helps to build resilience by providing disaster-prone communities around the
country with life-saving skills, advice and support. Unlike many charities focused on responding to disasters once they have
occurred, SUKOS Foundation works throughout the disaster cycle, helping communities prepare for, respond to and recover from
crisis.

The aim is to improve living environment and enhance quality of life by reducing exposure to hazards and minimize effects to
people and property. A total of TZS 90 million was spent in disaster recovery initiatives bringing relief to the affected communities.

Employee Engagement
The employee engagement programs vary widely, fueled by the passions of our colleagues and the needs of
our communities. It is very important for our people to connect with the society that works and lives around
them and build relationships with these communities.

Our people engaged in the CSR programs in a number of ways, from volunteering, donating to various
charities during Customer Service Week, visiting orphanages, the homeless and the sick, the DONATION BOX initiative to taking
advantage of the CSR staff initiative program. Through the CSR staff initiative, NMB CSR matched volunteer employee donations;
a total amount of TZS 400 million that staff participated in.

Staff have also been highly active in participation of blood drives in various areas in the country. They responded to the high
demand of blood needed at Mloganzila hospital, Bugando Hospital and Ocean Road Hospital by voluntarily donating 204 liters
of blood to save thousands of lives.

Through our CSR programs, we aim to keep our commitment to make a difference, collaborate with partners, be future-focused,
be accountable and do what’s right. We will broaden our partnerships with individuals and institutions operating within our
pillars to create a resilient and socially responsible organization.
We are proud of the progress we have made to date and look forward to building on these strong foundations as our business
continues to grow.

REPEAT
Corporate
Governance
As the largest Bank in Tanzania, we
are establishing the highest standards
of Corporate Governance across our
organisation. With an excellent Board
of Directors and the institution of all
recommended sub committees, the
Bank is compliant with all the necessary
statutory requirements.
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RISK REPORT

Risk Management

NMB is guided by its values and mission to be the preferred financial service provider in both urban and rural areas in Tanzania.
A strong Risk and Compliance Management framework is therefore needed by the bank to underpin this objective.

NMB’s Risk and Compliance Management Framework is geared towards four key objectives, namely:
1 Safeguarding of the bank’s identity, reputation and sustainability.
2 Protection of profits and growth.
3 Maintaining solid balance sheet ratios
4 To ensure compliance with all regulatory requirements, both local and international.

Profit after Tax (PAT) was significantly higher in 2019 when compared to the previous year. A look at the bank’s performance in
2019 also reveals solid liquidity and solvency ratios in excess of regulatory requirements and internal limits. Key performance
ratios are generally ahead of or in line with industry averages in Tanzania. Asset quality in 2019 however, continued to remain
challenged when measured by the NPL ratio (6.7% versus as of December 2019 compared to 5.9% at the end of 2018). These
trends were tied to a number of factors which will be explained further in this section as well as other areas of the annual report.

NMB has adapted an Enterprise Risk Management framework to help the bank deliver on its key targets and objectives while
ensuring that risks and uncertainties do not exceed certain limits of tolerance as stipulated in the bank’s Risk Appetite Statement.
NMB’s Risk Appetite Statement is aligned to and is guided by the bank’s Medium Term Strategy. It serves and acts as a lower and
upper guardrail to ensure that the actions of Management and staff at all times during the course of the bank’s operations do not
exceed allowable levels of downside risk that could result in material losses to the bank. The ERM process gives reasonable, not
absolute assurance against material loss.

The Chief Risk and Compliance Officer at NMB Bank Plc is tasked by Management with the responsibility of establishing and
overseeing the bank’s ERM framework. Recent milestones and achievements for the bank in 2019 in the Risk and Compliance
space include successful Volcker Rule certification under the new TOTUS regime, completion of our General Data Protection
Requirements Project (GDPR) in order to ensure conformance with new EU-zone requirements for data protection for EU individuals
and entities, along with FATCA re-certification. Additional key milestones and achievements in the Risk and Compliance space
during the course of 2019 are listed in further sections of this report.

NMB Risk Profile

NMB defines risk as a potentially negative impact on the bank’s value that can arise due to internal processes or future internal
or external events. The concept of risk includes the probability that an event will occur and the impact it could have on the
bank’s results, equity or value. The Principal Risk categories for NMB correspond to those defined by the Bank of Tanzania’s Risk
Management Guidelines, and consist of Operational Risk, Credit Risk, Liquidity and Solvency Risk, Market Risk, Compliance Risk
and Strategic Risk. The following table encapsulates NMB’s risk profile and risk management processes and mechanisms.

REPEAT
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Description NMB Risk Profile in 2019 Risk Management Measures

Credit Risk NMB experienced some credit risk-related Responsible lending is critical to a well-functioning bank. This means taking
The risk that a borrower will setbacks in 2019 that saw the end of year into consideration each customer’s long-term financing needs, ability to repay
fail to meet their contractual NPL ratio climb to 6.7% from 5.9% a year and resilience. In recent years, NMB has spearheaded a number of initiatives
obligations to NMB and the risk earlier. NMB has a well-diversified and to improve its loan origination and disbursement processes, including
balanced credit portfolio with a low risk automation of credit scoring and centralization of the disbursement process.
that pledged collateral will not
profile. Lending to the public consists Turn-around-times and efficiencies have subsequently improved. Through
cover the claim.
largely of Salaried Worker’s Loans (SWL’s), its Special Assets department, NMB works proactively with customers who
with a growing portfolio of loans to large are facing financial difficulties, within the bounds of the bank’s internal and
Credit risk also includes corporates and small and medium-sized regulatory guidelines. The bank’s credit administration and other support
counterparty risk, companies with a low to moderate risk functions have also undergone strengthening in recent years.
concentration risk and level. NMB’s NPL ratio in 2019 exceeded the
settlement risk. 5 percent threshold as required by Bank of Supporting the bank’s lending posture is a clearly drafted and robust NMB
Tanzania guidelines. This can be explained Risk Appetite Statement and a strong credit governance framework with
by loan repayment challenges experienced various levels of approvals needed for loans of different sizes and complexity.
by a selected number of corporate clients The apex credit decision-making committee is the Board Credit Committee
and medium size enterprises. On the other which works with other existing Management committees to review smaller
hand, the bank’s loan impairment figure credit applications, loan-related controls, as well as asset quality. Branches
for 2019 is significantly reduced when also have some discretion to autonomously approve certain credits up to
compared to the previous year (TZS 100.4 closely monitored internal limits.
Billion versus TZS 137.3 Billion in the year
ago period). This is due to the fact that the
bank was able to enhance its collateral-
related data quality in 2019, which resulted
in significant impairment reductions as per
IFRS 9 standards.

Operational Risk NMB’s Operational Risk profile is stable. NMB has adapted an Enterprise Risk Management (ERM) framework to
The risk of losses resulting Operational risks occur in all businesses. manage its various risks, including operational risk. The following are some
from inadequate or failed It is not possible or cost effective to try of the measures that the bank is taking within its ERM framework to control
this risk.
internal processes or routines, to eliminate all of them. NMB’s goal is to
human error, system error or minimize the risks given the nature of its
People
external events. Operational operations, strategy, risk appetite and In the realm of people-related operational risk, talent retention and career
risk also includes legal risk and market. Minor losses are a normal part development are key, as is succession planning for key individuals and roles.
information risk (i.e. the risk of the bank’s operations. The Bank works
Management, through the HR department has robust code of ethics and
of losses due to insufficient actively to avoid larger losses and incidents business conduct policies in place to achieve this. The bank also has strong
protection of information and such events are rare. When they do strategies in place to deal with the threat of fraud, whether internal or external
in terms of confidentiality, occur, the Bank always ensures that it has in nature as well as Legal Risk.
accuracy and accessibility). adequate insurance protection in place to
deal with any related losses above a certain Process
threshold. In an increasingly digital world, The bank has internal policies to manage operational risk and works diligently
to prevent incidents and losses from occurring. A variety of tools and
it is important for NMB to strengthen its
measures are deployed as part of the bank’s ERM framework, including the
cyber risk posture and Management is well- use of Risk Control Self Assessments RCSA’s), control testing and conformance
attuned to this fact. To minimize IT risk, it reviews by the Second Line of Defence, plus risk analyses and reporting with
is critical that the bank’s employees are a focus on control improvement. Risk-reducing measures are discussed in the
aware and prepared. Measures are taken on Risk and Compliance Committee (RCC), which is chaired by the Chief Risk and
a routine basis to create awareness about Compliance Officer. The bank also has measures in place to perform control
the threat of cyber risk for both staff and evaluation on a continuous basis and in connection with major changes in
operations and product offerings.
customers. Measures aimed at continuously
strengthening IT processes and routines are Through Business Continuity Planning (BCP) the bank is prepared to minimize
also an important focus for Management. the effects of incidents as quickly as possible as and when they occur. NMB
also has internal policies describing how information should be protected.
Security policies are also updated as threat
Based on best international benchmarks and standards and our own risk
scenarios change. and threat analysis, we define adequate protection for various categories of
information and systems.

Systems
The bank continues to automate its various risk management processes and
procedures for better efficiency. One of the key projects of 2019 was the
successful completion of our new Governance and Compliance Management
software (GCM), which is the bank’s new Operational Risk Management
platform. Through this new platform, the bank will continue to gain new
efficiencies in term of risk reporting, aggregation and visibility for better-
informed Management and Board decision-making.
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Description NMB Risk Profile Risk Management Measures

Compliance Risk Given its heft and importance as a market Compliance Risk is managed via a large number of NMB’s Enterprise Risk
Compliance risk is the current leader in the Tanzanian banking industry, Management processes, such as the New Product Approval process (NPA).
or prospective risk to earnings, NMB cannot afford to be perceived as a bank One of the key areas of focus for the bank’s NPA process is Conduct Risk
capital and reputation arising with sub optimally-managed Compliance and follow through monitoring mechanisms for the same are in place for
from violations or non-compliance and Regulatory risks. As per the bank’s Risk all stages of the product life cycle
with laws, rules, regulations, Appetite Statement, NMB will always act in
agreements, prescribed practices, an exemplary manner and actively manage Compliance Risk is also an integral part of the customer onboarding and
or ethical standards, as well as from threats to its reputation by complying with due diligence processes (KYC and CDD). Compliance-related issues and
incorrect interpretation of relevant all laws and dictates of the United Republic escalations are typically referred to the bank’s are Risk and Compliance
laws or regulations. of Tanzania as well as Bank of Tanzania and Committee (RCC) and other Management Committees as appropriate for
international regulations. NMB will always full and timely resolution.
Institutions are exposed to strive to maintain pristine relations with the
Compliance risk due to relations full spectrum of its various stakeholders, NMB has a robust Compliance Function, overseen by a Head of
with various stakeholders, e.g. including customers, counter parties, tax Compliance who is also the bank’s Money Laundering Reporting Officer
regulators, customers, counter authorities, local authorities and other (MLRO). NMB has a variety of sophisticated tools and processes to review
parties, as well as, tax authorities, authorized agencies. Measures taken by and interdict transactions of a suspicious nature, related to fraud and
local authorities and other Management and the Board of Directors money laundering. Screening of all transactions, as well as persons and
authorized agencies. on any given matter will always be aligned entities who deal with the bank in one way or another is also continually
with NMB’s values. performed. New investments in technology continued to be made in
2019 to ensure that the bank continues to maintain robust screening and
transaction detection capabilities.

Liquidity and Solvency Risk NMB’s liquidity risk profile is low. The bank Liquidity risk at NMB is overseen day-to-day by the Treasury department
Liquidity Risk is the risk that the maintains a liquidity reserve to ensure its with close over watch by the Middle Office (Market Risk team). A number
bank cannot fulfil its payment resilience in the event of any disruptions. of tools are used to control this risk e.g. system limits, dealer mandates etc.
commitments at maturity. Liquidity The reserve consists of balances with the There is also close monitoring and tracking of liquidity risk issues in the
risk arises because the maturity central bank and securities with a high level monthly Assets and Liabilities Committee (ALCO).
structures on the asset and liability of creditworthiness that can be pledged to
sides of the balance sheet do not the central bank or divested on very short Solvency Risk is monitored and overseen by ALCO, in addition to other key
coincide. notice. NMB also closely monitors the gap Management Committees.
between the maturities in its liabilities with
Solvency Risk is the risk of bank not the corresponding maturities in its assets.
meeting minimum capital holding
requirements when weighted The Solvency Risk profile at NMB is low,
against its various Risk Weighted and reveals capitalization levels for the
Assets, as required by the Bank of bank’s various Risk Weighted Asset classes
Tanzania and other international in excess of the regulatory minimum of
banking rules and regulations. 14.5%. As at the end of 2019 the bank’s Tier
1 Capital Ratio (as a proportion of total risk-
weighted assets) stood at a healthy figure
amount 17%, while the bank’s total capital
ratio (Tier 1 and Tier II) was 19%.

REPEAT
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Description NMB Risk Profile Risk Management Measures

Market Risk NMB’s Market Risk profile is low. The Market risk at NMB is overseen day-to-day by the Treasury department
Market risk is the risk of losses in predominant risks are interest rate and with close over watch by the Middle Office (Market Risk team). A
on and off-balance sheet positions foreign currency risk that arise from the number of tools are used to control this risk e.g. system limits, dealer
as a result of adverse changes in bank’s core business. Although the bank mandates etc. There is also close monitoring and tracking of market risk
market prices i.e. interest rates, introduced a trading book in 2018 and issues in the monthly Assets and Liabilities Committee (ALCO) and other
foreign exchange rates, equity prices obtained subsequent TOTUS Exemption key Management Committees.
and commodity prices. Market risk under Volcker rules, Market Risk remains
exists in both trading and banking low at NMB.
book. A trading book consists of
positions in financial instruments and
commodities held either with trading
intent or in order to hedge other
elements of the trading book.

Strategic Risk At NMB, strategic risk is viewed from Strategic Risk at NMB is at the forefront of Management and the Board’s
Strategic risk is the current and the vantage points of positioning and thinking at NMB. The bank is focused on delivering on its Medium Term
prospective impact on earnings, execution. NMB has a Medium Term Plan Plan targets, but also periodically recalibrates some of its assumptions
capital, reputation or good standing (MTP), which calls for the bank to deliver in based on market trends and developments. In 2019 the bank remained
of an institution arising from poor a number of areas and in line with certain focused on executing its existing MTP (Vision 2020) while beginning
business decisions, improper financial and growth targets. These MTP preparations for the development of its next MTP after the Vision 2020
implementation of decisions or lack assumptions and targets are periodically runs it’s full course at the end of the year 2020.
of response to industry, economic reassessed and revalidated in line with
or technological changes. This risk changing market trends and developments,
is a function of the compatibility of and where necessary recalibrations are
an organization’s strategic goals, the accordingly done.
business strategies developed to
achieve these goals, the resources
deployed to meet these goals and the
quality of implementation.
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BOARD OF DIRECTORS

Margaret Ikongo | Interim Board Chairman

Mrs. Ikongo is an independent consultant in Insurance and risk management having previously
worked at the National Insurance Corporation (NIC) and Tanzanian Insurance Regulator
Authority (TIRA). At NIC she was the Managing Director and at TIRA she served as a special
advisor to the Commissioner of Insurance.

She is an Associate Member of the Chartered Insurance Institute, UK and a Graduate Member
of the Institute of Risk Management, UK. Mrs. Ikongo also holds an International Diploma in
Enterprise Risk Management, an Advanced Diploma in Insurance, a postgraduate Diploma in Finance Management and MBA
(Finance) from the Open University of Tanzania. She serves as a director in various boards in Tanzania and Africa.

George N. Mandepo | Non-executive Director

Mr. Mandepo has 17 years of experience in Tanzania’s legal sector and has successfully undertaken
several advisory assignments in the field of business operations, primarily in litigation and
arbitration as well as other forms of alternative disputes resolutions (ADR). He currently works
as Director of Arbitration in the Office of the Solicitor General where he heads a unit that is
responsible for handling arbitration both domestically and internationally. He has participated
in various sector committees for research, review and or formulation of various legislations and
mainly in agricultural and mining sectors.
He has also rendered legal advice in the institutional restructuring and reformation of a number of public institutions. Regionally
and internationally, he has been involved in various working groups and consultancies for the preparation of several legal
instruments and rendering implementation advise. Mr. Mandepo holds a Masters’ Degree in Construction Law (LLM) from the
University of Strathclyde and a Bachelor of Laws (LLB) from the University of Dar Es Salaam where he specialized in Company
and Banking Laws.

Dr. George Mulamula | Non-executive Director

The founder and CEO of DTBi, the only Tech Incubator/Accelerator supporting entrepreneurship
& innovation in Tanzania. Dr. Mulamula is also the Senior Government Advisor on Information
Communication Technology (ICT) Entrepreneurship & Innovation for an enabling environment
and eco-system for ICT entrepreneurship growth. Prior to that he was the first Principal Deputy
Chief Executive Officer (PDCEO) of the Rwanda Development Board (RDB) and Senior Advisor
in the Ministry of Commerce & Industry and worked on their SME and Entrepreneurship Policy.
Dr. Mulamula was for over 8 years the first Africa Technical Expert in Intellectual Property (IP)
Automation with the World Intellectual Property Organization (WIPO), based in Geneva, Switzerland and worked with Sub-Sahara
African Governments on the utility of ICT in IP.

He also was a catalyst in transforming the African Advanced Level Telecommunications Institute in Nairobi, Kenya to be a Centre of
Excellence while he worked there. For over 15 years he has taught at various Higher Learning Institutions in the region, consulted
with international and regional organizations, and also involved in policy formulation for innovation & entrepreneurship in ICT. He
has run ICT companies and has written extensively on ICT, Technology Transfer for Sustainable Development. Dr. Mulamula holds
a Phd in ICT Technology Transfer and a Masters in Computer Science from the City of New York University.

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Christine Glover | Non-executive Director

Ms. Glover was appointed to join the NMB Board of Directors in June 2018. With over 30 years’
strategic and operational experience in housing and development finance, she has held
several leadership roles in the reputable firms where she was responsible for among other
things designing financial housing products for the low-income sector, project managing
housing development and structuring institutions such as banks and investment vehicles. Until
November 2017, Ms. Glover was the head of development impact funds, a position she had
held since October 2007.

Ms. Glover holds a Masters in City and Regional Planning from the University of Cape Town and a Honours degree in Art and
Architectural History from the University of South Africa.

Hendrik Reisinger | Non-executive Director

Mr. Reisinger was appointed to join NMB Bank’s Board of Directors in June 2019.
He is an economist and has over 25 years of experience in fields of banking and risk
management, business analysis and investment management.
In 1990, he joined Rabo International and has held positions in Area Management, Food
& Agribusiness Research and Corporate Finance. In 2005, he was appointed as Senior
Investment Manager, and in 2016 as Head of Investments, a position he held until 2018. As
such he was responsible for negotiating and structuring the acquisition of minority equity

participations in leading retail banks in China, Mozambique, Zambia, Rwanda and Uganda. In 2018 Mr. Reisinger established
his own private company providing financial advisory services and board room services. He is an experienced non-executive
director with relevant experience in both Africa and Europe. Mr. Reisinger holds a Master of Science Degree in Economic History
from the University of Groningen and a Master of Science Degree in Business Economics from the University of Groningen.

Leonard C. Mususa | Non-executive Director

Mr. Mususa was appointed to join the NMB Board of Directors in June 2015. He is an Accountant
by profession, registered with the National Board of Accountants and Auditors as a Fellow Certified
Public Accountant (Tanzania) and a Fellow of the Association of Chartered Certified Accountants
(UK). Mr. Mususa retired from PricewaterhouseCoopers (PwC) in June 2014, where he worked
for 36 years and gained experience in various areas, including transaction services, corporate
governance, financial reporting, risk management and control. He served as Country Senior
Partner of PwC (Tanzania) for 14 years. He also served in other roles as Head of Assurance Risk and
Quality in the PWC Africa Central region (covering 9 countries) and Head of Risk, Independence and Quality in East Africa Market
Area (covering 6 countries). Mr. Mususa also holds directorships in diverse companies in financial, manufacturing, commerce and
media sectors, including Tanzania Breweries Plc, Nation Media Group, Reliance Insurance Tanzania Limited and AutoXpress Tanzania
Limited.
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Mathias Magwanya | Non-executive Director

Mr. Magwanya has twenty years’ experience in auditing and has carried out various due
diligence assignments. He holds a Bachelor of Commerce in Accounting from the University
of Dar es Salaam and Master of Business Administration in Corporate Management from
Mzumbe University.
He currently works as Chief Internal Auditor of TANROADS and is a member of the Institute of
Internal Auditors - Tanzania. Mr. Magwanya was appointed to join the NMB Board of Directors
in June 2018.

Lilian Komwihangiro | Company Secretary

Mrs. Komwihangiro joined NMB in 2003, having previously worked as a legal consultant for
Maajar, Rwechungura and Kameja Advocates, FK Law Chambers and PricewaterhouseCoopers.
She has ten years of working experience in the legal field and is also an Advocate of the High
Court of Tanzania.

Lilian holds a Bachelor of Laws degree and Master of Laws in commercial and business law,
both from the University of Dar es Salaam. She also holds an MBA in Executive Management
from the Eastern and Southern African Management Institute (ESAMI).

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CORPORATE GOVERNANCE

Overview
We believe in adopting the best practices in Corporate Governance. The Board, Management and NMB employees are committed
to upholding the core values of transparency, integrity, honesty and accountability, which are fundamental to the attainment of
good governance and excellent performance in any organisation.

Good corporate governance principles are accepted as the drivers of improved corporate performance throughout the world.
Responsibility for overseeing the proper implementation of good corporate governance rests with the directors.

The Board of Directors

Functions

The Board is responsible and accountable for providing effective corporate governance, direction and control of the company. The
directors have a duty to exercise leadership, enterprise, integrity and judgment based on transparency, fairness, accountability
and responsibility.

The Board is responsible for appointing Management, adopting a corporate strategy, policies, procedures and monitoring
operational performance including identifying risks impacting the company. It is also responsible for managing good relationships
with all stakeholders.

Composition
In 2019 the Board of Directors was made up of eight non-executive directors with a mix of skills, experience and diversity.

Appointment

The appointment of directors is regulated by the Memorandum and Articles of Association of the Company, as well as the
guidelines issued by the Bank of Tanzania (BOT) and the Capital Markets and Securities Authority, pursuant to the Banking and
Financial Institutions Act 2006 and the Capital Markets and Securities Act 1994, respectively. Shareholders with more than a 10%
stake in the share capital of NMB are entitled to nominate one director for every 10% of the shares held by them. The names are
presented to the AGM for ratification and appointments are submitted to BOT for approval.

All non-executive directors are subject to retirement by rotation and re-election by shareholders periodically in accordance with
the articles of association. Rotation is staggered to ensure continuity of experience and knowledge. The number of terms an
individual may serve is not limited. The Companies Act 2002 requires that directors retire at the age of 70 years, however there is
a provision in the law for re-election.

Resignations

In the year 2019, Director Jos van Lange resigned from the Board. Directors George Mandepo and Rik Reisinger were appointed
and Director Leonard Mususa re-appointed to the Board at the AGM in June 2019.
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Board meetings

The Board meets quarterly, with additional meetings convened as and when necessary.
During 2019, the Board and its committees met to discuss and decide on the business activities. The Board Committees act on
behalf of the Board to direct the bank effectively and accelerate the decision-making process. The four Board committees are: the
Board Executive Committee (BEC), the Board Audit, Risk and Compliance Committee (BARCC), the Board Human Resources and
Remuneration Committee (BHRRC) and the Board Credit Committee (BCC).

The number of meetings held over the course of the year is given in brackets:
• Board of Directors (8)
• Board Executive Committee (4)
• Board Audit Risk and Compliance Committee (10)
• Board Human Resources and Remuneration Committee (4)
• Board Credit Committee (12)

The following table shows the number of Board and Committee meetings held during the year 2019 and the attendance
by directors:

DIRECTORS Board (8) BARCC (10) BCC (12) BHR&RC (4) BEC (4)

Prof. Joseph Semboja* 7 n/a n/a n/a 3

Mr. Jos Van Lange**  2 3 n/a n/a n/a

Mr. George Mandepo 4 n/a 4 n/a n/a

Mrs. Margaret Ikongo 8 6 2 4 2

Mr. Mathias Magwanya 8 4 n/a 3 3

Dr. George Mulamula 8 10 7  n/a n/a

Mr. Leonard Mususa 7 10 7  n/a n/a

Ms. Christine Glover 8 n/a 11 4 4

Mr. Hendrik Reisinger 5 n/a 5 2 n/a

n/a – not applicable

* Prof. Joseph Semboja retired on 4 February 2020
**Mr. Jos Van Lange retired on 15 June 2019.

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DIRECTORS PAYMENTS MADE IN 2019

    Directors’ Fees Sitting Allowance Total Expenses

1 Prof. Joseph Semboja 18,055,000 13,715,000 31,770,000

2 Mr. George Mandepo 4,285,000 6,825,000 11,110,000

3 Mrs. Margaret Ikongo 16,875,000 27,954,000 44,829,000

4 Mr. Leonard Mususa 16,875,000 26,107,000 42,982,000

5 Mr. Mathias Magwanya 16,875,000 21,433,000 38,308,000

6 Dr. George Mulamula 16,875,000 23,906,000 40,781,000

7 Mr. Hendrik Reisinger 7,577,250 3,540,000 11,117,250

8 Mr. Jos Van Lange 7,577,250 3,540,000 11,117,250

9 Ms. Christine Glover 15,154,500 7,080,000 22,234,500

    120,149,000 134,100,000 254,249,000

Directors Evaluation
The Board itself regularly undergoes self-assessment and evaluation under the guidance of an independent party in order to
improve the internal Governance of the Board and its Committees.

Training
Training is provided in order to ensure that the Board keeps abreast with current developments in the market. In 2019, a number
of trainings were held for the Directors. These included Integrated Reporting, Strategic Management and Insider Trading and
Conflict of Interest.

Relationship with Auditors

The Board Audit, Risk and Compliance Committee and the full Board held meetings with the external auditors to discuss these
auditors’ terms of engagement, duties and various other issues during the year under review.
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Board Committees

Board Executive Committee

The Committee assists the Board in fulfilling its oversight responsibilities in accordance with the Articles of Association of the
Company. The Committee exercises the powers of the Board in managing the business and affairs of the Company during the
intervals between Board meetings, when action by the Board is necessary or desirable but convening a special Board meeting is
not warranted or practical.

Board Audit, Risk and Compliance Committee

The Committee assists the Board in fulfilling its oversight responsibility relating to the integrity of the bank’s financial statements
and financial reporting process, systems of accounting and financial controls; the annual external audit of financial statements;
performance of the Internal Audit, Risk and Compliance Functions; compliance with legal and regulatory requirements; and
compliance with International Financial Reporting Standards and applicable laws, rules and regulations.

Board Human Resources & Remuneration Committee

The primary function of the Committee is to assist the Board of Directors in fulfilling its oversight responsibility to shareholders by
ensuring that the bank has coherent remuneration policies and practices that fairly and responsibly reward executives and staff
having regard to performance, the law and the highest standards of governance.

Board Credit Committee

The Committee assists the full Board in providing oversight in the management of credit risk in line with best global practice
and in compliance with BOT regulatory requirements. Specifically, the Committee is responsible for reviewing and approving the
credit policy of the Bank as well as reviewing and approving credit applications above a set threshold upon the recommendation
of management. It also monitors and considers matters that may affect the present and future quality of the Bank’s credit risk
management.

Company Secretary
The company secretary is Mrs Lilian Komwihangiro and she provides support and guidance to the Board in matters relating
to governance and ethical practices. She is also responsible for induction programs of new directors, keeping board members
abreast of relevant changes in legislation and governance principles.

Communication with Shareholders

The company recognizes that effective communication with stakeholders is essential to good governance. Following the
publication of its financial results, it engages with investors to present the results and answer questions accordingly.

Shareholders are encouraged to attend the Annual General Meeting to be held on Friday, 5th June 2020 at Julius Nyerere
Convention Centre, Dar es Salaam and participate in the affairs of the company.

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Corporate
Information
Our valued behaviours demand that
we do things differently, in order for us
to succeed.
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EXECUTIVE MANAGEMENT

Ruth Zaipuna | Ag. Managing Director

Mrs. Zaipuna joined NMB Bank from Standard Chartered Bank as Chief Financial Officer, towards
the end of June 2018. The NMB Board of Directors has recently appointed Ruth as Acting Managing
Director for NMB.

Ruth started her career in 2002 at PricewaterHouseCoopers (PwC) where for a decade she
specialized in the audit of banks and other financial institutions. At PwC, Ruth rose through the
ranks to the level of Associate Director. Ruth demonstrated great professionalism and technical
ability in her work and she was entrusted to lead some of the most complex assignments of the
firm.

Ruth left the firm in August 2011, to take up the position of the Executive Director Finance
and Chief Financial Officer at Standard Chartered Bank. In July 2017, Ruth took on additional
responsibilities combining her role in Tanzania with that of Business Finance Lead for the East
African cluster, overseeing and leading the Bank’s business finance activities in Tanzania, Kenya
and Uganda.

Ruth is also an Independent Non-Executive Director for Tanzania Portland Cement Company
Limited (TPCC), the leading cement producing company in Tanzania and listed on the Dar es
Salaam Stock Exchange.

Ruth is an Associate Certified Public Accountant (ACPA (T)). She holds a Master of Business
Administration (MBA) in Finance and a Bachelor of Commerce (B.Com) degree in Accounting
both from the University of Dar es Salaam.

Benedicto Baragomwa | Ag. Chief Financial Officer

Mr. Baragomwa is a seasoned Auditor, boasting over 12 years of experience in audit, financial risk
management and corporate governance consulting in the banking sector. He started his career
in 2008 with KPMG East Africa as an Auditor specialized in financial services assurance, where he
grew through to Senior Auditor. In 2012, he joined Barclays Bank as a Risk & Control Assurance
Manager responsible for risk management and controls.

Benedicto joined NMB Bank in 2014 as a Senior Audit Manager, where he played a major role in
the transformation of the function to be the leading audit shop in the market until November
2017, when he was appointed as the Acting Chief Internal Auditor. He was then promoted to
Head Internal Audit in June 2018.In November 2019, management and the Board appointed him
as the Acting Chief Financial Officer.He is a beneficiary of the NMB’s talents development program
that is in partnership with Rabobank whereby he was attached at Rabobank Netherlands in 2016.

Benedicto is an Associate Certified Public Accountant (ACPA) (T) and Certified Information
Systems Auditor (CISA). He holds a MSc. Economics and Finance from University of Bradford (UK)
and a First Class Bachelor’s degree in Accounting & Finance from Mzumbe University. He is a
professional member of the National Board of Accountants and Auditors Tanzania (NBAA), The
Institute of Internal Auditors (IIA) and ISACA.

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Lilian Komwihangiro | Head of Legal and Company Secretary

Mrs. Komwihangiro joined NMB in 2003, having previously worked as a legal consultant for
Maajar, Rwechungura and Kameja Advocates, FK Law Chambers and PricewaterhouseCoopers.
She has ten years of working experience in the legal field and is also an Advocate of the High
Court of Tanzania.

Lilian holds a Bachelor of Laws degree and Master of Laws in commercial and business law,
both from the University of Dar es Salaam. She also holds an MBA in Executive Management
from the Eastern and Southern African Management Institute (ESAMI).

Aziz Chacha | Treasurer and Ag. Chief Wholesale Banking

Mr. Chacha joined NMB as the bank’s Treasurer in September 2011 from Barclays Bank Tanzania
where he had worked as the Country Treasurer. He holds an MBA from Manchester Business
School of the University of Manchester, United Kingdom and currently serves in the Tanzania
Bankers Association (TBA) financial markets technical committee. He has a wealth of experience
in Treasury risk management, Treasury technology, capital markets/corporate finance, capital
planning and balance sheet management and is a certified member of ACI-Financial Markets
headquartered in France.

Nenyuata Mejooli | Chief Shared Services

Nenyuata Olekambaine Mejooli a seasoned banker with 20 years’ experience in Banking
Operations, Operations risk, Quality assurance, and Business process improvement and
reengineering.

Nenyuata joined NMB from Standard Chartered Bank in September 2007 as Manager Business
process in 2007 and has since held several roles including Senior Operations Manager, Senior
Manager Banking Operations and Head of Banking Operations. Prior to her current appointment
in June 2018, she was the Head Branch Network in 2016.

She holds a BSc Electronics degree from Bangalore University India and an MBA from Dublin City
University Ireland. Nenyuata is also PRINCE 2 Practitioner and holds a leadership certificate from
Gordon Institute of Business Science (GIBS), SA. She is certified Board member from ESAMI under
Female Future Program Tanzania, cohort 1, a program which aims at preparing Tanzanian women
to take higher leadership position.
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Pete Novat | Chief Technology and Digital Transformation

Mr. Novat is the Chief Technology and Digital Transformation of NMB responsible for managing
technology and innovative products and services across the spectrum leverage technology
to serve clients’ needs. Pete directs NMB’s digital delivery Channel network of ATMs and its
award-winning digital banking platform that support millions of NMB’s clients, including mobile
banking users. Prior to his appointment as Chief Technology and Digital Transformation, Pete was
the Chief Operating Officer for 4 years responsible for leading NMB Operations, Shared Services
and Technology.

Pete has extensive financial services experience, having worked in the industry since the late
1990s. He spent 9 years at NBC Bank leading the team of Technology professionals before joining
NMB in February 2013.Pete holds a Bachelor Degree (Hon) in Electronics and Communication
Science from University of Dar es Salaam and a Certificate of Programme for Management
Development (PMD) from Gibson Institute of Business Science (GIBS), SA.

Juma Kimori | Chief Internal Audit

Mr. Kimori joined NMB Bank Plc as the Chief Internal Auditor on 28 May 2018 (to date), reporting
to the Board Audit, Risk and Compliance Committee (BARCC) functionally and administratively
to the Chief Executive Officer (CEO). Prior to joining NMB Bank, Juma worked with Barclays Bank
Tanzania (BBT) as the Chief Internal Auditor (CIA) and Barclays Africa as Regional Director for 7
years. As the Regional Director for Barclays Africa Internal Audit, Juma provided leadership to
the Audit teams in Barclays Botswana, Barclays Tanzania, Barclays Zambia, Barclays Mozambique,
Barclays Mauritius, Barclays Zimbabwe, and Barclays Seychelles. Juma has more than 13 years
cumulative experience on enterprise risk management, leadership, dealing with multiple
stakeholders, change management, corporate governance, governance reporting, business
skills, and strategy development. Juma has significant experience in the audits of Procurement,
Finance, Credit, Payment Operations, Branch Operations, Corporate Governance, and Strategy.

Juma worked with African Banking Corporation (BancABC) as the Country Head of Internal
Audit prior to joining Barclays Bank. He started his career in accounting and auditing with
PricewaterhouseCoopers in 2006 in the Assurance Lines of Service (Associate to Senior Associate
level) where he specialized on financial services audits.

Juma holds a Bachelor of Commerce in Accounting (First Class Honors) from the University of Dar
es Salaam and he is currently pursuing Masters in Business Administration at Eastern and Southern
Africa Management Institute (ESAMI). He is a member of the National Board of Accountants and
Auditors Tanzania (NBAA) as an Associate Certified Public Accountant (ACPA). He is also a member
of the Institute of Internal Auditors (IIA) and a Certified Facilitator for the IIA and has experience in
delivering Internal Audit professional and Corporate Governance papers both within and outside
Tanzania.

Juma is a Certified Director by the Institute of Directors Tanzania (IoDT) and he has been a Board
Member of the IIA Tanzania since 2015 (including Deputy Chairman of IIA for 2 years).

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Victor Rugeiyamu | Chief Risk and Compliance

Mr. Rugeiyamu was appointed to the position of Chief Risk and Compliance Officer in April 2018.
Prior to this appointment he acted in the capacity of the bank’s Head of Risk, managing the
Risk Department of the bank, a responsibility he had since he first joined NMB in 2009. In his
capacity as the Chief Risk and Compliance Officer, Victor is responsible for oversight of the bank’s
Enterprise Risk Management (ERM) framework as well as the management of the bank’s overall
risk posture and appetite. He is also responsible for overseeing NMB’s Compliance, Market Risk,
Enterprise Risk, Operational Risk, IT Risk and Credit Risk teams as well as its Forensics Department.

With almost 20 years’ worth of experience working in the financial services industry, Victor has
held a number of positions in the brokerage and banking industries, on the commercial side as
well as in Compliance and Risk. A native of Tanzania, he began his career in the United States
immediately after completing his undergraduate degree where he served as a trader for DLJ/
Credit Suisse First Boston Direct before later moving to banking at Wachovia Bank N.A.

Victor holds a Bachelor of Arts Degree (Honors) in Economics from Belmont Abbey College in
North Carolina U.S.A. and an MBA in Finance and Banking from the University of North Carolina
at Charlotte U.S.A.

Demetus Kamguna | Ag. Chief Credit Officer

Mr. Kamguna has 20 years’ experience in banking and has built a reputation as a guru in
credit management (end-to-end credit value chain) He holds BA in Economics and marketing
management certificate from University of Dar Es Salaam. He also holds various certificates in
Credit Management discipline from various institutions including Damelin School of Banking
(Uganda and Zimbabwe), IFS School of Finance (incorporated by Royal Charter), Gordon Institute
of Business Science (University of Pretoria) and Connemara Consulting (pty) ltd (for Leadership).
Demetus is also a certified credit Trainer for NMB, having done a lot on imparting credit skills to
the entire NMB branch network.

His experience spans across five commercial banks having started his career in 1999; before
NMB Bank Plc, Demetus worked previously with CRDB Bank Plc, Stanbic Bank Tanzania Ltd (also
attached at Standard Bank SA), Barclays Bank Tanzania Ltd and Exim Bank Tanzania Ltd in the
capacities of Credit Analyst, Credit Manager, Manager-Credit Evaluation, Senior Manager Credit,
Ag. Head of Corporate Credit, Head of Business Banking & SME Credit, Ag. Corporate Credit
Director and Head of Retail Credit. Demetus also worked as consultant for International Finance
Corporation (IFC) in partnership with Financial Access Capital Partners (FA).
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Emmanuel Akonaay | Ag. Chief Human Resources

Mr. Akonaay joined NMB Bank Plc in July 2014 and has been the Acting Chief Human Resources
reporting to the Managing Director since November 2018. In his role, Emmanuel is responsible
for driving the execution of the People strategy in line with the bank’s vision and providing the
necessary guidance to the HR team in strategy implementation.

Prior to the current appointment, Emmanuel was Head of HR Shared Services; responsible for
designing and implementing staff welfare policies and employee relations in addition to leading
optimal HR support functions.

Emmanuel previously worked at Ernst & Young as the country Head of Human Resources function
responsible to drive HR agenda in strategic talent acquisition, development and retention.

Prior to joining Ernst &Young, Emmanuel worked at Barclays Bank Tanzania as HR Business Partner
and Reward Manager responsible for execution of compensation & Benefits and as a strategic
HR business partner. Emmanuel has extensive knowledge and experience in HR from various
sectors ranging from Manufacturing to Mining industry before he joined banking. Emmanuel is a
certified Reward & HR practitioner who holds a Bachelor of Arts from University of Dar es Salaam,
is currently pursuing his MBA at ESAMI.

Filbert Mponzi | Chief Retail Banking

Mr. Mponzi was appointed as Chief Retail Banking in June 2019 and has over 16 years of banking
experience. Rejoined NMB Bank plc in June 2018 as Business Head Wholesale Banking from NBC
limited, a member of Barclays Africa Group and recently ABSA Group, where he served as Retail
Banking Director and successfully drove the strategy to include Personal and Mass segments and
pioneered the Distribution Optimization (Branches, ATMs and introduction of Agency Banking).

Prior to joining NBC Limited, he held different senior positions within NMB Bank including Head
of MSME, Business Banking, and Head of Corporate Banking (Large local, MNCs and Emerging
Corporates). He brought in a wealth of experience in Retail Banking, MSME, Corporate, and Agri
Business.

Filbert is also a member of the Board of Trustees of Social Action Trust Fund (SATF) an NGO
helping Most Vulnerable Children to become productive members of the society. He also sitting
as member of Investment Committee in SME Impact Fund.

Filbert is an Associate Certified Public Accountant (ACPA (T)) and holds a Bachelor of Commerce
in Accounting (Hons) from University of Dar es salaam, and MBA from Eastern and Southern
African Management Institute (ESAMI). Filbert also attended senior leadership courses in Harvard
Business School (HBS) (USA) and Gordon Institute of Business Science (GIBS) in South Africa.

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ANNUAL GENERAL MEETING NOTICE 2020

Notice is hereby given that the 20th Annual General Meeting of NMB Bank Plc shareholders will be held Online on Friday, 5th
June, 2020 at 10.00 a.m. The agenda will be as follows:

20.1 NOTICE AND QUORUM

20.2 ADOPTION OF THE AGENDA
20.3 CONFIRMATION OF THE MINUTES OF THE 19th ANNUAL GENERAL MEETING HELD ON 15th JUNE 2019
20.4 MATTERS ARISING FROM THE PREVIOUS MINUTES
20.5 TO RECEIVE, CONSIDER AND ADOPT THE DIRECTORS’ REPORT AND AUDITED FINANCIAL STATEMENTS FOR YEAR
ENDED 31st DECEMBER 2019
20.6 DIVIDEND DECLARATION FOR THE FINANCIAL YEAR 2019
20.7 TO RECEIVE AND APPROVE THE PROPOSAL FOR DIRECTORS’ REMUNERATION
20.8 CHANGES IN THE ARTICLES OF ASSOCIATION
20.9 RESIGNATION AND APPOINTMENT OF DIRECTORS
20.10 TO RECEIVE AND APPROVE APPOINTMENT OF EXTERNAL AUDITORS FOR THE FINANCIAL YEAR 2020
20.11 ANY OTHER BUSINESS

IMPORTANT NOTES:

1. Members wishing to attend the meeting must submit online one of the following: a copy of his/her depository
receipt, passport, voters ID card, or bank card.

2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote on his/her behalf in
accordance with the provisions of the Articles of the Company. The proxy form must be deposited at the registered office of
the company (physical or online) not later than 10.00 am Thursday, 4th June 2020.

3. The meeting will be held online. Copies of annual report and proxy forms will be available in NMB branches and on the NMB
website (www.nmbbank.co.tz).

4. Directors propose payment of a dividend of TZS 96 per share, amounting to TZS 48 billion out of 2019 profit.

Date of announcement of results: - 15th May 2020

Shares trading cum div: - 15th May 2020
Last day of trading cum-dividend: - 4th June 2020
Shares start trading ex-div: - 5th June 2020 onwards
Register Closing Date (Books Closure Date) - 9th June 2020
Payment of dividend: - on or about 17th June 2020

By order of the Board.

___________________
Lilian R. Komwihangiro
Company Secretary
May 8th, 2020
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WHISTLE BLOWING

As NMB Values encourage compliance and integrity above all, we also encourage our staff members, customers, or other
stakeholders to raise any concerns, inappropriate practices of any nature through our whistle blowing channels as shown below:

1. THROUGH NMB WEBSITE

http://www.nmbbank.co.tz

2. BY POST:
You can confidentially send your concerns to the Managing Director (MD): Attn to MD [envelope marked “strictly private
and confidential”]
NMB Head Office,
P. O. Box 9213,
Ali Hassan Mwinyi/Ohio Streets
Dar es Salaam, Tanzania.

3. THROUGH EMAIL:
whistleblowing@nmbbank.co.tz

4. BY CALLING:
The following Toll Free Phone Numbers, for those who would wish to call:
• 0779751 000 - Zantel
• 0685 751 000 - Airtel
• 0800 751 000 - Vodacom

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Financial
Statements
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REPORT OF THE DIRECTORS

1. INCORPORATION

Directors submit their report together with the audited financial statements for the year ended 31 December 2019,
which disclose the state of affairs of NMB Bank Plc (the “Bank”) and its subsidiary, Upanga Joint Venture Company Limited
(together, the ‘Group’).

2. INCORPORATION

The Bank is incorporated in Tanzania under the Companies Act, No.12 of 2002 as a public limited liability company.

3. VISION

To be the preferred financial services partner in Tanzania.

4. MISSION

Through innovative distribution and its extensive branch network, the Bank offers affordable, customer focused financial
services to the Tanzanian community, in order to realise sustainable benefits for all its stakeholders.

5. PRINCIPAL ACTIVITIES

The Bank is licensed under the Banking and Financial Institution Act, 2006, with license number CBA 00032. It is authorized
to conduct and carry out banking business in Tanzania as a Bank. The Bank is regulated by the Bank of Tanzania and is
subject to the provisions of the Banking and Financial Institutions Act, 2006 and its regulations.

The Bank is a full service commercial bank incorporated in the United Republic of Tanzania. It is engaged in taking
customer deposits, providing credit facilities and offering other commercial banking services. Through its three main
business divisions: Retail, Wholesale and Treasury, the Bank provides a suite of financial services and products to retail
customers, farmers, small businesses, Corporates, Institutions and the Government.

The Bank has 224 branches, 794 ATMs and 5,980 active agents across the country. The Bank is listed on the Dar es Salaam
Stock Exchange in Tanzania.

224
Branches
794
ATMs
5980
Agents

During the year, the Bank further reinforced it’s position as the innovative market leader with an
extensive reach. In October 2019, the bank rebranded its mobile app and NMB Klik app to NMB Mkononi,
NMB
Mkononi
a new state-of-the-art App for smart phones providing self-service bank services, account opening and
the introduction of scan to pay by using QR codes. This is in addition to the USSD functionality that is
available to feature phones.

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6. DIRECTORS

The Directors of the Bank who were in the office since 1 January 2019 to the date of this report are:

Qualification/ Date of Appointment/

No Name Position Date of Birth Nationality
discipline Retired

1 Prof. Joseph Semboja Chairman 24 April 1951 Tanzanian Economist Retired on 4 February 2020

2 Jos van Lange Member 06 June 1956 Dutch Economist/Banker Retired on 15 June 2019
Certified Public
3 Leonard Mususa Member 25 September 1953 Tanzanian Re-appointed on 15 June 2019
Accountant
4 Margaret Ikongo Member 08 June 1957 Tanzanian Chartered Insurer Re-appointed on 3 June 2017

5 Mathias Magwanya Member 03 January 1968 Tanzanian Auditor Appointed on 2 June 2018

6 George Mulamula Member 04 April 1956 Tanzanian Computer Scientist Appointed on 2 June 2018

7 Christine Glover Member 29 November 1952 Tanzanian Investment Manager Appointed on 2 June 2018

8 Rik Reisinger Member 27 March 1964 Dutch Economist/ Banker Appointed on 15 June 2019

9 George Mandepo Member 29 December 1975 Tanzanian Lawyer Appointed on 15 June 2019

7. COMPANY SECRETARY
The Bank’s secretary as at 31 December 2019 and during the year was Lilian R. Komwihangiro.

8. CORPORATE GOVERNANCE

The Board of Directors (the “Board”) consists of nine directors. The Board takes overall responsibility for the Bank,
including responsibility for identifying key risk areas, considering and monitoring investment decisions, considering
significant financial matters, and reviewing the performance of management business plans and budgets. The Board is
also responsible for ensuring that a comprehensive system of internal controls, policies and procedures is operative, and
for compliance with sound corporate governance principles.

The Board is required to meet at least four times a year. The Board delegates the day to day management of the business
to the Managing Director assisted by the Management Team. The Management Team is invited to attend board meetings
and facilitates the effective control of all the Bank’s operational activities, acting as a medium of communication and
coordination between all the various units of the Bank.

The Bank is committed to the principles of effective corporate governance, and recognizes the importance of integrity,
transparency and accountability. During the year, the Board had the following board sub-committees to ensure a high
standard of corporate governance throughout the Bank.

i Board Executive Committee (BEC)

ii Board Audit, Risk and Compliance Committee (BARCC)

iii Board Human Resources and Remuneration Committee (BHR&RC)

iv Board Credit Committee (BCC)

During the year, there were 8 board meetings (4 of which were special meetings). There were also 12 Board Credit
Committee meetings, 4 Board Human Resources and Remuneration Committee meetings, 10 Board Audit, Risk and
Compliance Committee meetings (6 of which were special) and 4 Board Executive Committee meetings.
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The following table shows the number of Board and Committee meetings held during the year and the attendance
by directors

DIRECTORS Board (8) BARCC (10) BCC (12) BHR&RC (4) BEC (4)

Prof. Joseph Semboja* 7 n/a n/a n/a 3

Jos Van Lange**  2 3 n/a n/a n/a
George Mandepo 4 n/a 4 n/a n/a
Margaret Ikongo 8 6 2 4 2
Mathias Magwanya 8 4 n/a 3 3
George Mulamula 8 10 7  n/a n/a
Leonard Mususa 7 10 7  n/a n/a
Christine Glover 8 n/a 11 4 4
Rik Reisinger 5 n/a 5 2 n/a
n/a – not applicable
* Prof. Joseph Semboja retired on 4 February 2020
**Mr. Jos Van Lange retired on 15 June 2019.

9. REMUNERATION POLICIES

The Bank has in place processes and procedures for determining remuneration paid to its Directors. Management normally
prepares a proposal of fees and other emoluments paid to directors after having conducted a market survey, which is
brought to the Board before presenting the same to the Annual General Meeting (AGM) for final approval.

10. ACCOUNTING POLICIES

The accounting policies of the Bank disclosed in Note 3 to the financial statements have been approved by the Board. The
accounting policies have been updated to reflect the new and revised International Financial Reporting Standards (IFRSs)
in Note 2.

11. MANAGEMENT TEAM

The Management of the Bank is led by the Managing Director assisted by the Management Team. The Management of the
Bank at the date of the report consisted of the following: -

• Managing Director • Chief Credit Officer • Chief Human Resources Officer

• Chief Retail Banking • Chief Technology and Digital • Chief Risk and Compliance Officer
• Chief Wholesale Banking Transformation • Treasurer
• Chief Financial Officer • Chief Shared Services

12. INTERNAL AUDIT FUNCTION

The Bank has an independent Internal Audit function reporting to the Board Audit Risk and Compliance
Committee.

13. STOCK EXCHANGE INFORMATION

In 2008 the Bank was listed at the Dar es Salaam Stock Exchange. The price per share as at year-end date was TZS 2,340
(2018: TZS 2,340). Market capitalisation as at 31 December 2019 was TZS 1,170 billion (2018: TZS 1,170 billion).

Stock prices changes are affected by the demand and supply of shares in the stock market. Changes in economic
conditions, regulations and accounting standards can have an impact on corporate profits, which would result in stock
price changes on at least a temporary basis.

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14. CAPITAL STRUCTURE

The Bank’s capital structure for the year under review is disclosed under note 35 to the financial statements.
Details of the capital management, regulatory capital and capital structure are disclosed under Note 6.6.

15. SHAREHOLDERS OF THE BANK

The total number of shareholders during the year 2019 is estimated to be 17,608 (2018: 17,596). None of the Directors is
holding a significant number of shares at the Bank.

The following is a list of shareholders who individually own 0.5% or more of the shares of the Bank.

2019 2018
Name of the Shareholder number number
% of shares % of shares

Cooperatieve Centrale Raiffeisen - Boerenleenbank B.A.

34.9 174,500,000 34.9 174,500,000
“Rabobank Nederland” (Rabobank)

The Treasury Registrar 31.8 158,901,800 31.8 158,901,800

National Investment Company Limited (NICOL) 6.6 33,049,520 6.6 33,049,520

Mr Aunali F Rajabali and Sajjad F Rajabali 5.0 25,000,000 5.0 25,000,000

BNYM Re SQM Frontier Africa Master Fund Ltd - SQM1 1.9 9,566,432 1.9 9,566,432

Morgan Stanley Institutional Fund, Inc -Frontier Markets

1.3 6,718,721 1.3 6,718,721
Portfolio-MGGQ

Morgan Stanley Galaxy Fund 1.3 6,427,232 1.3 6,427,232

Banque Pictet and Cie Sa A/C Patrick Schegg 1.0 4,972,700 1.0 4,972,700

Parastatal Pension Fund (PPF) 1.0   4,831,636 1.0 4,831,636

Kuwait Investment Authority 0.7   3,500,000 0.7 3,500,000

Sanlam Centre Sub Saharan Africa Equity Master Fund

0.7 3,400,000 0.7 3,400,000
Class E

Duet Africa Opportunities Master Fund 0.6 3,150,000 0.6 3,150,000

Stanbic Nominees Limited 0.6 3,115,338 0.6 3,115,338

TCCIA Investment Company Limited 0.5 2,611,886 0.5 2,611,886

Orbit Securities Co. Ltd ITF WWB Capital Partners, LP. 0.5 2,372,044 0.5 2,372,044

General Public 11.6 57,882,691 11.6 57,882,691

Total 100.0 500,000,000 100.0 500,000,000

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16. STRATEGIC OBJECTIVES

The Bank’s objectives that drive its long-term strategic focus is to maintain its leadership in profitability while maintaining
its stronghold position in the retail and wholesale market. The Bank has its Medium-Term Plan focusing on three pillars
namely deposit mobilization, operational efficiency and business generation, with its strategic objectives focusing on:

• Maintaining a stable and structural deposit flow to sustainably fund the assets;
• Maintain a high quality and diversified loan book with non-performing loans below 5%, to secure a LDR
below 75% and comply with BOT liquidity standards;
• Increase in non-funded income contribution to total income to 32% by enhancing existing value propositions;
• Lower the cost to serve. Cost to Income Ratio below 56% in the medium term;
• Improve Return on Equity to 20% in the medium term;
• Expand offerings available from agency banking and other channels;
• Become the best in service and product offerings – customer obsessed and insight driven;
• Enhance the digital offering solutions to customers; and
• Create a performance and customer-oriented culture 

Strategic Objectives Medium-Term Plan

Deposit Operational Business

Mobilization Generation

17.
FUTURE STRATEGIC PLANS

The core of the Bank’s strategy is to provide to our customers relevant and affordable products and services that will enable
them to grow and prosper whilst maximizing returns to shareholders. To deliver this, we have over the years invested in
world class technology and infrastructure, which allows to provide convenience and accessibility to our customers. These
investments have enabled us to significantly expand our reach through our different channels including Agency Banking
and Mobile Banking. With 5,980 active agencies as at December 2019, the Bank serves over 3.3 million customers.

The Bank remains committed to serving and remaining relevant to its customers. It will achieve this by reviewing and
enhancing its products and services, as well as re-engineering and where possible automating the processes that are used
in their delivery. This should ultimately increase operational efficiency, reduce operating costs and increase profitability.
The goal is to provide our customers with a superior customer experience and become the benchmark for customer
service, affordability and product offerings.

The Bank is invested in the communities in which it operates. It is for this reason that we
continuously promote the essence of shared growth with our customers and other
stakeholders. We truly want our staff, shareholders and customers to thrive, as we believe that
it is only through their success that the Bank can symbiotically continue to prosper as well.

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18.
MARKET OVERVIEW

Global economic growth decelerated markedly in 2019 to reach an estimate of 2.4%, its lowest rate of expansion since
the global financial crisis, from 3% recorded in 2018 (The World Bank, 2020). This is mainly a result of weakening global
trade and investment that has affected both advanced and developing economies. Particularly, the intensified trade
tensions between the United States and China have heightened policy uncertainty and weighed on international trade,
confidence, and investment. Consequently, the increase of tariffs between the two countries over the past couple of years,
has significantly caused a bigger share of world trade to become subject to protectionist measures. Global growth is,
however, projected to improve to 2.5% in 2020 and edge further up thereafter on the back of recovering global trade and
investment as trade disputes between China and the United States reduce due to ongoing bilateral negotiations between
the two countries. Moreover, rebounding of activities in emerging markets and developing economies (EMDEs) will also
improve the global growth in 2020. Nonetheless, per capita growth in EMDEs is still forecasted to remain insufficient to
meet poverty alleviation goals.

2019 2020
Global Global
Economic Economic
Growth >>>>> Growth

2.4% 2.5%
In Tanzania, real GDP growth stood at an estimate of 6.8% in 2019, down slightly from 7% in 2018 on the back of robust
private consumption, substantial public spending on infrastructure strong investment growth, and an upturn in exports
(AfDB, 2020). Tourism, mining, services, construction, agriculture, and manufacturing continue to be notable sectors in
driving the country’s economic growth. Inflation remained low and below the country’s medium-term target to stand at
3.8% in December 2019. This is attributed to adequate food supply, stable exchange rate and sustained prudent monetary
and fiscal policies. With exception of Quarter 1 2019, the Tanzanian shilling against the USD was fairly stable in 2019,
exchanging at an average of 2,290, compared to 2,263 in 2018.

2018 2019
1 USD = 1 USD =

2,263 TZS
TZS 2,290 TZS

The Bank of Tanzania reviewed downward the SMR rate on non-central government deposits and borrowings held by
banks from 8% to 7% in May 2019. Moreover, the central bank improved the SMR averaging framework to allow banks
to utilize up to 20% of their required SMR during the 14-day maintenance period up from 10% that had been previously
operational.

These revisions eased liquidity in the market to support credit extension to the private
sector by banks that grew by 11.1% Y-o-Y in December 2019 from 4.9% Y-o-Y growth
recorded in December 2018 (BOT Monthly Economic Report, January 2020). The overnight
market was also fairly liquid across the year with interbank rates averaging at 4.8% in 2019.
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19.
PERFORMANCE FOR THE YEAR
.

2019 Financial Highlights

Statement of Financial Position

Total assets of the Group increased to TZS 6.4 trillion (2018: TZS 5.7 trillion), this represents a yearly
growth of 12%.

The Bank’s net loans and advances grew by TZS 344 billion (11%) year on year, driven by an increase
of retail loans particularly consumer loans. Government securities increased by TZS 21 billion (3%)
attributed to yield improvement. Placements with banks increased by TZS 90 billion (52%) while
cash and balances with Bank of Tanzania increased by TZS 271 billion (25%) driven by increase of
customers deposits. Assets growth was funded by increase of customer deposits by TZS 595 billion
(14%) YoY and TZS 83.3 billion from the public through Issuance of Retail Bond

There was an increase in Bank’s non-earning assets by 30% year on year mainly coming from Right-
of-use assets resulting from the adoption of IFRS 16, while Property and Equipment increased by
TZS 25 billion (11%).

Statement of profit or loss and other comprehensive income

During the year, the Group recorded a net profit of TZS 145 billion (2018: TZS 101 billion), increase of
43% while the Bank earned a net profit of TZS 142 billion (2018: TZS 98 billion), an increase of 46%
year on year. This increase in profit was mainly attributed to decrease in loan impairment charge
by TZS 37 billion, increase in net interest income and net fees and commission income by TZS 31
billion and TZS 3 billion respectively.

The Bank’s total income grew 13% year on year to TZS 622 billion. The growth is from the Bank’s net
interest income which increased by 5% mainly as a result of increase in interest income by 9% while
net fees and other income increased by 4% mainly attributed to increase other fees, teller withdrawal
fee and ATM fees and MNO. Impairment charge decreased by 27% due to improvements in portfolio
management and inclusion of collateral information into modelled impairment consideration.

The Bank’s operating expenses decreased slightly by 0.4% during the year mainly contributed by
a decrease in general administrative expenses by 18% while depreciation expenses increased by
36% driven by capitalization of completed projects during the year and amortization of right-of-
use assets.

The Bank’s subsidiary, Upanga Joint Venture Company (UJVC) Limited made a profit after tax of TZS 2 billion (2018: TZS
2.1 billion). The decrease in profit is attributable to settlement of prior year’s tax obligations. As at 31 December 2019, its
total assets were TZS 48 billion (2018: TZS 57 billion); the decrease was due to decrease in cash and bank balances and
depreciation of investment properties.

The audited financial statements for the year are set out on pages 89 to 210 of the Annual Report.

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20. CASH FLOW

During the year, the Group’s major source of cash flow was from its operating activities which generated TZS 577 billion
(2018: utilized TZS 214 billion). This was attributed to the growth of deposits from customers by TZS 601 billion (2018: TZS
43 billion).

The major use of the cash flow was servicing of borrowings by TZS 147 billion (2018:TZS 113 billion) , TZS 60 billion (2018:
TZS 68 billion) for payment of taxes, TZS 13 billion (2018: TZS 26 billion) investment in fixed assets, TZS 8 billion (2018: TZS
12 billion) investment in software and TZS 33 billion (2018: TZS 32 billion) for dividend payment.

The Group’s cash projections indicate that future cash flows will mostly be generated from deposits. The Bank will continue
to implement different strategies to mobilize deposits by targeting individual depositors but also offering competitive
rates for fixed deposits and improving cash collection solutions to big corporate customers, government institutions,
Non-Government Organizations and other agencies.

21. DIVIDEND
The Directors propose payment of a dividend of TZS 96 per share, amounting to TZS 48 billion. In 2018, a dividend of TZS
66 per share, amounting to TZS 33 billion was approved and paid.

22. KEY PERFORMANCE INDICATORS FOR BANK

The following Key Performance Indicators (KPIs) are effective in measuring the delivery of the Bank’s strategy and
managing the business.

NMB Ratios

Performance indicator Definition and calculation method 2019 2018

Return on equity Net profit/Total equity 15% 11%

Return on assets Net profit/Total assets 2% 2%

Cost to income ratio Total costs/Net income 60% 59%

Interest margin on earning assets Total interest income/ Interest earning assets 17% 15%

Non - interest income to Gross income Non - interest income/Total income 28% 28%

Gross loans to customers’ deposits Total loans to customers/Total deposits from customers 72% 78%

Non - performing loans to gross loans Non - performing loans/Gross loans and advances 6.7% 6%

Earning assets to total assets Earning assets/Total assets 71% 73%

Growth on total assets Increase in assets for the year/Total asset opening balance 15% 3%

Growth on loans and advances to

Increase in Loans and advances /Opening balance of loans and advances 11% 17%
customers

Growth on customer deposits Increase in customer deposits/Opening balance of customer deposits 14% 1%

Capital adequacy

Tier 1 Capital Core Capital /Risk weighted assets including off balance sheet items 17% 17%

Tier 1+Tier 2 Capital Total Capital /Risk Weighted assets including off balance sheet items 19% 19%
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23. TREASURY POLICY

The Bank maintains a well-documented treasury policy that outlines approved Treasury activities in the Bank and how
various risks that arise from such dealings together with other banking activities are identified, measured and managed.
These, among others, include liquidity risk, foreign exchange risk and interest rate risk.

Regulatory ratios and internal limits on the above stated risks are stipulated in the policy to enable an efficient monitoring
of compliance. Moreover, to combat any losses that may result from dealing activities, the policy allows for establishment
of dealer limits, counterparty limits and stop-loss limits that must be reviewed regularly and kept up to-date. In addition to
this, roles and responsibilities of Treasury staff, Market Risk unit, senior management and Assets and Liabilities Committee
(ALCO) members in complying with the policy are stated.

Assets and Liabilities Management (ALM) team in conjunction with Market risk unit provide monthly reports to ALCO
to evidence compliance with the policy. Any incident where a guideline has been breached is reported by the treasury
functions to the Treasurer who then escalates the breach to ALCO members and Bank Management for immediate actions.

The following sections are covered in the Treasury policy:

(i) Liquidity Management

Liquidity management evaluates the Bank’s ability to meet its commitments as they fall due and whilst maintaining
market confidence in the market so as to be able to replace funds when they are withdrawn.

The Bank’s sound and robust liquidity management process, as carried out within the bank and monitored by ALCO,
encompasses the following:

• Day-to-day funding, managed by monitoring future cash flows to ensure that daily obligations can be met. This
includes replenishment of funds as they mature or borrowed by customers. The Bank maintains an active presence in
money markets to enable this to happen;
• Maintaining a portfolio of highly liquid and marketable securities that can easily be liquidated as protection against
any unforeseen interruption to cash flows;
• Monitoring balance sheet liquidity ratios, i.e., Liquid Asset Ratio (LAR), Loan to Deposit Ratio (LDR) and Long-term
Funding Ratio (LTFR) against internal and regulatory requirements;
• Managing the concentration and profile of debt maturities;
• Diversification of depositor base;
• Performing Liquidity stress and scenario tests; and
• Maintaining a robust and effective contingency funding plan.

It is vital to know that changes in interest rates impact the overall profit of the Bank. Hence, in addition to liquidity
management, the Bank manages its interest expenses through regular review of the fixed deposit rates and other savings
accounts rates, together with striving to obtain reasonable and fair borrowing rates from the interbank and multilateral
lenders.

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23. TREASURY POLICY (CONTINUED)

(ii) Foreign Exchange Risk

Foreign Exchange risk is a current or prospective exposure to earnings and capital arising from adverse movement in
currency exchange rate. The Treasury policy mainly focuses on foreign exchange risk that arises from trading activities
whose management principles are as outlined below;

• Identification of foreign exchange risks in the trading and banking book

• Risk appetite specification in the form of limits and triggers
• Breach management
• Price validation and profit recognition
• Sign off of positions and profit or loss
• Reporting and management of foreign exchange risk.

The policy further outlines the roles and responsibilities of ALCO, Market risk unit and foreign exchange traders in
managing this risk for the Bank.

(iii) Interest Rate Risk

Interest rate risk is the risk that arises from mismatches between the re-pricing dates on interest rate sensitive assets
and liabilities in the normal course of business activities. Treasury policy explains the types of interest rate risk together
with methods for measuring and managing it. The policy additionally outlines the roles and responsibilities of ALCO and
Treasury in their involvement with managing the risk. All these are disclosed both internally via reports to ALCO (monthly)
and Board Audit Risk and Compliance Committee (BARCC) on a quarterly basis and publicly through annual financial
reports.

All borrowings have been disclosed under note 32 and 33 to the financial statements. Interest rate sensitivity analysis is
disclosed under note 6.2.2.

(iv) Contingency Funding Plan

Treasury policy puts together a contingency funding plan that is aimed at providing a framework within which an effective
plan of action can be put in place in response to an adverse liquidity event. The plan stipulates:

• The points that will trigger implementation of the plan;

• Roles and responsibilities of Management;
• Team members during phase 1 and phase 2 of the crisis situation as defined in the policy; and
• An updated call tree during the liquidity crisis.
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24 PRINCIPAL RISKS AND UNCERTAINTIES

The key risks that may significantly impact the Bank’s short-to-medium term strategy are mainly Credit, Operational,
Compliance, Information and Communication Technology (ICT), Market, Liquidity, Strategic and Reputational risk. 

Below, we provide a description of these various risk categories that the Bank faces.

Operational risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from
external events, including the legal risk.

Fraud, whether internal or external, is also a subset of operational risk. The number and value of fraud cases within the
bank is quite low when compared to overall customer numbers, balances and transaction volumes. This is due to the Bank
being able to implement a number of stringent controls including preventive and detective measures.

Compliance risk

The risk to earnings and capital arising from violations of, or non-compliance with laws, rules, regulations, internal bank
policies and authority levels, prescribed practices and ethical standards. Management continually and robustly ensures
that the Bank complies with relevant laws, rules, regulatory requirements and other internal procedures via a number of
stringent controls.  

Credit risk

This is the risk resulting from the possibility that an asset in the form of a monetary claim against a counter party may
not result in a cash receipt (or equivalent) as per the terms of the contract. The Bank has robust controls in place to its
exposure to credit risk, including approval limits, disbursement controls, continuous monitoring and a robust risk appetite
statement.

ICT risk

Risk associated with the use of Information and Communication Technology to support business processes/standards. ICT
risk results from inadequate or failed ICT Strategy, ICT Project and Program or ICT Operations. The Bank has robust checks
in place to limit its exposure to ICT risk and performs regular monitoring to validate the efficacy of its ICT risk controls.

Market risk

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market risk comprises three type of risk: currency risk, interest rate risk and other price risk. The Bank has stringent controls
and monitoring mechanisms in place to limit its exposure to market risk.

Liquidity risk

Risk that the bank will encounter difficulity in meeting obligations associated with financial liabilities that are settled by
delivering cash or other financial asset. The Bank has stringent controls and monitoring mechanisms in place to limit its
exposure to liquidity risk.

Strategic risk

Strategic risk concerns the consequences that occur when the environment in which decisions that are hard to implement
quickly or reverse quickly result in an unattractive or adverse impact. Strategic risk ultimately has two elements: one is
doing the right thing at the right time (positioning) and the other is doing it well (execution). Strategic risk includes the risk
that the Bank’s strategy may be inappropriate to support sustainable future growth. The Bank has strong controls in place
to mitigate strategic risk, including regular strategic risk reviews at Board and Management levels.

Reputational risk

The risk that an activity, action or stance taken by the Bank’s officials will impair its image in the community and/or the
long-term trust placed in the Bank by its stakeholders resulting in the loss of business or the threat or legal action. The Bank
has stringent reputation risk controls in place including very tight controls on corporate communications and messaging.

REPEAT
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25 RISK MANAGEMENT AND INTERNAL CONTROL

The Board accepts final responsibility for the risk management and internal control systems of the Bank. It is the task of
management to ensure 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 behaviours 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 with 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 carries out risk and internal control assessment through the Board Audit, Risk and Compliance Committee. The
Board assessed the internal control systems throughout the financial year ended 31 December 2019 and is of the opinion
that they met the accepted criteria.

26 SERIOUS PREJUDICIAL MATTERS

In the opinion of the Directors, there are no serious unfavorable matters that can affect the Bank (2018: None).

27 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 Board of Directors has reasonable expectation that the
Bank has adequate resources to continue in operational existence for the foreseeable future.

28 MAJOR FINANCING TRANSACTIONS

During the year, the Group raised TZS 83.3 billion from the public through Issuance of Retail Bond. The Bank issued a TZS
25 billion 3-year bond, with a green shoe option of up to TZS 15 billion targeted towards the retail investor segment;
offering a gross coupon rate of 10% and issued at par. The coupon on the bond is paid quarterly. The offer period closed
on 8th July 2019 with market demand exceeding expectations. The bond was oversubscribed by 233%. This third tranche
issuance is part of the Medium-Term Note (MTN) program. The issuance of the bonds is part of the Bank’s strategy to
diversify its funding sources.

29 RESOURCES
Employees with appropriate skills and experience in running the business are a key resource available to the Bank and
they assist in pursuing the Bank’s business objectives.
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30 EMPLOYEES’ WELFARE

Management and employees’ relationship

The employee relations climate across the bank network has continued to be very stable evidenced by
healthy relations between management and trade unions with regular interactions and engagements
between the parties.

The establishment of the Employee Engagement Forum (SIKIKA) in June 2019 has proved to be an
important means to connect management to staff, champion employee engagement, receive new
business ideas from staff and find best ways to resolve staff and business matters proactively. In that
regard, there was no major unresolved grievance(s) from staff.

The Bank has continued to be 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.

Training facilities

During the year, the Bank spent TZS 2,996 million (2018: TZS 2,897 million) on staff training in order
to improve employees’ technical skills and hence effectiveness. Training programs have been and are
continually being developed to ensure employees are adequately trained at all levels. All employees have
some form of annual training to upgrade skills and enhance development.

Medical assistance

All staff and their dependents (spouse and up to four children) are availed medical services by the Bank
through an external service provider. From March 2018 (after moving to NHIF), staff own parents and
spouse’s parents are accepted under medical insurance.

Financial assistance to staff

TZS Loans are available to all confirmed employees depending on assessment, and discretion of Management
as to the need and circumstances. Loans provided to employees include personal loans, vehicle loans,
mortgage loans and other advances.

Persons with disabilities

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

Employees benefit plan

The Bank pays contributions to publicly administered pension plans on mandatory basis, which qualify
to be defined contribution plans.

REPEAT
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31 GENDER PARITY
At 31 December 2019, the Bank had 3,450 employees (2018: 3,450); out of which 1,793 (52%) were male and 1,657 (48%)
were female (2018: male 1,824 (53%), female 1,626 (47%)).

32 RELATED PARTY TRANSACTIONS

All related party transactions and balances are disclosed in Note 41 to the financial statements.

33 POLITICAL DONATIONS
The Bank did not make any political donations during the year (2018: NIL)

34 RELATIONSHIP WITH STAKEHOLDERS

The Bank continued to maintain a good relationship with all stakeholders including regulators.

The Bank also recognizes that effective communication with stakeholders is essential to good governance. Following
the publication of its financial results, the Bank engages with investors to present the results and answer questions
accordingly. Shareholders are encouraged to attend Annual General Meeting and participate in the affairs of the Bank.

35 CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Bank is deeply engaged in creating community values and dedicated to embracing goals which demonstrate our
sustainability commitment that are aligned with three pillars: education, health, and financial inclusion.

In 2019, the Bank allocated 1% of its’ previous year’s profit of after tax amounting to TZS 977 million (2018: TZS 1,486
million) to support social economic activities under the mentioned pillars.

Education

The Bank focused on education programs and initiatives that made a positive impact in Primary and Secondary schools
across the country addressing challenges of inadequate school desks and laboratory tools. Students with disabilities were
supported with learning aid devices as one of our approach in creating the right conditions and promoting equal access
to education for all.

NMB continues to not only implement financial capability initiatives and complementary services through Jifunze,
Jipange and Wajibika sessions that promote the uptake of Wajibu products (NMB Mtoto Account, NMB Chipukizi Account
and NMB Mwanachuo Account) but also building the financial corner-stone and resilience for customers by promoting
financial inclusion to all segments.

Health

The provision of health services in Tanzania it is important for the bank to work together with the Government to improve
the health sector. As a good partner, NMB Bank has always believed in touching and making a difference in people’s lives
by providing hospital beds, delivery beds and medical kits to health facilities that are in need especially in rural areas.

Natural Disaster Recovery

NMB Bank supported recovery efforts for the oil tank explosion in Morogoro by contributing mattresses, bedsheets,
gloves, blankets and assorted medicines to support the victims.
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35 CORPORATE SOCIAL RESPONSIBILITY (CSR) (CONTINUED)

Additional Support

Our staff are engaged in the CSR activities in several ways; from volunteering, donation to various charities, visiting
orphanages, the homeless and the sick through the matching up funds as top up to what they have contributed from
their own pockets (CSR staff volunteering program). Over 3,000 (87%) staff have participated in these initiatives.

We also introduced the DONATION BOX initiative to complement staff volunteering program, where staff give out used
toys, cloths, games, shoes, stationeries, inedible groceries, text books or anything in good quality to support the less
privileged groups. We have these boxes kept at every floor in our head office at the branches.

Staff have participated in CSR staff initiatives and the NMB CSR program has matched employees’ donations amounting
to TZS 400 million in total.

Our CSR projects are extended to communities where we open new branches in areas of health, education and financial
capability trainings.

36 AUDITORS
PricewaterhouseCoopers was the auditor of the Bank for the year ended 31 December 2019 and have expressed their
willingness to continue in office in accordance with Section 170(2) of the Companies Act, No.12 of 2002. Appointment of
auditors for the year ending 31 December 2020 will be done at the Annual General Meeting and the process will comply
with the requirements of Section 6 of the Banking and Financial Institutions (External Auditors) Regulations, 2014.

BY ORDER OF THE BOARD

Margaret Ikongo
Director
30th March, 2020

REPEAT
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STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Companies Act, No.12 of 2002 requires Directors to prepare financial statements for each financial year that give a true and
fair view of the state of affairs of the Bank and of the Group as at the end of the financial year and of the profit or loss for the
year. It also requires the Directors to ensure that the Bank and its subsidiary keeps proper accounting records that disclose, with
reasonable accuracy, the financial position of the Bank and of the Group. They are also responsible for safeguarding the assets
of the Bank and of the Group and hence taking reasonable steps for the prevention and detection of fraud, error and other
irregularities.

The Directors accept responsibility for the 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, No.12 of 2002.

The Directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the
Bank and of the Group and of the profit in accordance with International Financial Reporting Standards (IFRS). 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 designing, implementing and maintaining internal control relevant to the preparation and fair presentation
of financial statements that are free from material misstatement whether due to fraud or error.

Nothing has come to the attention of the Directors to indicate that the Bank and its subsidiary will not remain a going concern
for at least twelve months from the date of this statement.

Signed on behalf of the Board of Directors by:

Margaret Ikongo
Director
30th March, 2020
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DECLARATION OF THE CHIEF FINANCIAL OFFICER

The National Board of Accountants and Auditors (NBAA) according to the power conferred under the Auditors and Accountants
(Registration) Act. No. 33 of 1972, as amended by Act No. 2 of 1995, requires financial statements to be accompanied with a
declaration issued by the Head of Finance/Accounting responsible for the preparation of financial statements of the entity
concerned.

It is the duty of a Professional Accountant to assist the Board of Directors to discharge the responsibility of preparing financial
statements of an entity showing a true and fair view of the entity’s financial position and performance in accordance with applicable
International Financial Reporting Standards (IFRS) and statutory financial reporting requirements. Full legal responsibility for the
preparation of financial statements rests with the Board of Directors’ as per the Statement of Directors’ Responsibility on page 81.

I, Benedicto M. Baragomwa, being the Acting Chief Financial Officer of NMB Bank Plc hereby acknowledge my responsibility of
ensuring that the consolidated and the Bank’s financial statements for the year ended 31 December 2019 have been prepared
in compliance with the International Financial Reporting Standards (IFRS) and the requirements of the Companies Act, No.12 of
2002 and Banking and Financial Institutions Act (BFIA), 2006 and its regulations.

I thus confirm that the financial statements give a true and fair view of the financial performance of NMB Bank Plc and its subsidiary
for the year ended on 31 December 2019 and its financial position as on that date and that they have been prepared based on
properly maintained financial records.

CPA Benedicto M. Baragomwa

Acting Chief Financial Officer
NBAA Membership number: ACPA 2317
30th March, 2020

REPEAT
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NMB BANK PLC

Report on the audit of the Consolidated and Bank Financial Statements

Our opinion

In our opinion, the Consolidated and Bank financial statements give a true and fair view of the Consolidated and Bank financial
position of NMB Bank Plc (the Bank) and its subsidiaries (together the Group) as at 31 December 2019, and of the Consolidated
and Bank financial performance and Consolidated and Bank cash flows for the year then ended in accordance with International
Financial Reporting Standards and the requirements of the Companies Act, No. 12 of 2002.

What we have audited

NMB Bank Plc’s Consolidated and Bank financial statements as set out on pages 89 to 210 comprise:

• The Consolidated and Bank statements of financial position as at 31 December 2019;

• The Consolidated and Bank statements of profit or loss and other comprehensive income for the year then ended;

• The Consolidated and Bank statements of changes in equity for the year then ended;

• The Consolidated and Bank statements of cash flows for the year then ended; and

• The notes to the financial statements, which include significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the Consolidated and Bank financial statements section of
our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group and Bank in accordance with the IESBA International Code of Ethics for Professional
Accountants (including International Independence Standards) (IESBA Code) and the ethical requirements of the National Board
of Accountants and Auditors (NBAA) that are relevant to our audit of the financial statements in Tanzania. We have fulfilled our
other ethical responsibilities in accordance with the IESBA Code and the ethical requirements of the NBAA.

Key audit matter

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Consolidated
and Bank financial statements of the current period. These matters were addressed in the context of our audit of the Consolidated
and Bank financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
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Report on the audit of the Consolidated and Bank Financial Statements (Continued)

Key audit matter How our audit addressed the key audit matter

• We tested the reasonableness of the quantitative and qualitative

criteria used in the classification of loans and advances.

Impairment of loans and advances to customers

As the quantitative basis of classification of loans and advances
is reliant on information systems, we understood and tested
key information technology general and application controls
Management exercises significant judgement using including the calculation of the number of days past due.
subjective assumptions over both when and how
much to record as loan impairment.
• We tested management’s application of the qualitative criteria
The Bank applies IFRS 9 in estimating the expected loss. in the classification of loans and advances.
Judgement is applied to determine the appropriate
parameters and assumptions used to estimate the • We tested reasonableness of portfolio segmentation in the view
provisions in the following areas: of sub portfolio characteristics and associated credit risks.

• We tested the reliability, accuracy and reasonableness of

information used for estimating the exposure at default,
probability of default and loss given default.

• We tested the reasonableness of the forward-looking

parameters considered by management in establishing
• Quantitative and qualitative criteria for
projected probabilities of default.
classification of loans and advances based on
assessment of factors contributing to significant • We challenged management’s basis for establishing the
increase in credit risk and default; correlation between forward looking parameters and the bank’s
non-performing loan trends.
• We tested management use of scenarios in development of
•  Determination of the probability of defaults;
forward-looking estimates.

•  Determination of the probability of defaults; • We tested accuracy of the loss given default for the secured and
unsecured loan portfolio.
• Determination of exposure at default;
• We tested the reasonableness of the expected cash flows and
challenged management’s assumptions of recovery estimates
•  Determination of the forward-looking parameters for unsecured facilities.
to be incorporated in the estimation of expected
credit losses; and

• Determination of the loss given default which

include estimation of the expected cash flows and • We tested recovery costs and recovery periods used to estimate
recovery rates. the recoverable amount of collateral for secured facilities.

The value of the loans and advances to customers is

also significant. The detailed disclosures are included
in Note Note 3(f ), Note 4(a), Note 6.1 and Note 20 of the
financial statements

REPEAT
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Report on the audit of the Consolidated and Bank Financial Statements (Continued)

Other information

The directors are responsible for the other information. The other information comprises Index to the notes, List of Abbreviations,
Corporate Information, Report of the Directors, Statement of Directors’ responsibilities and Declaration of the Chief Financial
Officer (but does not include the financial statements and our auditor’s report thereon), which we obtained prior to the date of
this auditor’s report, and CFO Report and Financial Highlights, Value Added Statement, Chairman’s Report, Managing Director’s
Report, Business and Operational Review, Sustainability and Corporate Social Responsibility, Corporate governance, and other
additional Corporate information, which is expected to be made available to us after that date. 

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon. 

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. 

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.

When we read CFO Report and Financial Highlights, Value Added Statement, Chairman’s Report, Managing Director’s Report,
Business and Operational Review, Sustainability and Corporate Social Responsibility, Corporate governance, and other additional
Corporate information, if we conclude that there is a material misstatement therein, we are required to communicate the matter
to those charged with governance.

Responsibilities of the directors for the Consolidated and Bank financial statements

The directors are responsible for the preparation of the Consolidated and Bank financial statements that give a true and fair view
in accordance with International Financial Reporting Standards and the requirements of the Companies Act, No. 12 of 2002, and
for such internal control as the directors determine is necessary to enable the preparation of Consolidated and Bank financial
statements that are free from material misstatement, whether due to fraud or error.

In preparing the Consolidated and Bank financial statements, the directors are responsible for assessing the Group and the Bank’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group and/or the Bank or to cease operations, or have no
realistic alternative but to do so.

The directors are responsible for overseeing the Group’s financial reporting process.
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Auditor’s responsibilities for the audit of the consolidated and bank financial statements

Our objectives are to obtain reasonable assurance about whether the Consolidated and Bank financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these Consolidated and Bank financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:
• Identify and assess the risks of material misstatement of the Consolidated and Bank financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Bank’s
internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s and the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we
are required to draw attention in our auditor’s report to the related disclosures in the Consolidated and Bank financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and / or Bank
to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Consolidated and Bank financial statements, including
the disclosures, and whether the Consolidated and Bank financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the group to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.

REPEAT
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Auditor’s responsibilities for the audit of the consolidated and bank financial statements (Continued)

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of
the Consolidated and Bank financial statements of the current period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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Report on other legal and regulatory requirements

This report, including the opinion, has been prepared for, and only for, the Bank’s members as a body in accordance with the
Companies Act, No. 12 of 2002 and for no other purposes.

As required by the Companies Act, No. 12 of 2002, we are also required to report to you if, in our opinion, the Directors’ Report
is not consistent with the financial statements, if the Bank has not kept proper accounting records, if the financial statements
are not in agreement with the accounting records, if we have not received all the information and explanations we require for
our audit, or if information specified by law regarding directors’ remuneration and transactions with the Bank is not disclosed. In
respect of the foregoing requirements, we have no matter to report.

Cletus Kiyuga ACPA-PP No. 1981

For and on behalf of PricewaterhouseCoopers
Certified Public Accountants
Dar es Salaam
Date: 31 March 2020

REPEAT
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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Note 2019 2018

TZS’ TZS’
Millions Millions

Interest income 7(a) 653,195 600,555

Interest expense 8(a) (130,820) (109,615)
Net interest income 522,375 490,940
Impairment charge – loans and advances 20(a) (98,850) (135,256)
Impairment charge – off-balance sheet exposures 6.1.5 (e) (1,560) (2,049)
Total impairment charge (100,410) (137,305)
Net interest income after impairment 421,965 353,635
Fee and commission income 10 215,816 203,003
Fee and commission expense 10 (46,663) (36,721)
Net fee and commission income 169,153 166,282
Trading income 1,100 1,033
Foreign exchange income 9(a) 24,454 20,861
Other income 11 9,702 7,647
Total operating income 626,374 549,458
Employee benefits expense 12 (182,579) (166,149)
Other operating expenses 13(a) (154,567) (183,043)
Depreciation and amortization 14(a) (73,367) (55,904)
Total operating expenses (410,513) (405,096)

Profit before income tax 215,861 144,362

Income tax expense 15(a) (71,122) (43,401)
Profit for the year 144,739 100,961
Attributable to  
Owners of the Bank 144,619 100,510
Non-controlling interests 120 451
Profit for the year 144,739 100,961
 
Other comprehensive income, net of tax  
Items that may subsequently be reclassified to profit or loss:  
 
Fair value gain on financial assets at FVOCI – net of tax 35 (v) 168 182
Total comprehensive income for the year 144,907 101,143

Attributable to:  
Owners of the Bank 144,787 100,692
Non-controlling interests 120 451

Total comprehensive income for the year 144,907 101,143

Basic and diluted earnings per share (TZS) 16(a) 289.24 201.02
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BANK’S STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Note 2019 2018

TZS’ TZS’
Millions Millions

Interest income 7(b) 653,974 601,638

Interest expense 8(b) (136,333) (109,615)

Net interest income 517,641 492,023

 
Impairment charge – loans and advances 20(b) (98,850) (135,256)
Impairment charge – off-balance sheet exposures 6.1.5 (e) (1,560) (2,049)
Total Impairment charge (100,410) (137,305)
 
Net interest income after impairment 417,231 354,718
 
Fee and commission income 10 215,816 203,003
Fee and commission expense 10 (46,663) (36,721)
 
Net fee and commission income 169,153 166,282
 
Trading income 1,100 1,033
Foreign exchange income 9(b) 24,454 20,914
Other income 11 9,702 7,647
Total operating income 621,640 550,594
 
Employee benefits expense 12 (182,579) (166,149)
Other operating expenses 13(b) (154,365) (188,871)
Depreciation and amortization 14(b) (73,608) (53,933)
   
Total operating expenses (410,552) (408,953)
 
Profit before tax 211,088 141,641
 
Income tax expense 15(b) (68,921) (43,978)
 
Profit for the year 142,167 97,663

Other comprehensive income, net of tax

Items that may subsequently be reclassified to profit or loss:
Fair value gain on financial assets at FVOCI – net of tax 168 182
Total comprehensive income for the year 142,335 97,845

Basic and diluted earnings per share (TZS) (Note 16(b) 284.33 195.33

REPEAT
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER

Note 2019 2018

TZS’ TZS’
Millions Millions
Assets
Cash and balances with Bank of Tanzania 18 1,341,140 1,070,422
Placements and balances with other banks 19 264,326 174,391
Loans and advances to customers 20(a) 3,590,006 3,241,401
Investment in government securities  
- At amortised cost 21(a) 744,527   724,943
- At FVOCI 21(b) 17,027 15,242
Equity investment at FVOCI 22(a) 2,920 2,920
Other assets 23(a) 91,324 84,755
Current tax assets 15(c) - 13,066
Property and equipment 24(a) 239,169 265,700
Intangible assets 25 20,779 21,241
Right-of-use assets 26(a) 29,421 -
Deferred tax assets 27(a) 76,788 62,132
 
Total assets 6,417,427 5,676,213
 
Liabilities  
 
Deposits due to other banks 29 33,446 20,770
Deposits from customers 28(a) 4,916,551 4,315,220
Other liabilities 30(a) 108,304 107,149
Lease liabilities 26(c) 27,985 -
Provisions 31 2,230 3,519
Borrowings 32 276,445 301,388
Subordinated debt 33 70,998 70,972
Current tax liabilities 15(c) 12,366 -

Total liabilities 5,448,325 4,819,018

Capital and reserves  

 
Share capital 35 (i) 20,000 20,000
Retained earnings 944,472 799,128
General reserve 35 (iv) - 33,725
Fair valuation reserve 35 (v) 1,049 881
 
Capital and reserves attributable to owners of the parent 965,521 853,734

Non-controlling interest 3,581 3,461

 
Total equity 969,102 857,195
 
Total equity and liabilities 6,417,427 5,676,213

The financial statements on pages 89 to 210 were approved and authorized for issue by the Board of directors and were signed
on its behalf by:

30th March, 2020

Margaret Ikongo
Director
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BANK’S STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER

Note 2019 2018

TZS’ TZS’
Millions Millions
Assets
Cash and balances with Bank of Tanzania 18 1,341,140 1,070,422
Placements and balances with other banks 19 264,326 174,391
Loans and advances to customers 20(b) 3,595,688 3,251,794
Investment in government securities  
- At amortised cost 21(a) 744,527   724,943
- Fair value through other comprehensive income 21(b) 17,027 15,242
Equity investment at FVOCI 22(a) 2,920 2,920
Investment in subsidiary 22(b) 39,639 39,639
Other assets 23(b) 87,657 78,368
Current tax assets 15(d) - 13,188
Property and equipment 24(b) 203,044 227,607
Intangible assets 25 20,779 21,241
Right-of-use assets 26(b) 162,184 -
Deferred tax assets 27(b) 77,084 61,229
 
Total assets 6,556,015 5,680,984

Liabilities  
 
Deposits due to other banks 29 33,446 20,770
Deposits from customers 28(b) 4,922,278 4,327,607
Other liabilities 30(b) 106,896 93,674
Lease liabilities 26(d) 156,030 -
Provisions 31 2,230 3,519
Borrowings 32 276,445 301,388
Subordinated debt 33 70,998 70,972
Current tax liabilities 15(d) 15,303 -
 
Total liabilities 5,583,626 4,817,930

Capital and reserves

Share capital 35 (i) 20,000 20,000

Retained earnings 951,340 808,448
General reserve 35 (iv) - 33,725
Fair valuation reserve 35 (v) 1,049 881
 
Total equity 972,389 863,054

Total equity and liabilities 6,556,015 5,680,984

The financial statements on pages 89 to 210 were approved and authorised for issue by the Board of directors and were signed
on its behalf by:

30th March, 2020

Margaret Ikongo
Director

REPEAT
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to owners of the parent

Fair Non-
Share Retained *General Total
capital earnings valuation Reserve Total controlling
reserve equity
interest

TZS’ TZS’ TZS’ TZS’ TZS’ TZS’ TZS’

Millions Millions Millions Millions Millions Millions Millions

At 1 January 2019 20,000 799,128 881 33,725 853,734 3,461 857,195

Profit for the year - 144,619 - - 144,619 120 144,739

Other comprehensive
       
income (OCI)
Gain of fair valuation - - 240 - 240 - 240

Deferred tax on OCI - - (72) - (72) - (72)

             
Total comprehensive
20,000 144,619 168 - 144,787 120 144,907
income

Transfer to retained
- 33,725 - (33,725) - - -
earnings
Transactions with owners        
Dividends paid for the
- (33,000) - - (33,000) - (33,000)
year 2018
             
At 31 December 2019 20,000 944,472 1,049 - 965,521 3,581 969,102

* General Reserve represents 1% provision charged on all current credit accommodation and other risk assets as required
by the Bank of Tanzania regulations, 2014. General Reserve is created by transferring the amount from retained earnings.
This reserve is not available for distribution. During the year, effective from July 2019, the Bank of Tanzania issued a circular
removing the requirement to maintain the reserve.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

Attributable to owners of the parent

Fair Non-
Share Retained *General Total
capital earnings valuation Reserve Total controlling
reserve equity
interest

TZS’ TZS’ TZS’ TZS’ TZS’ TZS’ TZS’

Millions Millions Millions Millions Millions Millions Millions

At 1 January 2018 20,000   737,494 699 26,849 785,042 3,010 788,052

Profit for the year - 100,510 - - 100,510 451 100,961

Other comprehensive
income (OCI)
Gain of fair valuation - - 260 - 260 - 260

Deferred tax on OCI - - (78) - (78) - (78)

Total comprehensive
- 100,510 182 100,692 451 101,143
income

Transfer to General
- (6,876) - 6,876 - - -
Reserve
Transactions with owners
Dividends paid for the
- (32,000) - - (32,000) - (32,000)
year 2017

At 31 December 2018 20,000 799,128 881 33,725 853,734 3,461 857,195

** General Reserve represents 1% provision charged on all current credit accommodation and other risk assets as required
by the Bank of Tanzania regulations, 2014. General Reserve is created by transferring the amount from retained earnings.
This reserve is not available for distribution. During the year, effective from July 2019, the Bank of Tanzania issued a circular
removing the requirement to maintain the reserve.

REPEAT
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BANK’S STATEMENT OF CHANGES IN EQUITY

Share Retained Fair valuation *General Total

capital earnings reserve reserve

TZS’ TZS’ TZS’

TZS’ Millions TZS’ Millions
Millions Millions Millions

At 1 January 2019 20,000   808,448 881 33,725 863,054

Comprehensive income
Profit for the year - 142,167 - - 142,167
Other comprehensive income (OCI)        
Gain of fair valuation - - 240 - 240
Deferred tax on OCI - - (72) - (72)
Total comprehensive income - 142,167 168 - 142,335

Transfer to retained earnings - 33,725 - (33,725) -

Transactions with owners         -
Dividends paid for the year 2018 - (33,000) - - (33,000)
At 31 December 2019 20,000 951,340 1,049  -  972,389

At 1 January 2018 20,000   749,661 699 26,849 797,209

At 1 January 2018 20,000   749,661 699 26,849 797,209

Comprehensive income
Profit for the year - 97,663 - - 97,663
Other comprehensive income (OCI)
Gain of fair valuation - 260 - 260
Deferred tax on OCI - (78) - (78)
Total comprehensive income - 97,663 182 - 97,845

Transfer from General Reserve - (6,876) - 6,876 -

Transactions with owners
Dividends paid for the year 2017 - (32,000) - - (32,000)

At 31 December 2018 20,000 808,448 881 33,725 863,054

* General Reserve represents 1% provision charged on all current credit accommodation and other risk assets as required by
the Bank of Tanzania regulations.
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CONSOLIDATED STATEMENT OF CASH FLOWS

2019 2018
Note TZS’ TZS’
Millions Millions

Cash generated from/(utilized in) operations 37(a) 576,972 (213,710)

Tax paid 15(c) (60,418) (68,480)

Net cash generated from/(utilized in) operations 516,554 (282,190)

Cash flows from investing activities

Proceeds from government securities 641,480 791,522
Investment in government securities (659,892) (608,848)
Purchase of property and equipment 24(a) (12,649) (25,530)
Purchase of intangible assets 25 (10,967) (11,930)
Proceeds on disposal of property and equipment 292 365
 
Net cash (utilized in) /generated from investing activities (41,736) 145,579

Cash flows from financing activities

Proceeds received from borrowings 88,349 114,565
Principal repaid on borrowings (113,426) (83,730)
Interest paid on borrowings (33,782) (28,765)
Dividends paid 17 (33,000) (32,000)
Repayment of lease liabilities 26(c) (12,243) -
   
Net cash used in financing activities (104,102) (29,930)

Net increase/(decrease) in cash and cash equivalents 370,716 (166,541)

Cash and cash equivalents at beginning of the year 842,714 1,002,394

Effect of movement in foreign exchange (60) 6,861

Cash and cash equivalents at end of the year 36 1,213,370 842,714

Analysis of cash and cash equivalents at end of the year:

Cash in hand 498,231 402,709

Balances with Bank of Tanzania (excluding SMR) 450,813 265,614
Deposits and balances due from banking institutions 264,326 174,391
1,213,370 842,714

REPEAT
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BANK’S STATEMENT OF CASH FLOWS

2019 2018
Note TZS’ TZS’
Millions Millions

Cash generated from/(utilised in) operations 37(b) 572,911 (213,710)

 
Tax paid 15(d) (56,357) (68,480)

Net cash generated from/(utilised in)operations 516,554 (282,190)

Cash flows from investing activities

Proceeds from government securities 641,480 791,522
Investment in government securities (659,892) (608,848)
Purchase of property and equipment 24(b) (12,649) (25,530)
Purchase of intangible assets 25 (10,967) (11,930)
Proceeds on disposal of property and equipment 292 365
 
Net cash (utilised in) /generated from investing activities (41,736) 145,579

Cash flows from financing activities

Proceeds from borrowings 88,349 114,565
Principal paid on borrowings (113,426) (83,730)
Interest paid on borrowings (33,782) (28,765)
Dividends paid 17 (33,000) (32,000)
Repayment of lease liabilities 26(d) (12,243) -
 
Net cash used in financing activities (104,102) (29,930)

Net increase/(decrease) in cash and cash equivalents 370,716 (166,541)

Cash and cash equivalents at the beginning of the year 842,714 1,002,394
Effect of movement in foreign exchange (60) 6,861

Cash and cash equivalents end of the year 36 1,213,370 842,714

Analysis of cash and cash equivalents at end of the year:

Cash in hand 498,231 402,709

Balances with Bank of Tanzania (excluding SMR) 450,813 265,614
Deposits and balances due from banking institutions 264,326 174,391
1,213,370 842,714
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. REPORTING ENTITY

NMB Bank Plc (the “Bank) is a public limited liability company and is incorporated and domiciled in the United Republic of
Tanzania. The address of its registered office is as disclosed under corporate information.

The Bank is listed on the Dar es Salaam Stock Exchange (DSE). The Bank has equity investments in Tanzania Mortgage
Refinance Company Limited (TMRC) and a subsidiary company named Upanga Joint Venture Company (UJVC) Limited.

2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

The principal accounting policies applied in the preparation of these consolidated and Bank financial statements are set
out below. These policies have been consistently applied to all periods presented, unless otherwise stated.

(a) Basis of preparation

The consolidated and Bank financial statements of NMB Bank Plc have been prepared in accordance with International
Financial Reporting Standards (IFRS) and interpretations issued by IFRS Interpretations Committee (IFRS IC) applicable to
companies reporting under IFRS. The Consolidated and Bank financial statements have been prepared under the historical
cost convention, as modified by the revaluation of debt and equity instruments designated at fair value through other
comprehensive income.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It
also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the
consolidated and Bank financial statements are disclosed in Note 4.

(b) Changes in accounting policy and disclosures

i) New standards amendments and interpretations adopted by the Group and Bank

The following standards and interpretations became effective in the current year and were relevant to the Group and had
material impact on the amounts reported in these financial statements.

IFRS 16 Leases

The Group has adopted IFRS 16 Leases retrospectively from 1 January 2019 (date of initial application), but has not restated
comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard. The
reclassifications and the adjustments arising from the new leasing rules are therefore recognized in the opening balance
sheet on 1 January 2019.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (CONTINUED)

(b) Changes in accounting policy and disclosures (continued)

i) New standards amendments and interpretations adopted by the Group and Bank (continued)

On adoption of IFRS 16, the Group and Bank recognized as lease liabilities TZS 37 billion and TZS 160 billion, respectively,
in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental
borrowing rate as of 1 January 2019. The weighted average lessee’s incremental borrowing rate applied to the lease
liabilities on that date was 4.5% and 11% for USD and TZS lease contracts respectively. The rates are derived from the
average borrowing cost of the Bank for similar loans of similar loan term.

(i) Practical expedients applied

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

• Applying a single discount rate to a portfolio of leases with reasonably similar characteristics
• Relying on previous assessments on whether leases are onerous as an alternative to performing
• An impairment review – there were no onerous contracts as at 1 January 2019
• Excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application, and
• Using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application.
Instead, for contracts entered into before the date of initial application, the Group relied on its assessment made applying
IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.

(ii) Measurement of lease liabilities GROUP BANK

TZS Million TZS Million

Operating lease commitment disclosed as at 31 December 2018 41,589 425,105

Discounted using the lessee’s incremental borrowing rate at the date of initial
34,819 157,351
application
Less: Short-term leases (274) (274)
Lease liabilities recognized as at 1 January 2019 34,545 157,077

Current - 13,146
Non-current 34,545 144,205
34,545 157,077
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (CONTINUED)

(b) Changes in accounting policy and disclosures (continued)

i) New standards amendments and interpretations adopted by the Group and Bank (continued)

(iii) Measurement of right-of-use assets

The right-of-use assets for property leases were measured at the amount equal to the lease liability, adjusted by the
amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position
as at 31 December 2018.

(iv) Adjustments recognised in the statement of financial position on 1 January 2019

The change in accounting policy affected the following items in the statement of financial position on 1 January 2019:

GROUP BANK
TZS Millions TZS Millions

Establishment of right-of-use assets of 37,707 172,681

Reduction in prepayment by 3,162 15,604
Establishment of lease liability 34,545 157,077

There was no impact on opening retained earnings on 1 January 2019

Impact on Capital

The recognition of the right of use assets and lease liabilities on Statement of Financial Position will have an impact on the
existing framework for calculation of regulatory capital and leverage ratios by the increased amount of assets and liabilities
from lease transaction. For regulatory capital purposes, right of use of asset is treated as a tangible asset and apply a risk
weight consistent with the risk weight that would be applied to underlying asset.

The adoption of IFRS 16 as at 1 January resulted in decrease of tier 1 and tier 2 capital reported as at 31 December 2018 to
15.8% and 17.72% respectively.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (CONTINUED)

(b) Changes in accounting policy and disclosures (continued)

i) New standards amendments and interpretations adopted by the Group and Bank (continued)

The following standards and interpretations became effective from 1 January 2019 and were relevant to the Group but
had no material impact on the amounts reported in these financial statements.

Title Key requirements

Prepayment Features with The narrow-scope amendment covers two issues:
Negative Compensation –
Amendments to IFRS 9 The amendments allow companies to measure particular pre-payable financial assets
with so-called negative compensation at amortised cost or at fair value through other
comprehensive income if a specified condition is met—instead of at fair value through
profit or loss. It is likely to have the biggest impact on banks and other financial services
entities.

How to account for the modification of a financial liability. The amendment confirms
that most such modifications will result in immediate recognition of a gain or loss. This
is a change from common practice under IAS 39 today and will affect all kinds of entities
that have renegotiated borrowings.

These amendments had no impact on the consolidated financial statements of the

Group.

Plan Amendment, These amendments require an entity to:

Curtailment or Settlement –
Amendments to IAS 19 • Use updated assumptions to determine current service cost and net interest for
the remainder of the period after a plan amendment, curtailment or settlement;
and

• Recognise in profit or loss as part of past service cost, or a gain or loss on

settlement, any reduction in a surplus (recognised or unrecognised). This
reflects the substance of the transaction, because a surplus that has been used
to settle an obligation or provide additional benefits is recovered. The impact
on the asset ceiling is recognised in other comprehensive income, and it is not
reclassified to profit or loss. The impact of the amendments is to confirm that
these effects are not offset.

The amendment had no impact on the consolidated financial statements of the Group.
Long-term Interests in The amendments clarified that companies account for long-term interests in an associate
Associates and Joint or joint venture, to which the equity method is not applied, using IFRS 9.
Ventures – Amendments to
IAS 28 This amendment had no impact on the consolidated financial statements of the Group.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (CONTINUED)

(b) Changes in accounting policy and disclosures (continued)

i) New standards amendments and interpretations adopted by the Group and Bank (continued)

Title Key requirements

Annual Improvements to The following improvements were finalized in December 2017:
IFRS Standards 2015-2017
Cycle • IFRS 3 Business Combinations – clarified that obtaining control of a business
that is a joint operation is a business combination achieved in stages.

• IFRS 11 Joint Arrangements – clarified that the party obtaining joint control of
a business that is a joint operation should not re-measure its previously held
interest in the joint operation.

• IAS 12 Disclosure of Interests in Other Entities – clarified that the income

tax consequences of dividends on financial instruments classified as equity
should be recognised according to where the past transactions or events that
generated distributable profits were recognised.

• IAS 23 Borrowing Costs – clarified that, if a specific borrowing remains

outstanding after the related qualifying asset is ready for its intended use or
sale, it becomes part of general borrowings.
These amendments had no impact on the consolidated financial statements of the
Group.
Interpretation 23 The interpretation explains how to recognize and measure deferred and current income
Uncertainty over Income tax assets and liabilities where there is uncertainty over a tax treatment. In particular, it
Tax Treatments discusses:

• How to determine the appropriate unit of account, and that each uncertain tax
treatment should be considered separately or together as a Group, depending
on which approach better predicts the resolution of the uncertainty

• That the entity should assume a tax authority will examine the uncertain tax
treatments and have full knowledge of all related information, ie that detection
risk should be ignored

• That the entity should reflect the effect of the uncertainty in its income tax
accounting when it is not probable that the tax authorities will accept the
treatment

• That the impact of the uncertainty should be measured using either the most
likely amount or the expected value method, depending on which method
better predicts the resolution of the uncertainty, and

• That the judgements and estimates made must be reassessed whenever

circumstances have changed or there is new information that affects the
judgements.
The Interpretation did not have a significant impact on the consolidated financial
statements of the Group. The Group is continues to provide information about
judgments and estimates made in determination of liabilities arising from uncertain tax
positions. Refer note 4(e).

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (CONTINUED)

(b) Changes in accounting policy and disclosures (continued)

(ii) New standards and interpretations that are not yet effective and have not been early adopted.

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December
2019 reporting periods and have not been early adopted by the Group. These standards are not expected to have a
material impact on the Group in the current or future reporting periods and on foreseeable future transactions

Title Key requirements Effective date

Definition of Material – The IASB has made amendments to IAS 1 Presentation of 1 January 2020
Amendments to IAS 1 and Financial Statements and IAS 8 Accounting Policies, Changes
IAS 8 in Accounting Estimates and Errors which use a consistent
definition of materiality throughout International Financial
Reporting Standards and the Conceptual Framework for
Financial Reporting, clarify when information is material and
incorporate some of the guidance in IAS 1 about immaterial
information.

In particular, the amendments clarify:

• That the reference to obscuring information addresses

situations in which the effect is similar to omitting
or misstating that information, and that an entity
assesses materiality in the context of the financial
statements as a whole, and

• The meaning of ‘primary users of general purpose

financial statements’ to whom those financial
statements are directed, by defining them as ‘existing
and potential investors, lenders and other creditors’
that must rely on general purpose financial statements
for much of the financial information they need.

Amendments to IFRS 9, These amendments provide certain reliefs in connection with 1 January 2020
Financial Instruments, interest rate benchmark reform (IBOR). The reliefs relate to
hedge accounting and have the effect that IBOR should not
IAS 39, Financial generally cause hedge accounting to terminate. However, any
Instruments: Recognition hedge ineffectiveness should continue to be recorded in the
and Measurement and IFRS income statement.
7, Financial Instruments:
Disclosure – Interest rate
benchmark reform
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (CONTINUED)

(b) Changes in accounting policy and disclosures (continued)

(ii) New standards and interpretations that are not yet effective and have not been early adopted (Continued).
Title Key requirements Effective date
IFRS 17 Insurance IFRS 17 was issued in May 2017 as replacement for IFRS 4 Insurance 1 January 2020
Contracts Contracts. It requires a current measurement model where estimates
are re-measured in each reporting period. Contracts are measured
using the building blocks of:

• Discounted probability-weighted cash flows

• An explicit risk adjustment, and
• A contractual service margin (CSM) representing the
unearned profit of the contract which is recognized as
revenue over the coverage period.
The standard allows a choice between recognising changes in
discount rates either in the statement of profit or loss or directly
in other comprehensive income. The choice is likely to reflect how
insurers account for their financial assets under IFRS 9.
An optional, simplified premium allocation approach is permitted for
the liability for the remaining coverage for short duration contracts,
which are often written by non-life insurers.
There is a modification of the general measurement model called the
‘variable fee approach’ for certain contracts written by life insurers
where policyholders share in the returns from underlying items.
When applying the variable fee approach, the entity’s share of the
fair value changes of the underlying items is included in the CSM.
The results of insurers using this model are therefore likely to be less
volatile than under the general model.
The new rules will affect the financial statements and key performance
indicators of all entities that issue insurance contracts or investment
contracts with discretionary participation features.

Definition of a Business The amended definition of a business requires an acquisition to 1 January 2020
– Amendments to IFRS include an input and a substantive process that together significantly
3 contribute to the ability to create outputs. The definition of the term
‘outputs’ is amended to focus on goods and services provided to
customers, generating investment income and other income, and
it excludes returns in the form of lower costs and other economic
benefits.

The amendments will likely result in more acquisitions being

accounted for as asset acquisitions.

There are no other standards that are not yet effective and that would be expected to have a material impact on the
entity in the current or future reporting periods and on foreseeable future transactions.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SIGNIFICANT ACCOUNTING POLICIES

(a) Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Bank’s Management
Team, which is chief operating decision maker. Information about segment operations is provided under Note 5.

(b) Principles of consolidation and equity accounting

The consolidated financial statements incorporate the financial statements of the Bank and an entity controlled by the
Bank (its subsidiary). The financial statements of the Bank and its subsidiary are made up to 31 December 2019.

I. Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity
when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group.

Intercompany transactions, balances and unrealized gains on transactions between Group companies are eliminated.
Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement
of profit or loss and other comprehensive income, statement of changes in equity and statement of financial position,
respectively.

II. Changes in ownership interests in subsidiaries without change of control

The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with
equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of
the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the
amount of the adjustment to non-controlling interests and any consideration paid or received is recognized in a separate
reserve within equity attributable to owners of the Group.

III. Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when
control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount
for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In
addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for
as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized
in other comprehensive income are reclassified to profit or loss.

IV. Separate financial statements

In the separate financial statements, investment in subsidiary is accounted for at cost less impairment.
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Interest income and expense

Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except
for:

I. Purchased or originated credit-impaired (POCI) financial assets, for which the original credit – adjusted effective is
applied to the amortised cost of the financial asset.

II. Financial assets that are not ‘POCI’ but have subsequently become credit-impaired (or stage 3), for which interest
revenue is calculated by applying the effective interest rate to their amortised cost (i.e. net of the expected credit
loss provision).

Interest income and expense for all interest-bearing financial instruments are recognised within ‘interest income’ or
‘interest expense’ in profit or loss using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and
of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or,
when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. The calculation
includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate,
transaction costs and all other premiums or discounts.

Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest
income is recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the
impairment loss.

(d) Fee and commission income and expense

Fees integral to the effective interest rate include origination fees received or paid by the entity relating to the creation
or acquisition of a financial asset or issuance of a financial liability, for example fees for evaluating creditworthiness,
evaluating and recording guarantees or collateral, negotiating the terms of the instrument and for processing transaction
documents. Commitment fees received by the Group to originate loans at market interest rates are integral to the effective
interest rate if it is probable that the Group will enter into a specific lending arrangement and does not expect to sell the
resulting loan shortly after origination. The Group does not designate loan commitments as financial liabilities at fair value
through profit or loss.

Fee and commission income is recognised at an amount that reflects the consideration to which the Bank expects to be
entitled in exchange for providing the services. The performance obligations, as well as the timing of their satisfaction, are
identified, and determined, at the inception of the contract. Commitment fees for loans that are likely to be drawn down
are deferred (together with related direct costs) and recognised as an adjustment to the effective interest rate on the loan.
Loan syndication fees are recognised as revenue when the syndication has been completed and the Bank has retained
no part of the loan package for itself or has retained a part at the same effective interest rate as the other participants.
Commission and 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.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e) Foreign currency translation

i. Functional and presentation currency

Items included in the financial statements in the Group and the Bank are measured using the currency of the primary
economic environment in which the Group and the Bank operate (“the functional currency”). The financial statements are
presented in Tanzania Shillings (TZS) rounded to the nearest million, which is the Bank’s functional currency.

ii. Transactions and balances

Foreign currency transactions are translated into Tanzania Shillings using the exchange rates prevailing at the dates of the
transactions. Monetary items denominated in foreign currency are translated with the closing rate as at the reporting date.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the profit or loss. All
other foreign exchange gains and losses are presented in the statement of profit or loss and other comprehensive income
on a net basis within other income or other expenses.

(f) Financial assets and financial liabilities

Initial recognition and measurement

Financial assets and financial liabilities are recognized when the entity becomes a party to the contractual provisions of
the instruments. Regular way purchases and sales of financial assets are recognized on trade – date on which the group
commits to purchase or sell the asset.

At initial recognition, the Group measures a financial asset or financial liability at its fair value plus or minus in the case of a
financial asset or financial liability not a fair value through profit or loss, transaction costs that are incremental and directly
attributable to the acquisition or issue of the financial asset or financial liability, such as fees and commissions. Transaction
costs of financial assets and liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately
after initial recognition, an expected credit loss allowance (ECL) is recognized for financial assets measured at amortised
cost and investments in debts instruments measured at FVOCI, which results in an accounting loss being recognized in
profit or loss when an asset is newly originated.
When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity
recognizes the difference as follows:
(a) When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a level 1
input) or based on a valuation technique that uses only data from observable markets, the difference is recognized
as a gain or loss.
(b) In all other cases, the difference is deferred and the timing or recognition of deferred day one profit or loss is
determined individually. It is either amortised over the life of the instrument, deferred until the instrument’s fair
value can be determined using market observable inputs, or realized through settlement.
Financial assets
(i) Classification and subsequent measurement
The Group classifies its financial assets in the following measurement categories:
• Fair Value through profit or loss (FVPL);
• Fair Value through other comprehensive income (FVOCI); and
• Amortised cost.
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Financial assets and financial liabilities (Continued)

Financial assets (Continued)
(i) Classification and subsequent measurement (continued)
The classification requirements for debts and equity instruments are described below:
Debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such
as loans, government and corporate bonds and trade receivables purchased from clients in factoring arrangements
without recourse.
Classification and subsequent measurement of debt instruments depend on:
(i) The Group’s business model for managing the asset; and
(ii) The cash flow characteristics of the asset.

Based on these factors, the group classifies its debt instruments into one of the following three measurement
categories:

• Amortised cost: Assets that are held for collection for contractual cash flows where those cash flows represent solely
payments of principal and interest (‘SPPI’), and that are not designated at FVPL, are measured at amortised cost.
The carrying amount of these assets is adjusted by any expected credit loss allowance recognized and measured as
described in note 6. Interest income from these financial assets is included in ‘Interest income’ using effective interest
rate method.
• Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual
cash flows and for selling the assets, where the assets’ cash flows represent solely payments of principals and interest,
and that are not designated at FVPL, are measured at fair value through other comprehensive income (FVOCI).
Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses,
interest revenue and foreign exchange gains and losses on the instrument’s amortised cost which are recognized
in profit and loss. When the financial asset is derecognized in ‘Net Investment income’, interest income from these
financial assets is included in ‘interest income’ using the effective interest rate method.
• Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair
value through profit or loss. A gain or loss on a debt investment that is subsequent measured at fair value through
profit or loss and is not part of a hedging relationship is recognized in profit or loss and presented in the profit or
loss statement within ‘Net trading income’ in the period in which it arises, unless it arises from debt instruments that
were designated at fair value or which are not held for trading, in which case they are presented separately in ‘Net
investment income’. Interest income from these financial assets is included in interest income’ using the effective
interest rate method.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Financial assets and financial liabilities (Continued)

Financial assets (Continued)

(i) Classification and subsequent measurement (continued)

Debt instruments (Continued)

• Business model: the business model reflects how the Group manages the assets in order to generate cash flows.
That is, whether the Group’s objective is solely to collect the contractual cash flows from the assets or is to collect
both the contractual cash flows and cash flows arising from the sale of the assets. If neither of these is applicable (e.g.
financial assets are held for trading purposes), then the financial assets are classified as part of ‘other’ business model
for a group of assets include past experience on how the cash flows for these assets were collected, how the asset’s
performance is evaluated and reported to key management personnel, how risks are assessed and managed and
how managers are compensated. For example, the Group’s business model for the mortgage loan book is to hold to
collect contractual cash flows, with sales of loans only being made internally to a consolidated SPV for the purpose of
collateralising notes issued, with no resulting derecognition by the Group. Another example is the liquidity portfolio
of assets, which are held by the Group as part of liquidity management and is generally classified within the hold to
collect and sell business model. Securities held for trading are held principally for the purposes of selling in the near
term or are part of a portfolio of financial instruments that are managed together and for which there is evidence of
a recent actual pattern of short-term profit taking. These securities are classified in the ‘other’ business model and
measured at FVPL.

• SPPI: Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows
and sell, the Group assesses whether the financial instruments’ cash flows represent solely payments or principals
and interest (the SPPI test’). In making this assessment, the Group considers whether the contractual cash flows are
consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money,
credit risk other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the
contractual terms introduce exposures to risk or volatility that are inconsistent with a basic lending arrangement, the
related financial assets are classified and measured at fair value through profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows
are solely payments of principal and interest.

The Group reclassifies debts investments when and only when its business model for managing those assets changes. The
reclassification takes place from the start of the first reporting period following the change. Such changes are expected to
be very infrequent and none occurred during the period.

Equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer’s perspective; that is, instruments
that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets. Example
of equity instruments include basic ordinary shares.
The Group subsequently measures all equity investments at fair value through profit or loss, except where the Group’s
management has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other
comprehensive income. The Group’s policy is to designate equity investments as FVOCI when those investments are
held for purposes other than to generate investment returns. When this election is used, fair value gains and losses are
recognized in OCI and are not subsequently reclassified to profit or loss, including on disposal. Impairment losses (and
reversal of impairment losses) are not reported separately from other changes in fair value. Dividends, when representing
a return on such investments, continue to be recognized in profit or loss as other income when the Group’s right to receive
payments is established.
Gains and losses on equity investments at FVPL are included in the ‘Net trading income’ line in the statement or profit or loss.
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Financial assets and financial liabilities (Continued)

Financial assets (Continued)

(ii) Impairment

The Group assesses on a forward –looking basis the expected credit losses (‘ECL’) associated with its debt instruments
assets carried at amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee
contracts. The Group recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects:

• An unbiased and probability – weighted amount that is determined by evaluating a range of possible outcomes.
• The time value of money; and
• Reasonable and supportable information that is available without undue cost or efforts at the reporting date about
past events, current conditions and forecast of future economic conditions.
Details of the Group’s impairment policy and disclosures are provided under Note 6.1.3.
(iii) Modifications of Loans
The Group sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this
happens, the Group assesses whether or not the new terms are substantially different to the original terms. The Group
does this by considering, among others, the following factors:

• If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to
amounts the borrower is expected to be able to pay.

• Whether any substantially new terms are introduced, such as a profit share/equity- based return that substantially
affects the risk profile of the loan.

• Significant extension of the loan term when the borrower is not in financial difficulty.
• Significant changes in the interest rate.
• Change in the currency the loan is denominated in.
• Insertion of collateral, other security or credit enhancements that significantly affects the credit risk associated with
the loan.
If the terms are substantially different, the Group derecognises the original financial asset and recognizes a ‘new’ asset
at fair value and recalculates a new effective interest rate for the asset. The date of renegotiation is consequently
considered to be the date of the initial recognition for impairment calculation purposes, including for the purposes
of determining whether a significant increase in credit risk has occurred. However, the Group also assessed whether
the new financial asset recognized is deemed to be credit-impaired at initial recognition, especially in circumstances
where the renegotiation was driven by the debtor being unable to make the originally agreed payments. Differences
in the carrying amount are also recognized in profit or loss as gains or loss on derecognition.
If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the
Group recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognizes a
modification gain or loss in profit or loss. The new gross carrying amount is recalculated by discounting the modified
cash flows at the original effective interest (or credit-adjusted effective interest rate for purchased or originated
credit-impaired financial assets).

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Financial assets and financial liabilities (Continued)

Financial assets (Continued)

(iii) Modifications of Loans (continued)

The risk of default of such assets after modification is assessed at the reporting date and compared with the risk under the
original terms at initial recognition, when the modification is not substantial and so does not result in derecognition of
the original asset. The Bank monitors the subsequent performance of modified assets. The Bank may determine that the
credit risk has significantly improved after restructuring, so that the assets are moved from Stage 3 or Stage 2 (Lifetime
ECL) to Stage 1 (12-month ECL). The loan will remain in its original stage until it meets the criteria as described in Note 3
(f ) (iv) below.

(iv) Curing of non-performing financial assets including restructured facilities.

An instrument is considered to no longer have SICR or be in default (i.e. to have cured) when it has been established that
the obligor is able to meet the requirements of the agreed terms and conditions.

IFRS 9 allows credit exposures to migrate from higher credit risk categories to lower credit risk categories, that is, from
stage 3 to stage 2 and from stage 2 to stage 1.

Under migration from stage 3 to stage 2, the Bank shall consider criteria for upgrade of credit accommodations as follows:
i. In the case of overdraft facilities, the account has satisfactorily performed for a minimum period of two consecutive
quarters; and

ii. In the case of term loans, the obligor has timely paid four consecutive installments.

On the other hand, credit exposures may migrate from stage 2 to stage 1 when there is a significant improvement of
the credit exposure. In determining whether an exposure should shift backward from stage 2 to stage 1, The Bank shall
consider the following;

i. All outstanding payments on the credit facility are made on time and there are no payments in arrears.
ii. There is improvement of the quantitative and qualitative factors that caused significant increase of the credit risk.

Upgrade from stage 2 to stage 1 shall be subject to a monitoring period of 90 days for conventional loans and 30 days for
Microfinance loans to confirm if the risk of default has decreased sufficiently before upgrading such exposure.

(v) Derecognition other than on a modification

Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the
assets have expired, or when they have been transferred and either (i) the Group transfers substantially all the risks and
rewards of ownership, or (ii) the Group neither transfers nor retains substantially all the risks and rewards of ownership and
the Group has not retained control.
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Financial assets and financial liabilities (Continued)

Financial assets (Continued)

(v) Derecognition other than on a modification(Continued)

The Group enters into transactions where it retains the contractual rights to receive cash flows from assets but assumes
a contractual obligation to pay those cash flows to other entities and transfers substantially all of the risks and rewards.
These transactions are accounted for as ‘pass through’ transfers that result in derecognition if the Group:

i) Has no obligation to make payments unless it collects equivalent amounts from the assets;
ii) Is prohibited from selling or pledging the assets; and
iii) Has an obligation to remit any cash it collects from the assets without material delay

Collateral (shares and bonds) furnished by the Group under standard repurchase agreements and securities lending and
borrowing transactions are not derecognised because the Group retains substantially all the risks and rewards on the basis
of the predetermined repurchase price, and the criteria for derecognition are therefore not met. This also applies to certain
securitisation transactions in which the Group retains a subordinated residual interest.

Financial liabilities
(i) Classification and subsequent measurement

In both the current and prior period, financial liabilities are classified as subsequently measured at amortised cost, except
for:

• Financial liabilities at fair value through profit or loss: this classification is applied to derivatives financial liabilities
held for trading (e.g. short positions in the trading booking) and other financial liabilities designated as such at initial
recognition. Gains or losses on financial liabilities designated at fair value through profit or loss are presented partially
in other comprehensive income (the amount of change in the fair value of the financial liability that is attributable
to changes in the credit risk of that liability, which is determined as the amount that is not attributable to Changes in
market conditions that give rise to market risk) and partially profit or loss (the remaining amount of change in the fair
value of the liability). This is unless such a presentation would create, or enlarge, an accounting mismatch, in which
case the gains and losses attributable to changes in the credit risk of the liability are also presented in profit or loss;

• Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby
a financial liability is recognised for the consideration received for the transfer. In subsequent periods, the Group
recognises any expense incurred on the financial liability; and financial liabilities are derecognised when they are
extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Financial assets and financial liabilities (Continued)

Financial liabilities (Continued)

(ii) Derecognition

Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is
discharged, cancelled or expires).

The exchange between the Group and its original lenders of debt instruments with substantially different terms, as well as
substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original
financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted
present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted
using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash
flows of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is
denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in
covenants are also taken into consideration. If an exchange of debt instruments or modification of terms is accounted for
as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the
exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount
of the liability and are amortised over the remaining term of the modified liability.

Financial guarantee contracts and loan commitments

Financial guarantee contracts are contracts that require the issuer to make specific payments to reimburse the holder
for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debts
instrument. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure
loans, overdraft and other banking facilities.

Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:

• The amount of the loss allowance; and

• The premium received on initial recognition less income recognized in accordance with the principles of IFRS 15

Loan commitments provided by the Group are measured as the amount of the loss allowance. The Group has not provided
any commitment to provide loans at a below-market interest rate, or that can be settled net in cash or by delivering or
issuing another financial instrument.

For loan commitments and financial guarantee contracts, the loss allowance is recognized as a provision. However, for
contracts that include both a loan and an undrawn commitment and the Group cannot separately identify the expected
credit losses on the undrawn commitment component from those on the loan component, the expected credit losses on
the undrawn commitment are recognised together with the loss allowance for the loan. To the extent that the combined
expected credit losses exceed the gross carrying amount of the loan, the expected credit losses are recognized as provision.
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Financial assets and financial liabilities (Continued)

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a
legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the
asset and settle the liability simultaneously.

(g) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at
amortised cost; the difference between the proceeds (net of transaction costs) and the redemption value is recognised in
profit or loss over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To
the extent there is no evidence that it is probable that some or all the facility will be drawn down, the fee is capitalised as
a prepayment for liquidity services and amortised over the period of the facility to which it relates.

(h) Current and deferred income taxes

The income tax expense for the period is the tax payable on the current period’s taxable income based on the applicable
income tax rate in accordance with the Income Tax Act, 2004 adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end
of the reporting period in Tanzania where the Bank’s subsidiary operates and generates taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in in accordance with the Income Tax Act,
2004 is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid
to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax
liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable profit. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those
temporary differences and losses.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(i) Current and deferred income taxes (continued)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are
offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the
asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.

(j) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it
is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a
reliable estimate of the amount of the obligation can be made. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined
by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with
respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.
The increase in the provision due to passage of time is recognised as interest expense.

(k) Non-financial assets

I. Property and equipment

Property and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items. Subsequent expenditures are included in the asset’s carrying amount or are
recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance are
charged to profit or loss during the financial period in which they are incurred.

Depreciation is provided on the straight-line basis so as to write down the cost of assets to their residual values over their
useful economic lives, at the following rates: -
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Non-financial assets (continued)

i. Property and equipment (continued)

Depreciation is provided on the straight-line basis so as to write down the cost of assets to their residual values over their
useful economic lives, at the following rates: -

Building 5
Leasehold Improvements 5-50
Motor vehicles 25
Furniture, fittings and equipment 20
Computer equipment 33.3

The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount. The recoverable amount is the higher of the assets fair value less costs to sell and
value in use.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in other
operating income in the profit or loss.

ii. Right-of-use assets

The Bank recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is
available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and
adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities
recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease
incentives received. Right-of-use assets are depreciated on a straight-line basis over the lease term.

The right-of-use assets are subject to impairment in line with the Bank’s policy as described in Note 3(l).

iii. Intangible assets

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the
specific software. These costs are amortised over their estimated useful lives (three to five years). Costs associated with
maintaining computer software programs are recognized as an expense when incurred.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(l) Impairment of non-financial assets

Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows (cash-generating units). The impairment test also can be performed on a single asset when the fair value less
cost to sell or the value in use can be determined reliably.

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other
assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in
use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-
generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal
of the impairment at the end of each reporting period. No indicators of impairment were identified therefore no non-
financial assets were impaired in 2019.
(m) Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments
with original maturities of three months or less. For the Bank, cash and cash equivalents include: cash and non-restricted
balances with Bank of Tanzania, Investment securities and amounts due from other banks. Cash and cash equivalents
excludes the cash reserve requirement held with the Bank of Tanzania. Cash and cash equivalents are carried at amortised
cost.
(n) Employee benefits
i. Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to
be settled wholly within 12 months after the end of the period in which the employees render the related service are
recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts
expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in
the statement of financial position.

ii. Other long-term employee benefit obligations

The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the
end of the period in which the employees render the related service. They are therefore measured as the present value of
expected future payments to be made in respect of services provided by employees up to the end of the reporting period
using the projected unit credit method.
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(n) Employee benefits (continued)
iii. Post-employment obligations

The Bank operates a defined contribution pension plans. The Bank has a statutory requirement to contribute to the Public
Service Social Security Fund (PSSSF) and National Social Security Fund (NSSF), which are defined contribution schemes.

Bank contributes 15% of the required 20% of gross emoluments to the scheme and the contributions are recognised as
an expense in the period to which they relate. The remaining 5% is deducted from employees.The subsidiary of the bank
does not have any employees. The Group has no further payment obligations once the contributions have been paid. The
contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an
asset to the extent that a cash refund or a reduction in the future payments is available.
(o) Share capital

Ordinary shares are classified as ‘share capital’ in equity. Any premium received over and above the par value of the shares
is classified as ‘share premium’ in equity. Incremental costs directly attributable to the issue of new shares or options or to
the acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds.

(p) Dividend

Dividend distribution to the Bank’s shareholders is recognised as a liability in the Group’s financial statements in the period
in which the dividends are approved by the Bank’s shareholders.
(q) Earnings per share

The Group presents basic and diluted earnings per share (EPS) in the consolidated and Bank financial statements. Basic EPS
is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by weighted average number
of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to
ordinary shareholders and the weighted average number of shares outstanding for the effects of all dilutive potential
ordinary shares.
(r) Leases
Accounting policies applicable in current period under IFRS 16

The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right
to control the use of an identified asset for a period of time in exchange for consideration.

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases
of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing
the right to use the underlying assets. The policy on recognition and measurement of right-of-use assets is presented on
note 3(k).

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(r) Leases (continued)
Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (less any lease incentives receivable),
variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value
guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by
the Bank and payments of penalties for terminating the lease, if the lease term reflects exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the
event or condition that triggers the payment occurs.
Accounting policies applicable in prior period under IAS 17

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to
the profit or loss on a straight-line basis over the period of the lease.

Leases of property, plant and equipment where the Group has substantially, all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the
leased property and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of
finance charges, are included in other longterm payables. The interest element of the finance cost is charged to the profit
or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability
for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the
useful life of the asset and the lease term.
(s) Contingencies and commitments

Transactions are classified as contingencies where the Bank and its subsidiary obligations depend on uncertain future
events. Items are classified as commitments where the Bank and its subsidiary commit themselves to future transactions
if the items will result in the acquisition of assets.
Financial guarantees

Financial guarantees are initially recognised in the consolidated and Bank financial statements at fair value on the date
the guarantee was given. The fair value of a financial guarantee at the time of signature is zero because all guarantees are
agreed on arm’s length terms and the value of the premium agreed corresponds to the value of the guarantee obligation.
Acceptances and letters of credit

Acceptances and letters of credit are accounted for as off-balance sheet transactions and disclosed as contingent liabilities.
Undrawn commitments

These are commitments the Bank has made to extend credit to customers and are accounted for as off-balance sheet
transactions and disclosed as contingent liabilities.
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(t) Comparatives

Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with
comparative information.

4. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of Consolidated and Bank financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s
accounting policies.

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next
period. Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances

a) Measurement of the expected credit loss allowance

The Group measurement of the expected credit loss allowance for financial assets measured at amortised cost and FVOCI
is an area that requires the use of complex models and significant assumptions about future economic conditions and
credit behavior (e.g. the likelihood of customers defaulting and the resulting losses). The Group uses several significant
judgements in applying the accounting requirements for measuring ECL, such as:

• Determination criteria for significant increase in credit risk;

• Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and
the associated ECL; and
• Estimating Probability of default, Exposure at Default and Loss Given Default
Detailed information about the judgement and estimates made by the Group are explained under note 6.
b) Property and equipment, leased premises refurbishments and intangible assets
Critical estimates are made by the Directors in determining the useful lives of property and equipment, leased premises
refurbishment and intangible assets as well as their residual values.
c) Business model assessment

The business model reflects how the Group manages the assets in order to generate cash flows. That is, whether the Group’s
objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and
cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes),
then the financial assets are classified as part of ‘other’ business model and measured at FVTPL. Factors considered by the
Group in determining the business model for a group of assets include past experience on how the cash flows for these
assets were collected, how the asset’s performance is evaluated and reported to key management personnel, how risks
are assessed and managed and how managers are compensated. Securities held for trading are held principally for the
purpose of selling in the near term or are part of a portfolio of financial instruments that are managed together and for
which there is evidence of a recent actual pattern of short-term profit-taking. These securities are classified in the ‘other’
business model and measured at FVPL.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES (CONTINUED)

(d) Assessment whether contractual cash flows are Solely Payments of Principal and Interest (SPPI)

Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell,
the Group assesses whether the financial instruments’ cash flows represent solely payments of principal and interest (the
`SPPI test’). In making this assessment, the Group considers whether the contractual cash flows are consistent with a basic
lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic lending
risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce
exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified
and measured at fair value through profit or loss.
e) Taxes

The Group is subjected to several taxes and levies by various government and quasi- government regulatory bodies. As
a rule of thumb, the Group recognizes liabilities for the anticipated tax /levies payable with utmost care and diligence.
However, significant judgment is usually required in the interpretation and applicability of those taxes /levies. Should it
come to the attention of management, in one way or the other, that the initially recorded liability was erroneous, such
differences will impact on the income and liabilities in the period in which such differences are determined.

The recognition of deferred tax asset relies on an assessment of the probability and sufficiency of future taxable profit,
future reversals of existing taxable temporary differences and ongoing tax planning and strategies. The deferred tax
recognised in the Group’s statement of financial position as at 31 December 2019 was TZS 76,788 million (2018: TZS 62,132
million). The judgment takes into consideration the effect of both positive and negative evidence, including historical
financial performance, projections of future taxable income and future reversals of existing taxable temporary differences.
f) Provisions

The Bank and Group have provided for the liabilities arising out of contractual obligations. The closing balance of
provisions on litigations amounted to TZS 2,230 million (2018: TZS 3,519 million). Professional expert advice is taken on
establishing litigation provisions. Provisions for legal proceedings and regulatory matters typically require a higher degree
of judgements than other types of provisions. When cases are at an early stage, accounting judgements can be difficult
because of the high degree of uncertainty associated with determining whether a present obligation exists because of
past event, estimating the probability of outflows and making estimates of the amount of any outflows that may arise. As
matters progress through various stages of the cases, Management together with legal advisers evaluate on an ongoing
basis whether provisions should be recognised, and the estimated amounts of any such provisions, revising previous
judgements and estimates as appropriate.
g) Fair valuation of financial instruments

The fair value of financial instruments traded in active markets at the financial reporting date is based on their quoted
bid market price or dealer price quotations without any deductions for transaction costs. For all other financial assets not
listed in an active market, the fair value is determined by using appropriate valuation techniques.

In determining the fair value of government securities that are designated as fair value through other comprehensive
income, the Bank uses yields of similar instruments traded in Bank of Tanzania’s auctions. Changes in valuation assumptions
could affect the reported fair value of financial instruments. For example, to the extent that the directors increased the
yield rate by 10 basis point, the fair values would be estimated at TZS 16,703 million (2018: TZS 15,991 million) as compared
to their reported fair value of TZS 17,027 million at 31 December 2019 (2018: TZS 15,242 million). If the yield rate had
decreased by 10 basis points the fair value would be estimated at TZS 16,670 million (2018: TZS 15,318 million).
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4. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES (CONTINUED)

g) Fair valuation of financial instruments (continued)

In determining the fair value of unquoted equity investment in TMRC, the Bank used a price of recent transaction of the
shares of the Company. If the price of the shares would have increased/decreased by 10% the fair value of the investments
would have been increased/decreased by TZS 292 million.
(h) Leases - Estimating the incremental borrowing rate

The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate
(IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar
term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a
similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation
when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease.
The Group estimates the IBR using observable inputs (such as market interest rates) when available. If the discount rate
used would have increased by 10%, the lease liability would have decreased by TZS 10,305 million. If the discount rate
used would have decreased by 10%, the lease liability would have increased by TZS 11,743 million.

5. SEGMENT REPORTING
The Group has the following business segments: Treasury, Retail, Wholesale banking and UJVC (the Bank’s subsidiary). The
operating segments are reported in a manner consistent with the internal reporting provided to the Bank’s Management
Team (The Chief Operating Decision-Maker), which is responsible for allocating resources to the reportable segments and
assessing their performances. All operating segments used by the Group meet the definition of a reportable segment
under IFRS 8.

Operating segments
The Group comprises the following main operating segments:
(i) Wholesale Banking - includes loans, deposits and other transactions and balances with corporate customers

(ii) Retail Banking - includes loans, deposits and other transactions and balances with retail customers

(iii) Treasury - undertakes the Group’s funding and centralised risk management activities through borrowings, issues
of debt securities, use of derivatives for risk management purposes and investing in liquid assets such as short-term
placements and corporate and government debt securities.

(iv) UJVC – includes operations of Upanga Joint Venture Company, a subsidiary of the Bank.

Revenue and assets reported to the Bank’s management team are measured in a manner consistent with that of the
financial statements.

In arriving to segmented net interest income, an internal allocation of interest income and interest expenses between
businesses has been done to recognise and measure how much each source of funding and each user of funding is
contributing to overall profitability of the Bank. Operating expenses for the Bank has also been allocated to the business
using an internal agreed allocation ratio.

All customers are based in Tanzania, except for interbank placements with corresponding banks. There was no income
deriving from transactions with a single external customer that amounted to 10% or more of the Group’s total income.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5. SEGMENT REPORTING (CONTINUED)

The segment information provided to the Bank’s Management Team for the reportable segments for the year ended 31
December 2019 is as follows;
(All amounts in TZS million):

holesale Retail liminations)/

2019 Treasury UJVC Total
banking banking consolidation

Interest income 97,230   74,005   482,738   -   (778)   653,195

Interest expense (10,396)   (44,401)   (81,536)   (778)   6,291   (130,820)
Net Interest Income 86,834   29,604   401,202   (778)   5,513   522,375

Impairment charges-off
- (37,090)   (63,320) - - (100,410)
and on balance sheet items

Net fees and commission,

trading, foreign exchange 25,554 34,139 144,716 6,033 (6,033) 204,409
and other income

Employee benefits expense (16,432)   (34,690)   (131,457) - - (182,579)

General and administrative
(13,893)   (29,330)   (111,143) (202) - (154,568)
expenses
Depreciation and
(6,625)   (13,986)   (52,997) (1,971) 2,212 (73,367)
amortization
Profit /(loss) before tax 75,438   (51,353)   187,001 3,082 1,692 215,860
         
Income tax provision (25,040)   17,046   (62,072)   (1,056)   -   (71,122)
     
Profit after tax 50,398   (34,307)   124,929   2,026   1,692   144,738

Segment assets 2,369,940 1,140,342 2,455,346 47,648 (182,945) 5,830,331

Unallocated assets - - - - - 587,096
Total assets 2,369,940   1,140,342   2,455,346   47,648   (182,945)   6,417,427
                     
Segment liabilities 347,443 1,443,715 3,512,009   47,648   (182,945) 5,167,870
Unallocated liabilities - - - - - 280,455
Equity - - - - - 969,102
Total liabilities and equity 347,443   1,443,715   3,512,009   47,648   (182,945)   6,417,427

There was no non-curent assets addition to individual segment.

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5. SEGMENT REPORTING (CONTINUED)

The segment information provided to the Bank’s Management Team for the reportable segments for the year ended 31
December 2018 is as follows; (all amounts in TZS million):
Wholesale Retail (Eliminations)/
2018 Treasury       UJVC     Total
banking banking consolidation
                       
Interest income 100,234   75,618   425,786       (1,083)   600,555
Interest expense (6,740)   (41,146)   (61,729)   (1,083)   1,083   (109,615)
Net Interest Income 93,494   34,472   364,057   (1,083)   -   490,940
                       
Impairment charges-off
-   (59,496)   (77,809)       -    (137,305)
and on balance sheet items
Net fees and commission,
trading, foreign exchange 20,914   33,036   141,926   5,980   (6,033)   195,823
and other income
Employee benefits expense (15,784)   (31,568)   (118,797)   -   -   (166,149)
General and administrative
(17,370)   (34,739)   (130,729)   (205)   -   (183,043)
expenses
Depreciation and
(5,696)   (11,394)   (42,876)   (1,971)   6,033   (55,904)
amortization
Profit /(loss) before tax 75,558   (69,689)   135,772   2,721   -   144,362
                       
Income tax provision (23,460)   21,638   (42,156)   577   -   (43,401)
                       
Profit after tax 52,098   (48,051)   93,616   3,298   -   100,961
                       
Segment assets  1,987,918   716,511   2,535,283   56,171   (61,721)   5,234,162
Unallocated assets -    -    -    -    -    442,051
Total assets 1,987,918   716,511   2,535,283   56,171   (61,721)   5,676,213
                       
Segment liabilities 372,360 1,322,221   3,026,156 56,171 (61,721) 4,715,187
Unallocated liabilities - - - - - 103,831
Equity 857,195 - - - - 857,195
Total liabilities and equity 1,229,555   1,322,221   3,026,156   56,171   (61,721)   5,676,213
                       
There was no additions of non-current assets to the segments during the year.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT

The Bank’s subsidiary does not have significant operations (Note 22 (b)). The financial assets and liabilities of the Bank’s
subsidiary mainly consist of loans from related parties that are eliminated on consolidation and other assets and liabilities
that are not material to the Group. Consequently, the financial risk management information presented below relates only
to the Bank.

The Bank’s business involves taking on risks in a targeted manner and managing them professionally. The core functions
of the Bank’s risk management are to identify all key risks for the Bank, measure these risks, manage the risk positions and
determine capital allocations. The Bank regularly reviews its risk management policies and systems to reflect changes in
markets, products and best market practice. The Bank’s aim is therefore to achieve an appropriate balance between risk
and return and minimize potential adverse effects on the Bank’s financial performance.

Risk management is carried out by the Risk Department under policies approved by the Board of Directors. The Board
provides written principles for overall risk management, as well as written policies covering specific areas, such as credit
risk, market risk (foreign exchange risk, interest risk and price risk) and liquidity risk. In addition, internal audit is responsible
for the independent review of risk management and the control environment.

6.1 Credit risk

The Bank takes on exposure to credit risk, which is the risk that counterparty will cause a financial loss to the Bank by
failing to discharge an obligation. Credit risk is the most important risk for the Bank’s business. Management, therefore,
carefully manages its exposure to credit risk. Credit exposures arise principally in lending activities that lead to loans and
advances and investment activities that bring debt securities and other bills into the Bank’s asset portfolio. There is also
credit risk in off-balance sheet financial instruments, such as loan commitments. The credit risk management and control
are centralised in the credit risk management team of the Bank and reported to the Board of Directors and heads of
department regularly.

6.1.1 Credit risk measurement

Loans and advances

The estimation of credit exposure for risk management purposes is complex and requires the use of models, as the
exposure varies with changes in market conditions, expected cash flows and the passage of time. The assessment of
credit risk of a portfolio of assets entails further estimations as to the likelihood of defaults occurring, of the associated
loss ratios and of default correlations between counterparties. The Group measures credit risk using Probability of Default
(PD), Exposure at Default (EAD) and Loss Given Default (LGD). This approach is similar to the one used for the purposes of
measuring Expected Credit Loss (ECL) under IFRS 9. The Loan book is split into Term Loans (Secured & unsecured) and off-
balance sheet items (these include overdrafts, Letters of Credit and Guarantees).
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.1 Credit risk measurement (continued)
The Group considers a term loan to be in default if the repayment of the loan installment (principal and accrued interest) is
more than 90 days past due for all product types. A revolving facility is in default if the facility is drawn above the limit for
more than 90 consecutive days during the lifetime of the facility or if the drawn amount is still outstanding 90 days after
maturity of the facility or if a related term loan is in default.

The Group estimates the Loss Given Default for unsecured term loans based on recoveries on loans that defaulted and
were written off and collections from loans that defaulted but were not written off while for secured term loans and
overdraft facilities which are all secured the Group considers collateral value discounted using an Effective interest rate.
For off balance sheet items, the probability of default has been estimated at 0.05% based on available historical data
on performance of off-balance sheet items and loss given default estimated using collateral value discounted using an
Effective interest rate.

Exposure at Default for term loans is estimated as contractual rundown on the loans. This is estimated as the outstanding
balance on the facility while for the off-balance sheet items exposure at default is estimated as the outstanding balance
multiplied by the credit conversion factor (CCF).

For regulatory purposes and for internal monitoring of the quality of the loan portfolio, all customers are segmented into
five rating classes as shown below:

Number of days
Bank’s rating
past due
Current 0 - 30
Especially mentioned 31 - 90
Sub-standard 91 -180
Doubtful 181 - 360
Loss 361 and more

For internal monitoring of balances with other banks, banks are rated into three categories based on their financial
position. Additionally, qualitative characteristics is taken into consideration when scoring a counterparty. Counterparts
with history of default are usually rated as Medium to High risk and dealing limits are cancelled.

Bank’s rating Score Staging

Defaulted Any Stage 3

High 2.51 - 3 Stage 2
Medium 1.51 – 2.5 Stage 1
Low 1 -1.51 Stage 1

The Bank’s balances with other banks as at 31 December 2019, are all low risk.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)

6.1.2 Risk limit control and mitigation policies
(a) Lending limits

The Bank manages limits and controls concentrations of credit risk wherever they are identified, in particular, to individual
counterparties and groups, and to industries. The Bank structures the levels of credit risk it undertakes by placing limits on
the amount of risk accepted in relation to one borrower, or groups of borrowers, and to industry segments. Such risks are
monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary.

The exposure to any one borrower including Banks is further restricted by sub-limits covering on and off-balance sheet
exposures. 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 these lending limits where appropriate.

(b) Collateral

The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of
security for funds advanced, which is common practice. The Bank implements guidelines on the acceptability of specific
classes of collateral or credit risk mitigation. The principal collateral types for loans and advances are:

• Mortgages over residential and commercial properties;

• Cash collaterals;

• Charges over business assets such as inventory and accounts receivable;

• Government guarantees; and

• Charges over financial instruments such as debt securities and equities.

Collateral held as security for financial assets other than loans and advances depends on the nature of the
instrument. Debt securities, treasury and other eligible bills are generally unsecured, with the exception of
asset-backed securities and similar instruments, which are secured by portfolios of financial instruments.

The Bank’s policies regarding obtaining collateral have not significantly changed during the reporting period and
there has been no significant change in the overall quality of the collateral held by the Bank since the prior period.
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6 FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)

6.1.2 Risk limit control and mitigation policies (continued)

(b) Collateral (continued)

The Group closely monitors collateral held for financial assets considered to be credit-impaired, as it becomes more likely
that the Group will take possession of collateral to mitigate potential credit losses. Financial assets that are credit-impaired
and related collateral held in order to mitigate potential losses are shown below:

Market
Credit impaired assets (amounts Gross Impairment Carrying
Value of
in TZS Millions) exposure allowance amount
Collateral

MSE 26,496 8,722 17,774 82,789

SWL 20,004 10,974 9,030 -
Other consumer loans 6,876 4,245 2,631 2,371
Corporate Customers 115,619 59,471 56,148 134,675
SME 36,664 14,822 21,842 122,101
Agribusiness loans 48,291 31,171 17,120 55,804
Total 253,950 129,405 124,545 397,740

(c) Credit-related commitments

The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees
and standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit which are
written undertakings by the Bank on behalf of a customer authorizing a third party to draw drafts on the Bank up to a
stipulated amount under specific terms and conditions are collateralising by the underlying shipments of goods to which
they relate.

Undrawn commitments represent unused portions of authorizations to extend credit in the form of loans, guarantees or
letters of credit. With respect to credit risk on undrawn commitments, the Bank is potentially exposed to loss in an amount
equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments,
as most undrawn commitments are contingent upon customers maintaining specific credit 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.

REPEAT
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (Continued)

6.1.3 Expected credit loss measurement

IFRS 9 outlines a ‘three-stage’ model for impairment based on changes in credit quality since initial recognition as
summarised below:

• A financial instrument that is not credit-impaired on initial recognition is classified in ‘Stage 1’ and has its credit
risk continuously monitored by the Group.
• If a significant increase in credit risk (‘SICR’) since initial recognition is identified, the financial instrument is
moved to ‘Stage 2’ but is not yet deemed to be credit-impaired. Refer to note 6.1.3.1 for a description of how the
Group determines when a significant increase in credit risk has occurred.
• If the financial instrument is credit-impaired, the financial instrument is then moved to ‘Stage 3’. Please refer to
note 6.1.3.2 for a description of how the Group defines credit-impaired and default.
• Financial instruments in Stage 1 have their ECL measured at an amount equal to the portion of lifetime expected
credit losses that result from default events possible within the next 12 months. Instruments in Stages 2 or 3
have their ECL measured based on expected credit losses on a lifetime basis. Please refer to note 6.1.3.3 for a
description of inputs, assumptions and estimation techniques used in measuring the ECL.
• A pervasive concept in measuring ECL in accordance with IFRS 9 is that it should consider forward-looking
information. Note 6.1.3.4 includes an explanation of how the Group has incorporated this in its ECL models.
• Purchased or originated credit-impaired financial assets are those financial assets that are credit-impaired on
initial recognition. Their ECL is always measured on a lifetime basis (Stage 3).

Grouping of instruments for losses measured on a collective basis

For expected credit loss provisions modelled on a collective basis, a grouping of exposures is performed on the basis of
shared risk characteristics, such that risk exposures within a group are homogeneous.

In performing this grouping, there must be sufficient information for the group to be statistically credible. Where sufficient
information is not available internally, the Bank has considered benchmarking internal/external supplementary data to
use for modelling purposes. The characteristics and any supplementary data used to determine groupings are outlined
below:

• Product type (e.g. Overdraft, Term loans, Letter of credit e.t.c)

Repayment type (e.g. Repayment/Interest only)
• LTV ratio for retail mortgages
• Credit risk grading
• Industry – Agribusiness loans are assessed independently in their own modal
Collateral type – whether secured or unsecured
The following exposures are assessed individually:

• Stage 3 loans secured loans and overdraft facilities

• Properties in repossession proceedings
The appropriateness of groupings is monitored and reviewed on a periodic basis by the Credit Risk team.
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)

6.1.3: Expected credit loss measurement (Continued)

Grouping of instruments for losses measured on a collective basis (continued)

The Bank groups its exposures based on product type and has specified the following default product segments under the
‘product type’ criteria where each product is identified by a specific product code.

Secured term loans group - This group comprises all term loans products secured by collateral i.e. legal mortgage,
guarantee or cash cover. Products in this group consist of Corporate, MSE, Special Asset Loan, Invoice Financing loans,
Personal loans with cash cover, SME, Staff mortgage and car loans.

Unsecured term loans - This comprises all unsecured facilities. Products in this group consist of Staff loans, Salaries
Workers’ Loans, Advances to NMB Wakala agents,

Agribusiness loans – This group comprises all term loans and overdraft facility advances to customers engaged in
agriculture operations. It comprises customers classified as SME and Corporates.

Overdrafts – This group comprises all overdraft advances to customers issued to SME and Corporate customers other than
those included in Agribusiness.

Off balance sheet items – This group comprises all financial guarantees, letter of credit and unutilized loan commitments.
6.1.3.1: Significant increase in credit risk (SICR)
The Group considers a financial instrument to have experience a significant increase in credit risk when one or more of the
following quantitative, qualitative or backstop criteria have been met:
Qualitative criteria
Loans and advances to customers
A loan facility is assessed to have significant increase in credit risk if the borrower meets one or more of the following
criteria:
• Direct debit cancellation;
• Extension to the terms granted;
• Previous arrears within the last 12 months;
• Significant adverse changes in business, financial and/or economic conditions in which the borrower operates;
• Actual or expected forbearance or restructuring;
• Actual or expected significant adverse change in operating results of the borrower;
• Significant change in collateral value (secured facilities only) which is expected to increase risk of default;
• Early signs of cash flow/liquidity problems such as delay in servicing of trade creditors/loans; and
• Identified fraudulent activities in issuing the loan

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)

6.1.3: Expected credit loss measurement (Continued)

6.1.3.1: Significant increase in credit risk (SICR) (continued)
Qualitative criteria (continued)

The assessment of SICR incorporates forward-looking information and is performed on an annual basis at a portfolio
level. A watch list is used to monitor credit risk on a monthly basis through Loan Portfolio Quality (LPQ) committee.
This assessment is performed at the counterparty level. The criteria used to identify SICR are monitored and reviewed
periodically for appropriateness by the independent Credit Risk team.
Loans and advances to banks
The following qualitative factors are considered as indicators of significant increase in credit risk
• Significant counterparty management restructuring or re-organization due to prolonged poor performance of the
entity;

• Significant change in regulatory, economic, or technological environment of the borrower that results in a significant
change in ability to meet its debt obligations; and

• Significant reductions in financial support from a parent entity that resulted to significant adverse change of operating
results of the counterparty.
Government securities
• Government securities are considered to have experienced a significant increase in credit risk when at least one of the
following factors have occurred:

• The government has received a low credit rating (“C”) by the International rating agencies; or
• The government has initiated debt restructuring process.
Quantitative criteria:

A backstop is applied and the financial instrument considered to have experienced a significant increase in credit risk if the
borrower is more than 30 days past due on its contractual payments.
Low credit risk exemption
Government securities such as treasury bills and bonds measured at amortised cost and at fair value through other
comprehensive income are classified as low credit risk financial instruments and impairment will be recorded only if there
is evidence of expected default on Government securities. It is important to note that there is no history of default on the
Tanzania Government securities.
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)

6.1.3: Expected credit loss measurement (Continued)

6.1.3.2: Definition of default and credit impaired assets

Loans and advances to customers

The Group defines a financial instrument as in default, which is fully aligned with the definition of credit-impaired, when
it meets one or more of the following criteria:

Quantitative

The Group considers a term loan to be in default if the repayments on the loan are more than 90 days past due for all
product types. Whilst the Group considers Agribusiness loans to be in default if the bullet repayment on the loan is more
than 90 days past due and further considering a revolving facility in default if the facility is drawn above the loan limit for
more than 90 consecutive days during the lifetime of the facility or if the drawn amount is still outstanding 90 days after
maturity of the facility.
Qualitative

The borrower meets unlikeliness to pay criteria, which indicates the borrower is in significant financial difficulty. These are
instances where: -

• The borrower is in long-term forbearance;

• The borrower is deceased;
• The borrower is insolvent;
• The borrower is in breach of financial covenant(s);
• An active market for that financial asset has disappeared because of financial difficulties;
• Concessions have been made by the lender relating to the borrower’s financial difficulty;
• Fraudulent activities were conducted in issuance of the loan;
• It is becoming probable that the borrower will enter bankruptcy; and
• Financial assets are purchased or originated at a deep discount that reflects the incurred credit losses.
The criteria above have been applied to all financial instruments held by the Group and are consistent with the definition
of default used for internal credit risk management purposes. The default definition has been applied consistently to
model the Probability of Default (PD), Exposure at Default (EAD) and Loss given Default (LGD) throughout the Group’s
expected loss calculations.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)

6.1.3: Expected credit loss measurement (Continued)

6.1.3.2: Definition of default and credit impaired assets Continued)

Loans and advances to banks

For balances due from other banks below events are considered as default when they occur

• When repayments of interest and principal are not done on time as per contractual schedules to the extent of 30 days
delay;

• When counterpart is taken under management by Statutory Manager;

• When counterpart licence has been revoked by Central Banks; and
• When counterpart has been declared bankrupt by responsible bodies like Registration, Insolvency and Trusteeship
Agency (RITA) and Court.

Government securities
For government securities below events are considered as default when they occur: -

• When repayments of interest and principal are not made on time as per contractual schedules to the extent of 30 days
delay;

• When the government is downgraded to below “C” Status by International Rating Agency such as Moody’s. S&P or
Fitch; and

• When the government is declared default/bankrupt by responsible agencies like World Bank or IMF.
6.1.3.3: Measuring ECL — Explanation of inputs, assumptions and estimation techniques
The Expected Credit Loss (ECL) is measured on either a 12-month (12M) or Lifetime basis depending on whether a
significant increase in credit risk has occurred since initial recognition or whether an asset is considered to be credit-
impaired. Expected credit losses are the discounted product of the Probability of Default (PD), Exposure at Default (EAD),
and Loss Given Default (LGD), defined as follows:

• The PD represents the likelihood of a borrower defaulting on its financial obligation (as per “Definition of default and
credit-impaired” above), either over the next 12 months (12M PD), or over the remaining lifetime (Lifetime PD) of the
obligation.

• EAD is based on the amounts the Group expects to be owed at the time of default, over the next 12 months (12M
EAD) or over the remaining lifetime (Lifetime EAD). For example, for a revolving commitment, the Group includes the
current drawn balance plus any further amount that is expected to be drawn up to the current contractual limit by
the time of default, should it occur.
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)

6.1.3: Expected credit loss measurement (Continued)

6.1.3.3: Measuring ECL — Explanation of inputs, assumptions and estimation techniques (continued)

• Loss Given Default (LGD) represents the Group’s expectation of the extent of loss on a defaulted exposure. LGD
varies by type of counterparty, type and seniority of claim and availability of collateral or other credit support. LGD is
expressed as a percentage loss per unit of exposure at the time of default (EAD). LGD is calculated on a 12-month or
lifetime basis, where 12-month LGD is the percentage of loss expected to be made if the default occurs in the next
12 months and Lifetime LGD is the percentage of loss expected to be made if the default occurs over the remaining
expected lifetime of the loan.

The ECL is determined by projecting the PD, LGD and EAD for each future month and for each individual exposure or
collective segment. These three components are multiplied together and adjusted for the likelihood of survival (i.e. the
exposure has not prepaid or defaulted in an earlier month). This effectively calculates an ECL for each future month, which
is then discounted back to the reporting date and summed. The discount rate used in the ECL calculation is the original
effective interest rate or an approximation thereof.

The Lifetime PD is developed by applying a maturity profile to the current 12M PD. The maturity profile looks at how
defaults develop on a portfolio from the point of initial recognition throughout the lifetime of the loans. The maturity
profile is based on historical observed data and is assumed to be the same across all assets within a portfolio and credit
grade band. This is supported by historical analysis.

The 12-month and lifetime EADs are determined based on the expected payment profile, which varies by product type.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)

6.1.3: Expected credit loss measurement (Continued)

6.1.3.4: Forward-looking information incorporated in the ECL models

The assessment of SICR and the calculation of ECL both incorporate forward-looking information. The Group has performed
historical analysis and identified the key economic variables impacting credit risk and expected credit losses for each
portfolio. These economic variables and their associated impact on the PD and vary between secured and unsecured
loans and off-balance sheet exposure. Expert judgment has also been applied in this process. Forecasts of these economic
variables (the “base economic scenario”) are provided by the Bank’s Strategy Team on an annual basis and provide the best
estimate view of the economy over the next three years.

After three years, to project the economic variables out for the full remaining lifetime of each instrument, a mean
reversion approach has been used, which means that economic variables tend to reflect either a long run average
rate (e.g. unemployment) or long run average growth rate (e.g. GDP, private credit growth) over a period of the past
three years. The impact of these economic variables on the PD has been determined by performing statistical
regression analysis to understand the impact changes in these variables have had historically on default rates.

In addition to the base economic scenario, the Bank’s Strategy team also provide other possible scenarios along with
scenario weightings. The number of other scenarios used is set based on the analysis of each major segment type to
ensure non-linearity are captured. The number of scenarios and their attributes are reassessed at each reporting date. The
Group concluded that three scenarios appropriately captured non-linearity.

The scenario weightings are determined by a combination of statistical analysis and expert credit judgement, taking
account of the range of possible outcomes each chosen scenario is representative of. The assessment of SICR is performed
using the Lifetime PD under each of the base, and the other scenarios, multiplied by the associated scenario weighting,
along with qualitative and backstop indicators. This determines whether the whole financial instrument is in Stage 1,
Stage 2, or Stage 3 and hence whether 12-month or lifetime ECL should be recorded. Following this assessment, the Bank
measures ECL as either a probability weighted 12-month ECL (Stage 1), or a probability weighted lifetime ECL (Stages 2
and 3). These probability-weighted ECLs are determined by running each scenario through the relevant ECL model and
multiplying it by the appropriate scenario weighting (as opposed to weighting the inputs).

As with any economic forecasts, the projections and likelihoods of occurrence are subject to a high degree of inherent
uncertainty and therefore the actual outcomes may be significantly different to those projected. The Bank considers these
forecasts to represent its best estimate of the possible outcomes and has analyzed the non-linearities and asymmetries
within the Bank’s different portfolios to establish that the chosen scenarios are appropriately representative of the range
of possible scenarios.
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)

6.1.3: Expected credit loss measurement (continued)

6.1.3.4: Forward-looking information incorporated in the ECL models
Economic variable assumptions

The most significant period-end assumptions used for the ECL estimate as at 31 December 2019 are set out below. The
scenarios “base”, “upside” and “downside” were used for all portfolios.

2019 2020 2021 2022 2023

Credit growth in private sector
Base 7.5% 9.5% 10% 10.5% 11.0%
Upside 10.5% 12.0% 14% 14.5% 15.0%
Downside 3.5% 4.9% 6.1% 6.5% 7.0%

The weightings assigned to each economic scenario was 80%, 10% and 10% for “base”, “upside” and “downside” respectively.

If the credit growth in private sector changed by 10%, the changes in expected loss allowance would have been as follows:

Expected loss allowance

Higher end Lower end
Sensitivity Analysis
TZS Millions TZS Millions
Year ended 31 December 2019
Secured term loans 211 208
Unsecured term loans 288 284
Overdraft facilities 120 120
Off-balance sheet exposures - -
Total expected loss allowance 619 612

Other forward-looking considerations not otherwise incorporated within the above scenarios, such as the impact of any
regulatory, legislative or political changes, have also been considered, but are not deemed to have a material impact and
therefore no adjustment has been made to the ECL for such factors. This is reviewed and monitored for appropriateness
on a quarterly basis.

REPEAT
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.4 Credit risk exposure
6.1.4.1: Maximum exposure to credit risk – Financial instruments subject to impairment
The following table contains an analysis of the credit risk exposure of financial instruments for which an ECL allowance is
recognised. The gross carrying amount of financial assets below also represents the Group’s maximum exposure to credit
risk on these assets

(a) Secured Term Loans

ECL Staging
Stage1 Stage 2 Stage 3
Amounts in
12-month Lifetime Lifetime Total
TZS’ Millions ECL ECL ECL
As at 31 December 2019
Credit grade
Current 765,001 - - 765,001
Especially mentioned - 104,390 - 104,390
Sub-standard - - 26,783 26,783
Doubtful - - 31,560 31,560
Loss - - 77,701 77,701
Gross carrying amount 765,001 104,390 136,044 1,005,435
Loss allowance (6,004) (19,981) (65,305) (91,290)
Carrying amount 758,997 84,409 70,739 914,145

As at 31 December 2018
Credit grade
Current 745,712 - - 745,712
Especially mentioned - 131,529 - 131,529
Sub-standard - - 72,409 72,409
Doubtful - - 25,517 25,517
Loss - - 5,363 5,363
Gross Carrying amount 745,712 131,529 103,289 980,530
Loss allowance (6,705) (9,039) (61,560) (77,304)
Carrying amount 739,007 122,490 41,729 903,226
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)

6.1.4 Credit risk exposure (continued)

6.1.4.1: Maximum exposure to credit risk – Financial instruments subject to impairment (continued)

(b) Unsecured term loans

ECL Staging
Stage1 Stage 2 Stage 3
Amounts in
12-month Lifetime Lifetime Total
TZS’ Millions ECL ECL ECL
Credit grade
As at 31 December 2019
Current 2,261,340 - - 2,261,340
Especially mentioned - 8,237 - 8,237
Sub-standard - - 8,705 8,705
Doubtful - - 10,442 10,442
Loss - - 3,326 3,326
Gross carrying amount 2,261,340 8,237 22,473 2,292,050
Loss allowance (17,444) (178) (12,682) (30,304)
Carrying amount 2,243,896 8,059 9,791 2,261,746

As at 31 December 2018
Current 1,898,047 - - 1,898,047
Especially mentioned - 14,665 - 14,665
Sub-standard - - 3,383 3,383
Doubtful - - 12,069 12,069
Loss - - 4,181 4,181
Gross carrying amount 1,898,047 14,665 19,633 1,932,345
Loss allowance (7,368) (126) (17,181) (24,675)
Carrying amount 1,890,679 14,539 2,452 1,907,670

(c) Agribusiness loans

As at 31 December 2019
Current 135,498 - - 135,498
Especially mentioned - 4,931 - 4,931
Sub-standard - - 28,148 28,148
Doubtful - - 16,205 16,205
Loss - - 3,937 3,937
Gross carrying amount 135,498 4,931 48,290 188,719
Loss allowance (2,178) (635) (25,943) (28,756)
Carrying amount 133,320 4,296 22,347 159,963

REPEAT
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)

6.1.4 Credit risk exposure (continued)

6.1.4.1: Maximum exposure to credit risk – Financial instruments subject to impairment (Continued)

(c) Agribusiness loans (continued)

ECL Staging

Stage1 Stage 2 Stage 3

Amounts in
12-month Lifetime Lifetime Total
TZS’ Millions ECL ECL ECL

Credit grade
As at 31 December 2018
Current 65,867 - - 65,867
Especially mentioned - 606 - 606
Sub-standard - - 3,466 3,466
Doubtful - - 1,480 1,480
Loss - - 155 155
Gross carrying amount 65,867 606 5,101 71,574
Loss allowance (5,866) (54) (2,118) (8,038)
Net carrying amount 60,001 552 2,983 63,536

(d) Overdraft facilities

As at 31 December 2019
Current 225,902 - - 225,902
Especially mentioned - 9,549 - 9,549
Sub-standard - - 4,019 4,019
Doubtful - - 6,963 6,963
Loss - - 36,161 36,161
Gross carrying amount 225,902 9,549 47,143 282,594
Loss allowance (2,626) (293) (19,841) (22,760)
Carrying amount 223,276 9,256 27,302 259,834

As at 31 December 2018
Current 319,411 - - 319,411
Especially mentioned - 13,325  - 13,325
Sub-standard - - 16,917 16,917
Doubtful - - 27,065  27,065
Loss - - 22,226 22,226
Gross carrying amount 319,411 13,325 66,208 398,944
Loss allowance (3,648) (133) (17,801) (21,582)
Carrying amount 315,763 13,192 48,407 377,362
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.4 Credit risk exposure (continued)
6.1.4.1: Maximum exposure to credit risk – Financial instruments subject to impairment (Continued)
(e) Off balance sheet exposures*
2019 2018
TZS’ TZS’
Millions Millions

Undrawn commitments 113,934 49,122

Acceptances and letters of credits 335,968 200,899
Financial guarantees 202,752 361,365
Gross carrying amount 652,654 611,386
Loss allowance (6,562) (5,002)
Net carrying amount 646,092 606,384

*The off-balance sheet exposures under the credit risk note include only loan commitment and financial contracts that
fall within the scope of IFRS 9. Provision for loss allowance relating to off-balance sheet exposures is disclosed under other
liabilities.

6.1.5: Loss allowance

The loss allowance recognised in the period is impacted by a variety of factors, as described below:

• Transfers between Stage 1 and Stages 2 or 3 due to financial instruments experiencing significant increases (or
decreases) of credit risk or becoming credit-impaired in the period, and the consequent “step up” (or “step down”)
between 12-month and Lifetime ECL;

• Additional allowances for new financial instruments recognised during the period, as well as releases for financial
instruments de-recognised in the period;

• Impact on the measurement of ECL due to changes in PDs, EADs and LGDs in the period, arising from regular refreshing
of inputs to models;

• Impacts on the measurement of ECL due to changes made to models and assumptions;
• Discount unwind within ECL due to the passage of time, as ECL is measured on a present value basis;
• Foreign exchange retranslations for assets denominated in foreign currencies and other movements; and
• Financial assets derecognised during the period and write-offs of allowances related to assets that were written off
during the period).

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.5 Loss allowance (continued)
6.1.5.1 Changes in loss allowance

The following tables explain the changes in the loss allowance between the beginning and the end of the annual period

due to these factors:

(a) Secured term loans

Stage 1 Stage 2 Stage 3

12-month Lifetime Lifetime
Amounts in TZS’ Millions Total
ECL ECL ECL

As at 1 January 2019 6,705 9,039 61,560 77,304

Movements
Transfer from stage 1 to stage 2 (64) 148 - 84
Transfer from stage 1 to stage 3 (323) - 8,986 8,663
Transfer from stage 2 to stage 1 133 (823) - (690)
Transfer from Stage 3 to Stage 1 1 - (111) (110)
Unwind of interest 418 695 4,239 5,352
New financial assets originated 4,567 1,203 14,461 20,231
Change in model assumptions and methodologies (1,850) 9,885 (3,500) 4,535

Total net P or L charge during the period 2,882 11,108 24,075 38,065

Other movements with no P or L impact

Write-offs (3,583) (166) (20,330) (24,079)

As at 31 December 2019 6,004 19,981 65,305 91,290

As at 1 January 2018 4,344 75 42,257 46,676

Movements
Transfer from stage 1 to stage 2 (3) 5,446 - 5,443
Transfers from stage 1 to stage 3 (6) - 4,226 4,220
New financial assets originated 4,610 2,795 47,016 54,421
Changes to model assumptions and methodologies 170 723 24,082 24,975

Net profit or loss charge during the period 4,771 8,964 75,324 89,059

Other movements with no P or L impact

Write-offs (2,410) - (56,021) (58,431)

As at 31 December 2018 6,705 9,039 61,560 77,304

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.5 Loss allowance (continued)
6.1.5.1 Changes in loss allowance (continued)
(b)Unsecured term loans

Stage 1 Stage 2 Stage 3

12-month Lifetime Lifetime
Amounts in TZS’ Millions Total
ECL ECL ECL

As at 1 January 2019 7,368 126 17,181 24,675

Movements
Transfer from stage 1 to stage 2 (28) 126 - 98
Transfer from stage 1 to stage 3 (70) - 9,477 9,407
Transfer from stage 2 to stage 1 17 (24) - (7)
Unwinding of interest 1,132 11 321 1,464
New financial assets originated 4,378 41 1,116 5,535
Change in model assumptions 5,369 (202) (5,479) (312)

Net profit or loss charge during the period 10,798 (48) 5,435 16,185

Other movements with no P or L impact

Write-offs (722) 100 (9,934) (10,556)

As at 31 December 2019 17,444 178 12,682 30,304

As at 1 January 2018 8,842 209 14,636 23,687

Movements
Transfer from stage 1 to stage 3 (347) - 369 22
Transfer from stage 1 to stage 2 (3) 19 - 16
New financial assets originated 872 4 7,045 7,921
Changes to model assumptions and methodologies (180) - (189) (369)

Net profit or loss charge during the period 342 23 7,225 7,590

Other movements with no P or L impact

Write-offs (1,816) (106) (4,680) (6,602)

As at 31 December 2018 7,368 126 17,181 24,675

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.5 Loss allowance (continued)
6.1.5.1 Changes in loss allowance (continued)
(c) Agribusiness loans

Stage 1 Stage 2 Stage 3

12-month Lifetime Lifetime
Amounts in TZS’ Millions Total
ECL ECL ECL

As at 1 January 2019 5,866 54 2,118 8,038

Movements
Transfer from stage 1 to stage 2 (248) 557 - 309
Transfer from stage 1 to stage 3 (1,337) - 5,831 4,494
Unwinding of interest 414 4 30 448
New financial assets originated 2,047 79 25,173 27,299
Change in model assumptions and methodologies (656) (10) 3,736 3,070

Net profit or loss charge during the period 220 630 34,770 35,620

Other movements with no P or L impact

Write-offs (3,908) (49) (10,945) (14,902)

As at 31 December 2019 2,178 635 25,943 28,756

As at 1 January 2018 3,249 28 2,644 5,921

Movements
Transfer from stage 1 to stage 3 (31) - 597 566
New financial assets originated or purchased 5,484 31 276 5,791
Changes to model assumptions and methodologies (55) - 550 495

Net profit or loss charge during the period 5,398 31 1,423 6,852

Other movements with no Por L impact

Write-offs (2,781) (5) (1,949) (4,735)

As at 31 December 2018 5,866 54 2,118 8,038

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.5 Loss allowance (continued)
6.1.5.1 Changes in loss allowance (continued)
(d) Overdraft facilities

Stage 1 Stage 2 Stage 3

12-month Lifetime Lifetime
Amounts in TZS’ Millions Total
ECL ECL ECL

As at 1 January 2019 3,648 133 17,801 21,582

Movements        
Transfer from stage 1 to stage 2 (12) 21 - 10
Transfer from stage 1 to stage 3 (84) - 950 866
Transfer from stage 2 to stage 1 54 (59) - (5)
Transfer from Stage 3 to Stage 1 4 - (262) (258)
Write-offs 321 21 1,337 1,679
New financial assets originated 249 - 364 613
Change in model assumptions and methodologies 85 206 5,786 6,077

Net profit or loss charge during the period 617 189 8,175 8,981

Other movements with no P or L impact

Write-offs (1,639) (29) (6,135) (7,803)

As at 31 December 2019 2,626 293 19,841 22,760

As at 1 January 2018 1,919 - 41,487 43,406
Movements
Transfer from stage 1 to stage 2 (16) 63 - 47
Transfer from stage 1 to stage 3 (378) - 16,893 16,515
New financial assets originated or purchased 1,507 6 12,733 14,246
Changes to model assumptions and methodologies 822 64 61 947
Net profit or loss charge during the period 1,935 133 29,687 31,755

Other movements with no P or L impact

Write-offs (206) - (53,373) (53,579)
As at 31 December 2018 3,648 133 17,801 21,582

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.5 Loss allowance (continued)
6.1.5.1 Changes in loss allowance (continued)
(e) Off-balance sheet items

2019 2018
TZS’ Millions TZS’ Millions

As at 1 January 5,002 2,953

Movements
New financial guarantees 52 2,360
Changes to model assumptions and methodologies 5,120 -
Matured financial guarantees (3,612) (311)
Net profit or loss charge during the period 1,560 2,049
As at 31 December 6,562 5,002

Allowance charged to profit or loss during the year

Secured loans 6.1.5 (a) 38,066 88,677

Unsecured loans 6.1.5 (b) 16,185 7,739
Agribusiness loans 6.1.5 (c) 35,620 6,847
Overdraft facilities 6.1.5 (d) 8,979 31,993
Off-balance sheet exposures 6.1.5 (e) 1,560 2,049
As at 31 December 100,410 137,305

6.1.5.2 Changes in gross carrying amount

Significant changes in the gross carrying amount of financial assets that contributed to changes in the loss allowance were
as follows:

• The high volume of new Salaried Workers Loans and other consumers loans originated during the period, aligned with
the Group’s organic growth objective, increase the gross carrying amount of the unsecured book by 19% and secured
book by 2%, with a corresponding TZS 5,569 million increase in loss allowance for unsecured book, TZS 13,986 million
for secured book.

• The write-off from loans of gross carrying amount of TZS 58 billion resulted in the reduction of the loss allowance by
TZS 37 billion.

• It is worth noting that changes in model assumptions and incorporation of collaterals in estimation of loss given
default (LGD) has largely impacted the loss allowance as of 31 December 2019.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.5: Loss allowance (continued)
6.1.5.2 Changes in gross carrying amount (continued)
The following table further explains changes in the gross carrying amount and explains their significance to the changes
in the loss allowance for the same portfolio as discussed above

(i) Secured term loans

Amounts in TZS’ Millions Stage 1 Stage 2 Stage 3

12-month Lifetime Lifetime
Total
ECL ECL ECL

As at 1 January 2019 745,712 131,529 103,289 980,530

Movements
Transfer from stage 1 to stage 2 (2,156) 2,156 - -
Transfer from stage 1 to stage 3 (26,239) - 26,239 -
Transfer from stage 2 to stage 1 24,665 (24,665) - -
Transfer from stage 3 to stage 1 111 - (111) -
New financial assets originated 616,586 17,228 34,792 668,606
Write-offs (16) (1,306) (18,677) (19,999)
De-recognition (593,662) (20,552) (9,488) (623,702)

As at 31 December 2019 765,001 104,390 136,044 1,005,435

As at 1 January 2018 715,538 20,712 70,639 806,889

Movements
Transfer from stage 1 to stage 2 (39,295) 39,295 - -
Transfer from stage 1 to stage 3 (76,456) - 76,456 -
New financial assets originated 590,710 92,188 12,215 695,113
Write-offs (2,410) - (56,021) (58,431)
De-recognition (442,375) (20,666) - (463,041)

As at 31 December 2018 745,712 131,529 103,289 980,530

(ii) Unsecured term loans

1,898,047 14,665 19,633 1,932,345
As at 1 January 2019
Movements
Transfer from stage 1 to stage 2 (5,884) 5,884 - -
Transfer from stage 1 to stage 3 (16,649) - 16,649 -
Transfer from stage 2 to stage 1 1,184 (1,184) - -
New financial assets originated 614,890 1,767 2,630 619,287
Write-offs (715) (4,599) (11,618) (16,932)
De-recognition (229,533) (8,296) (4,821) (242,650)

As at 31 December 2019 2,261,340 8,237 22,473 2,292,050

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.5 Loss allowance (continued)
6.1.5.2 Changes in gross carrying amount (continued)

(ii) Unsecured term loans

Stage 1 Stage 2 Stage 3

12-month Lifetime
Amounts in TZS’ Millions Lifetime ECL Total
ECL ECL

As at 1 January 2018 1,577,524 20,543 17,231 1,615,298

Movements
Transfer from stage 1 to stage 2 (11,234) 11,234 - -
Transfer from stage 1 to stage 3 (13,040) - 13,040 -
New financial assets originated 346,613 1,419 258 348,290
Write-offs (1,816) (106) (4,680) (6,602)
De-recognition - (18,425) (6,216) (24,641)

As at 31 December 2018 1,898,047 14,665 19,633 1,932,345

(iii) Agribusiness

As at 1 January 2019 65,867 606 5,101 71,574

Movements
Transfer from stage 1 to stage 2 (3,031) 3,031 - -
Transfer from stage 1 to stage 3 (9,843) - 9,843 -
New financial assets originated 130,988 1,697 38,182 170,867
Write-offs - (30) (1,030) (1,060)
De-recognition (48,483) (373) (3,806) (52,662)

As at 31 December 2019 135,498 4,931 48,290 188,719

As at 1 January 2018 30,590 311 6,912 37,813

Movements
Transfer from stage 1 to stage 3 (2,533) - 2,533 -
New financial assets originated 61,070 484 122 61,676
Write-offs (2,781) (5) (1,949) (4,735)
De-recognition (20,479) (184) (2,517) (23,180)

As at 31 December 2018 65,867 606 5,101 71,574

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.5 Loss allowance (continued)
6.1.5.2 Changes in gross carrying amount (continued)

(iv) Overdraft facilities

Stage 1 Stage 2 Stage 3

12-month Lifetime Lifetime
Total
ECL ECL ECL

As at 1 January 2019 319,411 13,325 66,208 398,944

Movements
Transfer from stage 1 to stage 2 (32) 32 - -
Transfer from stage 1 to stage 3 (950) - 950 -
Transfer from stage 2 to stage 1 694 (694) - -
Transfer from stage 3 to stage 1 262 - (262) -
New financial assets originated 10,020 62 520 10,602
Write-offs - - (20,174) (20,174)
De-recognition (103,503) (3,176) (99) (106,778)

As at 31 December 2019 225,902 9,549 47,143 282,594

As at 1 January 2018 351,465 - 80,532 431,997

Movements
Transfer from stage 1 to stage 2 (12,639) 12,639 - -
Transfer from stage 1 to stage 3 (61,726) - 61,726 -
New financial assets originated 53,156 739 1,777 55,672
Write-offs (206) - (53,373) (53,579)
De-recognition (10,639) (53) (24,454) (35,146)

As at 31 December 2018 319,411 13,325 66,208 398,944

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.6 Write-off policy
The Group writes off financial assets that have been past due for more than 365 days. The Bank may write-off some
financial assets in whole or in part before the 365 days threshold when it has exhausted all practical recovery efforts
and has concluded there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of
recovery include (i) ceasing enforcement activity and (ii) where the Bank’s recovery method is foreclosing on collateral
and the value of the collateral is such that there is no reasonable expectation of recovering in full. The Bank may write-off
financial assets that are still subject to enforcement activity. The outstanding contractual amounts of such assets written
off during the year ended 31 December 2019 was TZS 58 billion. The Bank still seeks to recover amounts it is legally owed
in full, but which have been partially written off due to no reasonable expectation of full recovery.

6.1.7. Modification of loans
The following table includes summary information for financial assets with lifetime ECL whose cash flows were modified
during the period as part of the Bank’s restructuring activities and their respective effect on the Bank’s financial performance:

2019 2018
TZS’ TZS’
Millions Millions
Loans and advance to customers
Amounts in TZS Millions
Gross amount before modification 21,157 31,132
Net modification loss 2,863 307

The net modification loss above represents the changes in the gross carrying amounts (i.e. before impairment allowance)
of the financial assets from immediately before, to immediately after, modification. In majority of cases, this gross loss had
been anticipated and already materially reflected within the ECL allowance. The gross carrying amount of restructured
facilities held as at 31 December 2019 was TZS 20,188 million (2018: TZS 28,702 million).

6.1.8 Amounts due from banks
Balances due from other banks are categorized as stage 1. The Loss Given Default (LGD) for these assets is zero hence no
impairment was recognized as at 31 December 2019 (2018: Nil). The expected credit loss is expected to be insignificant.
The Bank holds treasury bonds with face value of TZS 696.2 billion in respect to these balances (2018: Treasury bonds of
TZS 3 billion and treasury bills of TZS 38.9 billion).

6.1.9 Debt securities, treasury bills and other eligible bills
The Bank hold investments in Treasury Bills and Treasury bonds issued by the Government. At the end of reporting period,
these investments were categorized as stage 1. There are no credit ratings for these investments. The Loss Given Default
(LGD) for these assets is almost Nil hence no impairment was recognized as at 31 December 2019 (2018: Nil).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.10 Balances with Bank of Tanzania and other assets
Other assets and balances with Bank of Tanzania are categorized as stage 1 and stage 3. The simplified model has been
used for estimation of ECL. The impact has been determined to be insignificant.

6.1.11 Repossessed collateral
During the year, the Bank did not obtain assets by taking possession of collateral held as security. Repossessed properties
are usually sold as soon as practicable, with the proceeds used to reduce the outstanding indebtedness.

6.1.12 Concentration of risks of financial assets with credit risk exposure

Geographical sectors

The following table breaks down the Bank’s main credit exposure at their carrying amounts, as categorised by geographical
region as of 31 December 2019. For this table, the Bank has allocated exposures to regions based on the country of domicile
of its counterparties.

REPEAT
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BUSINESS PERFORMANCE SOCIAL RESPONSIBILITY GOVERNANCE INFORMATION STATEMENTS ADDRESSES 151

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.12 Concentration of risks of financial assets with credit risk exposure (continued)
Geographical sectors (continued)

Tanzania Europe America Others Total

Credit risk exposures relating to on- TZS TZS TZS TZS TZS
balance sheet assets are as follows: Millions Millions Millions Millions Millions
31 December 2019

Balances with the Bank of Tanzania 842,909 - 842,909

Placement and balances with other banks 56,017 63,273 77,785 67,251 264,326

Investment in Government securities

- Amortised cost 744,527 - - - 744,527

- Fair value through Other Comprehensive
17,027 - - - 17,027
Income
Loans and advances to customers:

- MSEs 346,100 - - - 346,100

- Other consumer loans 136,697 - - - 136,697

- Salaried workers loans 2,150,573 - - - 2,150,573

- Corporate customers 590,945 - - - 590,945

- SMEs 211,405 - - - 211,405

- Agribusiness 159,968 159,968

Other assets (excluding prepayments) 47,762 - - - 47,762

As at 31 December 2019 5,303,930 63,273 77,785 67,251 5,512,239

Credit risk exposures relating to off-balance
sheet assets are as follows:

Guarantees and indemnities (Note 39(a)) 202,752 - - - 202,752

Undrawn commitments (Note 39(a)) 113,934 - - - 113,934

Acceptances and letters of credit (Note
335,968 - - - 335,968
39(a))
As at 31 December 2019 652,654 - - - 652,654
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.1 Credit risk (continued)
6.1.11 Concentration of risks of financial assets with credit risk exposure (continued)

(a) Geographical sectors (continued)

Tanzania Europe America Others Total

Credit risk exposures relating to on- TZS TZS TZS TZS TZS
balance sheet assets are as follows: Millions Millions Millions Millions Millions
31 December 2018

Balances with the Bank of Tanzania 667,713 - - - 667,713

Placement and balances with other banks 51,099 69,675 11,176 42,441 174,391

Investment in Government securities

- Amortised cost 724,943 - - - 724,943

- Fair value through Other Comprehensive
15,242 - - - 15,242
Income
Loans and advances to customers:

- MSEs 347,203 - - - 347,203

- Other consumer loans 125,517 - - - 125,517

- Salaried workers loans 1,802,798 - - - 1,802,798

- Corporate customers 636,858 - - - 636,858

- SMEs 212,950 - - - 212,950

- Agribusiness loans 126,468 - - - 126,468

Other assets (excluding prepayments) 34,742 - - - 34,742

As at 31 December 2018 4,745,533 69,675 11,176 42,441 4,868,825

Credit risk exposures relating to off-balance
sheet assets are as follows:

Guarantees and indemnities (Note 39(a)) 212,113 - - - 212,113

Undrawn commitments (Note 39(a)) 129,355 - - - 129,355

Acceptances and letters of credit (Note 39(a)) 200,899 - - - 200,899

As at 31 December 2018 542,367 - - - 542,367

REPEAT
6. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk (continued)
OUR
BUSINESS

6.1.11 Concentration of risks of financial assets with credit risk exposure (continued)
(b) Industry sectors

The following table breaks down the Bank’s main credit exposure at their carrying amounts, as categorized by the industry sectors of its counterparties. (Amounts are in TZS’
Millions):
STRATEGY &
PERFORMANCE

Financial Trading and Transport and Wholesale

31 December 2019 Manufacturing Agriculture Individuals Others Total
institutions commercial communication and retail

Balances with the Bank of Tanzania 842,909 - - - - - - - 842,909

Placement and balances with other
264,326 - - - - - - - 264,326
banks
SOCIAL RESPONSIBILITY
SUSTAINABILITY& CORPORATE

Investment in Government securities

- Amortised cost 744,527 - - - - - - - 744,527
- Fair value through Other
17,027 - - - - - - - 17,027
comprehensive income
CORPORATE
GOVERNANCE

Loans and advances to customers:

- MSE - 28 22,282 28 303,736 926 - 19,100 346,100
- Other consumer loans - 56,855 79,192 9 - - - 641 136,697
- Salaries workers loans - - - - - - 2,150,573 - 2,150,573
CORPORATE
INFORMATION

- Corporate customers 64,898 268,647 128,362 113,098 - 7,036 - 8,904 590,945

- SMEs - 2,183 91,934 5,697 30,068 5,055 - 76,468 211,405
- Agribusiness - - 40,694 - 21,119 87,495 - 10,660 159,968
Other assets (excluding prepayments) - - - - - - - 47,762 47,762
FINANCIAL
STATEMENTS

As at 31 December 2019 1,933,687 327,713 362,464 118,832 354,923 100,512 2,150,573 163,535 5,512,239

Credit risk exposures relating to off-balance sheet assets are as follows:

Guarantees and indemnities - (Note
10,192 14,060 25,353 41,053 - - 59,230 202,751
39(a)) 52,863
CONTACT &
ADDRESSES

Undrawn commitments (Note 39(a)) - 30,520 14,425 644 67,633 - - 713 113,935
Acceptances and letters of credit (Note - 4,165 236,556 34,950 260 - - 60,037 335,968
39(a))
153

As at 31 December 2019 10,192 48,745 303,844 60,947 108,946 - - 119,980 652,654

 6. FINANCIAL RISK MANAGEMENT (CONTINUED)

REPEAT
154

6.1 Credit risk (continued)

6.1.11 Concentration of risks of financial assets with credit risk exposure (continued)
Industry sectors (continued)
OUR
BUSINESS

Financial Trading and Transport and Wholesale

31 December 2018 Manufacturing Agriculture Individuals Others Total
institutions commercial communication and retail

Balances with the Bank of Tanzania 667,713 - - - - - - - 667,713

STRATEGY &

Placement and balances with other

PERFORMANCE

174,391 - - - - - - - 174,391
banks
Investment in Government
- - - - - - -
securities
- Amortised cost 724,943 - - - - - - - 724,943
- Fair value through Other
15,242 - - - - - - - 15,242
comprehensive income
SOCIAL RESPONSIBILITY

Loans and advances to customers:

SUSTAINABILITY& CORPORATE

- MSE - 15 12,218 - 326,771 - 8,199 - 347,203

- Other consumer loans - - - - - - - 125,517 125,517
CORPORATE
GOVERNANCE

- Salaries workers loans - - - - - - 1,802,798 - 1,802,798

-Corporate customers - 99,952 196,764 97,420 230,212 12,510 - - 636,858
-SMEs - 6,454 135,872 5,564 65,060 - - - 212,950
-Agribusiness - - 20,510 - 22,142 79,429 - 4,387 126,468
CORPORATE
INFORMATION

Other assets (excluding

- - - - - - - 34,742 34,742
prepayments)
As at 31 December 2018 1,582,289 106,421 365,364 102,984 644,185 91,939 1,810,997 164,646 4,868,825
FINANCIAL
STATEMENTS

Credit risk exposures relating to off-balance sheet assets are as follows:

Guarantees and indemnities - (Note 39(a)) - - - 106 15,790 1,598 - 194,619 212,113
Undrawn commitments (Note 39(a)) 2,886 44,100 5,417 6,483 54,283 11,073 - 5,113 129,355
Acceptances and letters of credit (Note 39(a)) 2,470 8,364 86,935 21,717 33,406 1,917 - 46,090 200,899

As at 31 December 2018 5,356 52,464 92,352 28,306 103,479 14,588 - 245,822 542,367
CONTACT &
ADDRESSES
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.2 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 rate and currency, 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 Banks Assets and Liability Committee (ALCO) and heads of
department.

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 Bank’s retail and corporate banking assets
and liabilities.

6.2.1 Foreign exchange risk

The Bank takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial
position and cash flows. ALCO sets limits on the level of exposure by currency and in aggregate for both overnight and
intra-day positions, which are monitored daily.

The table below summarizes the Bank’s exposure to foreign currency exchange rate risk at 31 December 2019. Included in
the table are the Bank’s financial instruments at carrying amounts, categorized by currency.
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.2. Market risk (continued)
6.2.1 Foreign exchange risk (continued)
Concentrations of currency risk - on - and off - balance sheet financial instruments:

As at 31 December 2019 USD EURO GBP Others Total

Millions Millions Millions Millions Millions
Assets
Cash and balances with Bank of Tanzania 130,938 5,365 1,145 490 137,938

Placement and balances with other banks 124,089 70,165 12,559 1,496 208,309
Loans and advances to customers 288,621 - - - 288,621
Other assets (excluding prepayments) 1,120 26 - - 1,146
Total financial assets 544,768 75,556 13,704 1,986 636,014

Liabilities
Deposits from customers 392,028 22,234 1,700 - 415,962
Deposits from banks 219 - - - 219
Long term borrowing 112,142 - - - 112,142
Lease liabilities 94,808 - - - 94,808
Other liabilities (excluding non-financial other
4,380 5 2 - 4,387
liabilities)
Total financial liabilities 603,577 22,239 1,702 - 627,518

Net on-balance sheet financial position (58,809) 53,317 12,002 1,986 8,496

Off balance sheet position

Guarantee and indemnities 123,479 - - - 123,479
Undrawn commitments 47,557 - - - 47,557
Acceptance and letters of credit 278,339 13,599 1,004 - 292,942
449,375 13,599 1,004 122,299 463,978

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.2. Market risk (continued)
6.2.1 Foreign exchange risk (continued)
Concentrations of currency risk - on - and off - balance sheet financial instruments:

As at 31 December 2018 USD EURO GBP Others Total

Millions Millions Millions Millions Millions

Assets
Cash and balances with Bank of Tanzania 150,067   4,730   860   1,008   156,665
Placement and balances with other banks 76,434   33,071   13,292   528   123,325
Loans and advances to customers 263,434   -   -   -   263,434
Other assets (excluding prepayments) 283   26   -   -   309
Total financial assets 490,218   37,827   14,152   1,536   543,733

Liabilities
Deposits from customers 325,087   12,168   1,097   -   338,352
Long term borrowing 174,647   -   -   -   174,647
Other liabilities (excluding non-financial other
1,761   4   3       1,768
liabilities)
Total financial liabilities 501,495   12,172   1,100   -   514,767
Net on-balance sheet financial position (11,277)   25,655   13,052   1,536   28,966

Off balance sheet position

Guarantee and indemnities 139,934   -   -   -   139,934
Undrawn commitments 47,833   -   -   -   47,833
Acceptance and letters of credit 179,671   11,428   1,029   -   192,128
367,438   11,428   1,029   -   379,895
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.2 Market risk (continued)

6.2.1 Foreign exchange risk (continued)

Foreign exchange sensitivity analysis

The impact of fluctuation of Bank’s post tax profit for the year resulting from foreign exchange movements, keeping all
other variables held constant on translation of foreign currency dominated cash and balances with the Bank of Tanzania,
placements and balances with other banks, loans and deposits from customers and other banks is analysed in the table
below

% change in exchange rate 2019 2018

TZS Million TZS Million

USD 10% 5,881 1,128

EURO 10% 5,332 2,566
GBP 10% 1,220 1,305

The effect of translation of placements and balances with other banks in other currencies (Kenyan shillings, Ugandan
Shillings, Japanese Yen, Swiss Francs, Canadian dollars, Indian Rupees, Rwandese Francs, Australian dollars, Norwegian
Krona, Swedish Krona and South African Rand) is not considered to be significant.

6.2.2 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.

The Bank takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair
value and cash flow risks. Interest margins may increase as a result of such changes but may reduce losses in the event
that unexpected movements arise. The Bank’s Asset and Liability Committee (ALCO) sets limits on the level of mismatch of
interest rate repricing that may be undertaken, which is monitored regularly by the Bank. The table below summaries the
Bank’s exposure to interest rate risks. It includes the Bank’s financial instruments at carrying amounts, categorized by the
earlier of contractual repricing or maturity dates. The Bank does not bear an interest rate risk on off balance sheet items.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.2 Market risk (continued)

6.2.2 Interest rate risk (continued)

Non-
Up to1 1-3 3 - 12 Over 5
1- 5 years interest Total
month months months years
As at 31 December 2019 bearing

TZS TZS TZS TZS TZS TZS TZS

Millions Millions Millions Millions Millions Millions Millions
Assets
Cash and balances with
- - - - - 1,341,140 1,341,140
Bank of Tanzania
Investment in
Government securities
-Amortised cost 25,201 96,956 226,211 309,441 86,718 - 744,527
-Fair value through other
- - - - 17,027 - 17,027
comprehensive income
Placement and balances
208,309 - - - - 56,017 264,326
with other banks
Loans and advances to
272,780 625,671 1,746,583 568,521 382,133 - 3,595,688
customers
Equity Investments - - - - - 2,920 2,920
Other assets (excluding
- - - - - 47,762 47,762
prepayments)
Total financial assets 506,290 722,627 1,972,794 877,962 485,878 1,447,839 6,013,390
 
Liabilities
Deposits from customers 1,658,380 86,549 495,316 168,200 - 2,513,833 4,922,278
Deposit from banks 10 1,500 21,614 - - 10,322 33,446
Long term borrowing - 19,472 96,095 156,336 - 4,542 276,445
Subordinated Debt - - 51,143 17,047 2,808 70,998
Lease liabilities 58 51 786 20,111 135,024 - 156,030
Other liabilities
(excluding non-financial - - - - - 96,116 96,116
other liabilities)
Total financial liabilities 1,658,448 107,572 613,811 395,790 152,071 2,927,621   5,555,313
             
Total interest
(1,152,158) 615,055 1,358,983 482,172 333,807 -   -
repricing gap
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.2 Market risk (continued)

6.2.2 Interest rate risk (continued)

Up to1 1-3 3 - 12 Over 5 Non-interest

1- 5 years Total
As at 31 December month months months years bearing
2018 TZS TZS TZS TZS
TZS Millions TZS Millions TZS Millions
Millions Millions Millions Millions
Assets
Cash and balances
- - - - - 1,070,422 1,070,422
with Bank of Tanzania
Investment in
Government securities
- Amortised cost 26,806 239,284 162,771 233,875 62,207 - 724,943
- Fair value
through other
- - - 38 15,204 - 15,242
comprehensive
income
Placement and
balances with other 174,391 - - - - - 174,391
banks
Loans and advances to
216,133 122,329 689,949 1,433,532 789,851 - 3,251,794
customers

Equity Investments - - - - - 2,920 2,920

Other assets
(excluding - - - - - 34,742 34,742
prepayments)

Total financial assets 417,330 361,613 852,720 1,667,445 867,262 1,108,084 5,274,454

Liabilities
Deposits from
1,772,398 144,940 223,335 164,726 - 2,022,208 4,327,607
customers
Deposit from banks 20,770 - - - - - 20,770
Subordinated debt 2,782 17,048 51,142 70,972
Long term borrowing 4,404 69,000 84,728 143,256 - - 301,388
Other liabilities
(excluding non-
- - - - - 82,902 82,902
financial other
liabilities)
Total financial
1,800,354 213,940 308,063 325,030 51,142 2,105,110 4,803,639
liabilities
Total interest
(1,383,024) 147,673 544,657 1,342,415 816,120 - -
repricing gap

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.2 Market risk (continued)

6.2.2 Interest rate risk (continued)

Interest rate risk sensitivity

The interest rate risk sensitivity of the net mismatch between interest bearing assets and liabilities up to 12 months is
summarised below. This assumes a 1% adverse movement in interest rates over the period (amounts in TZS million).
Net Interest-
Weighted
Sensitivity period Bearing Net position Impact
average
Funding
2019
Less than 30 days (1,127) (112,700) 111,573 1,116
1 year (1,302) (326,882) 325,580 3,256

2018
Less than 30 days (1,667) (166,656) 164,990 1,650
1 year 40,632 840,883 (800,250) (8,003)

6.3 Liquidity risk

Liquidity risk is the risk that the Bank is unable to meet its payment obligations associated with its financial liabilities when
they fall due and to replace funds when they are withdrawn. The consequence may be the failure to meet obligations to
repay depositors and fulfill commitments to lend.

6.3.1 Liquidity risk management process

The Bank’s liquidity management process, as carried out within the Bank and monitored by the Bank’s Asset and Liability
Committee (ALCO), includes:

• Day-to-day funding managed by monitoring future cash flows to ensure that requirements can be met. These include
replenishment of funds as they mature or are borrowed by customers. The Bank maintains an active presence in
money markets to enable this to happen;

• Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen
interruption to cash flow;

• Monitoring statement of financial position liquidity ratios against internal and regulatory requirements; and
• Managing the concentration and profile of debt maturities.
Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month
respectively, as these are key periods for liquidity management. The starting point for those projections is an analysis of
the contractual maturity of the financial liabilities and the expected collection date of the financial assets (Notes 6.3.3).
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.3 Liquidity risk (continued)

6.3.2 Funding approach

Sources of liquidity are regularly reviewed by Bank’s Asset and Liability Committee to maintain a wide diversification by
currency, geography, provider, product and term.

6.3.3 Non-derivative cash flows

The table below presents the cash flows payable by the Bank under non-derivative financial liabilities by remaining
contractual maturities at the end of reporting period. The amounts disclosed in the table below are the undiscounted cash
flows. As at 31 December 2019, the interest-bearing deposits had a balance of TZS 2,408,445 million (2018: TZS 3,083,945
million).

Up to1 1-3 3 - 12 Over 1

As at 31 December 2019 Total
month months months year
TZS TZS TZS TZS
Liabilities TZS millions
millions millions millions millions

Deposits from customers 4,184,654 87,357 520,371 187,115 4,979,497

Deposits from banks 10,332 1,500 21,614 - 33,446
Long term borrowing* 7,314 25,282 58,439 188,339 279,374
Subordinated debt* 795 1,589 7,285 108,667 118,336
Lease liabilities 531 996 5,030 385,920 392,477
Other liabilities (excluding non-financial
96,116 - - - 96,116
liabilities)

4,299,742 116,724 612,739 870,041 5,899,246

Total liabilities
Assets held for managing liquidity 1,881,193 313,375 820,962 2,997,860 6,013,390

As at 31 December 2018

Liabilities
Deposits from customers 3,786,600 182,338 515,297 1,092,417 5,576,652
Deposits from banks 20,770 - - - 20,770
Long term borrowing* 1,298 81,380 96,311 150,802 329,791
Subordinated debt* 795 4,345 7,285 118,363 130,788
Other liabilities (excluding non-financial
82,902 - - - 82,902
liabilities)

Total liabilities 3,892,365 268,063 618,893 1,361,582 6,140,903

Assets held for managing liquidity 1,525,414 361,613 852,720 2,534,707 5,274,454

* Includes interest payable on the loan up to its maturity date as per repayment schedule. The amount is determined by
using the exchange rate and LIBOR rate at year-end.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.3 Liquidity risk (continued)

6.3.4 Assets held for managing liquidity risk

The Bank’s assets held for managing liquidity risk comprise:

Cash and balances with the Bank of Tanzania (excluding SMR);

Investment in government securities; and

Placements with other banks:

In the normal course of business, a proportion of customer loans contractually repayable within one year will be extended.
The Bank would also be able to meet unexpected net cash outflows by selling securities and accessing additional funding
sources such as asset-backed markets.

6.4 Off-balance sheet items

(a) Undrawn commitments, outstanding letters of credit, guarantee and indemnities

The dates of the contractual amounts of the Bank’s off-balance sheet financial instruments that commit it to extend credit
to customers and other facilities (Note 39) are summarised in the table below.

(b)Financial guarantees and other financial facilities

Financial guarantees (Note 39) are also included below based on the earliest contractual maturity date.

No later than 1-5

Total
1 year years
TZS’ TZS’ TZS’
Millions Millions Millions
As at 31 December 2019

Guarantee and indemnities 197,862 4,890 202,752

Undrawn commitments 113,934 - 113,934
Acceptance and letter of credit 317,237 18,731 335,968
Total 629,033 23,621 652,654

As at 31 December 2018
Guarantee and indemnities 24,121 187,992 212,113
Undrawn commitments 129,355 - 129,355
Acceptance and letter of credit 200,899 - 200,899
Total 354,375 187,992 542,367
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.5 Fair value of financial assets and liabilities

6.5.1 Fair value estimation

IFRS 13 requires the Bank to classify fair value measurements using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements.

The Bank specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are
observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable
inputs reflect the Bank’s market assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets
or liabilities.

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs).

This hierarchy requires the use of observable market data when available. The Bank considers relevant and observable
market prices in its valuations where possible.

There were no transfers between the levels during the year.

i) Fair value of the Group financial assets and financial liabilities that are measured at fair value on recurring basis
The following table gives information about how the fair value of these financial assets and liabilities are determined:

Fair value at Relationship of

2019 2018 Valuation Significant
unobservable
Type Hierarchy technique and unobservable
TZS TZS input to fair
key inputs inputs
Millions Millions value
Investment in Market
government 17,027 15,242 Level 2 observable N/A N/A
securities inputs
Market
Equity
2,920 2,920 Level 2 observable N/A N/A
instruments
inputs

REPEAT
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.5 Fair value of financial assets and liabilities (continued)

6.5.1 Fair value estimation (continued)

ii) Fair value of financial assets and liabilities that are not measured at fair value
Cash and balances with Bank of Tanzania

The carrying amount of cash and balances with Bank of Tanzania is a reasonable approximation of fair value

Investment in government securities

Investment in government securities includes treasury bonds and treasury bills. The fair value of government securities
has been determined by discounting the estimated future cash flows expected cash flows at current market yields as
observed from rates of similar bills and bonds traded by Bank of Tanzania.

Loans and advances to banks

Loans and advances to banks include inter-bank placements and items in the course of collection.

The carrying amount of floating rate placements and overnight advances is a reasonable approximation of fair value. The
estimated fair value of fixed interest-bearing advances is based on discounted cash flows using prevailing money-market
interest rates for debts with similar credit risk and remaining maturity.

Loans and advances to customers

Loans and advances are net of charges for impairment. The estimated fair value of loans and advances represents the
discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted at current
market rates to determine fair value.

Deposits from banks and customers

The estimated fair value of deposits with no stated maturity, which includes non-interest-bearing deposits, is the amount
repayable on demand.

The estimated fair value of fixed interest-bearing deposits not quoted in an active market is based on discounted cash
flows using interest rates for new debts with similar remaining maturity

Borrowings

Significant portion of borrowing is benchmarked to LIBOR and therefore reprices at balance sheet date. Management has
considered the impact of borrowings with fixed interest rate as insignificant to the total fair value of borrowings. The fair
value of borrowings therefore approximates its carrying value.
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.5 Fair value of financial assets and liabilities (continued)
6.5.1 Fair value estimation (continued)
ii) Fair value of financial assets and liabilities that are not measured at fair value (continued)

Carrying amount Fair value

2019 2018 2019 2018
Hierarchy TZS’ TZS’ TZS’ TZS’
GROUP
level Millions Millions Millions Millions
Financial assets
Cash and balances with Bank of Tanzania Level 2 1,341,140 1,070,422 1,341,140 1,070,422
Government securities at amortised cost
Level 1 471,720 476,503 453,901 468,409
(Treasury bonds)
Government securities at amortised cost
Level 2 272,807 248,440 275,525 249,411
(Treasury bills)
Placement and balances with other banks Level 2 264,326 174,391 264,326 174,391

Loans and advances to customers Level 3 3,583,505 3,241,401 3,583,505 3,240,652

Other assets (excluding prepayment) Level 3 51,350 41,028 51,350 41,028
   
5,984,848 5,252,185 5,969,747 5,244,313

Financial liabilities
Deposits from customers Level 3 4,916,551 4,315,220 4,916,551 4,315,220
Deposits from banks Level 2 33,446 20,770 33,446 20,770
Subordinated debt Level 3 70,998 70,972 70,998 70,972
Borrowings Level 3 276,446 301,388 276,446 301,388
Other liabilities (Excluding non-financial other
Level 3 96,369 96,377 96,369 96,377
liabilities)

5,393,810 4,804,727 5,393,810 4,804,727

There was no transfer of assets between the fair value hierarchy levels.

REPEAT
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.5 Fair value of financial assets and liabilities (continued)
6.5.1 Fair value estimation (continued)
ii) Fair value of financial assets and liabilities that are not measured at fair value (continued)

Carrying amount Fair value

2019 2018 2019 2018
Hierarchy TZS’ TZS’ TZS’ TZS’
BANK
level Millions Millions Millions Millions
Financial assets
Cash and balances with Bank of Tanzania Level 2 1,341,140 1,070,422 1,341,140 1,070,422
Government securities at amortised cost
Level 1 471,720 476,503 453,901 468,409
(Treasury bonds)
Government securities at amortised cost
Level 2 272,807 248,440 275,525 249,411
(Treasury bills)
Placement and balances with other banks Level 2 264,326 174,391 264,326 174,391
Loans and advances to customers Level 3 3,595,688 3,251,794 3,595,688 3,251,045
Other assets (Excluding prepayment) Level 3 47,762 34,742 47,762 34,742

5,993,443 5,256,292 5,978,342 5,248,420

Financial liabilities
Deposits from customers Level 3 4,922,278 4,327,607 4,922,278 4,327,607
Due to other banks Level 2 33,446 20,770 33,446 20,770
Subordinated debt Level 3 70,998 70,972 70,998 70,972
Borrowings Level 3 276,446 301,388 276,446 301,388
Other liabilities (Excluding non-financial other
Level 3 89,615 82,902 89,615 82,902
liabilities)

5,392,783 4,803,639 5,392,783 4,803,639

There was no transfer of assets between the fair value hierarchy levels.
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.6 Capital management

The Bank’s objectives when managing capital, which is a broader concept than the ‘equity’ on the face of statement of
financial positions, are:

• To comply with the capital requirements set by the Bank of Tanzania (BoT);
• To safeguard the Bank’s ability to continue as a going concern so that it can continue to provide returns for shareholders
and benefits for other stakeholders; and

• To maintain a strong capital base to support the development of its business.

Capital adequacy and the use of regulatory capital are monitored daily by the Bank’s management, employing techniques
based on the guidelines developed by the Basel Committee, as implemented by the Bank of Tanzania (BoT), for supervisory
purposes. The required information is filed with the BoT on a quarterly basis.

The Bank of Tanzania requires each bank or banking group to:

(a) Hold a minimum level of core capital of TZS 15 billion;

(b) Maintain a ratio of core capital to the risk-weighted assets plus risk-weighted off-balance sheet assets or above the
required minimum of 10%; and

(c) Maintain total capital of not less than 12% of risk-weighted assets plus risk-weighted off-balance sheet items.

(d) Maintain a capital conservation buffer of 2.5% of risk-weighted assets and off-balance sheet exposures from August
2018. The capital conservation buffer is made up of items that qualify as tier 1 capital.

When a bank is holding capital conservation buffer of less than 2.5% of risk-weighted assets and off-balance sheet
exposures but is meeting its minimum capital requirements that bank:

• Shall not be distribute dividends to shareholders or bonuses to senior management and other staff members until
the buffer is restored to at least 2.5%;

• Shall submit a capital restoration plan to Bank of Tanzania within a period specified by BoT, indicating how the bank
is going to raise capital to meet its minimum requirement including capital conservation buffer within a specified
period of time; and

• In the event that BoT does not approve the capital restoration plan, it may direct the bank to raise additional capital
within a specified time period in order to restore its capital conservation buffer.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.6 Capital management (continued)

The Bank’s regulatory capital as managed by its Treasury Department is divided into two tiers:

• Tier 1 capital: means permanent shareholders’ equity in the form of issued and fully paid ordinary shares, and
perpetual non-cumulative preference shares, capital grants and disclosed reserves less year to date losses, goodwill
organization, pre-operating expenses, prepaid expenses, deferred charges, leasehold rights and any other intangible
assets.

• Tier 2 capital: means general provisions which are held against future, presently unidentified losses and are freely
available to meet losses which subsequently materialize, subordinated debts, cumulative redeemable preferred
stocks and any other form of capital as may be determined and announced from time to time by the Bank.

The risk-weighted assets are measured by means of a hierarchy of five risk weights classified according to the nature and
reflecting an estimate of credit, market and other risks associated with each asset and counterparty, taking into account
any eligible collateral or guarantees. A similar treatment is adopted for off-balance sheet exposure, with some adjustments
to reflect the more contingent nature of the potential losses.

The table below summarizes the composition of regulatory capital and the ratios of the Bank for the year ended 31
December 2019 and year ended 31 December 2018. During those two periods, the Bank complied with all the externally
imposed capital requirements to which it is subject.

2019 2018
TZS’ TZS’
Note
Millions Millions
Tier 1 capital  
Share capital 20,000 20,000
Retained earnings 951,340 808,448
Excess impairment –IFRS 9(a) - 8,847
Less: Prepaid expenses 23(b) (39,896) (43,627)
Less: Intangible assets (b) 25 - (21,241)
Less: Deferred tax assets 27 (77,084) (61,229)

Total qualifying Tier 1 capital (A) 854,360 711,198

Tier 2 capital
Subordinated debt 70,998 70,972
Accrued interest (2,808) (2,782)
General risk reserve (b) - 33,725
Fair valuation reserve 1,049 881

Total qualifying Tier 2 capital (B) 69,239 102,796

Maximum Tier 2 capital allowed (2% of Risk weighted assets) – (C) (c)
99,564 89,990

Total regulatory capital (D) = [(A) + Lower of (B) or (C)] 923,599   801,188
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6. FINANCIAL RISK MANAGEMENT (CONTINUED)

6.6 Capital management (continued)

2019 2018
TZS’ TZS’
Risk-weighted assets
Millions Millions

On-balance sheet(d) 4,031,716 3,580,258

Off-balance sheet 534,985 379,289
Market risk 38,402 4,570
Operational risk(e) 383,687 357,415

Total risk-weighted assets (E) 4,988,790 4,321,532

2019 2018
Required ratio Bank’s Bank’s

(%) ratio (%) ratio (%)

Tier 1 capital 12.5 17.1 16.5

Tier 1 + Tier 2 capital 14.5 18.5 18.5

The increase in the total regulatory capital in the 2019 is mainly due to the contribution of the current-year profit. The
increase of the risk-weighted assets reflects the increase in loans and advances, off-balance sheet exposure and operational
risk capital charge during the year.

(a) For the purpose of computing Core Capital on first adoption of IFRS 9; BoT guidance on IFRS 9 allowed Banks and
financial institutions to spread the excess impairment equally over three years from 2019. The total excess impairment
adjusted to retained earnings on adoption was TZS 17,694 million. The Bank spread the impact of IFRS 9 Adoption for
two years for capital computation purpose. In 2019, the Bank added back TZS 8,847 million to retained earnings.

(b) During the year, the Bank of Tanzania issued a circular abolishing the requirement for banks and financial institutions
to maintain 1% general provision for loans categorized as unclassified and the exclusion of investment in computer
software in the core capital computation effective from July 2019.

(c) As per Bank of Tanzania requirement, Tier 2 Capital should not exceed 2% of the total risk weighted assets and off-
balance sheet exposure.

(d) Following adoption of IFRS 16 in 2019, on-balance sheet assets includes right-of-use asset. For regulatory capital
purposes, right-of-use of assets is treated as aa tangible asset and applies the risk weight consist with the risk weight
that would have been applied to the underlying asset.

(e) Capital charge for operational risk is calculated using Basic Indicator approach (BIA) prescribed under Basel II by
capping net interest income to 3.5% of interest earning assets.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7. INTEREST AND SIMILAR INCOME

(a) GROUP
2019 2018
TZS’ Millions TZS’ Millions
Loans and advances to customers 555,965 500,316
Government securities 94,067 98,181
Placements and balances with other banks 3,163 2,058
653,195 600,555
(b) BANK
Loans and advances to customers 556,744 501,399
Government securities 94,067 98,181
Placements and balances with other banks 3,163 2,058
653,974 601,638

8. INTEREST EXPENSE

(a) GROUP
2019 2018
TZS’ Millions TZS’ Millions
Deposits from customers
- Time deposits 52,777 31,510
- Current accounts 23,990 23,032
- Saving deposits 17,053 20,852
Deposits due to other banks 24 1,755
Borrowings from financial institutions 24,454 23,895
NMB bond 9,488 8,571
Lease liabilities 3,034 -
130,820 109,615
(b) BANK
Deposits from customers
- Time deposits 52,777 31,510
- Current accounts 23,990 23,032
- Saving deposits 17,053 20,852
Deposits due to other banks 24 1,755
Borrowings from financial institutions 24,454 23,895
NMB bond 9,488 8,571
Lease liabilities 8,547 -
136,333 109,615

9. FOREIGN EXCHANGE INCOME

(a) GROUP
2019 2018
TZS’ Millions TZS’ Millions
Foreign currency trading 24,454 20,861

(b) BANK
Foreign currency trading 24,454 20,914
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10. NET FEES AND COMMISSION INCOME

GROUP AND BANK

2019 2018
TZS’ Millions TZS’ Millions
Fees and commission income
Credit related fees and commissions 41,134   60,856
Other fees 104,299   71,685
ATM fees and card issuing 32,576   25,892
Maintenance fees 10,180   22,349
Teller withdrawal fees 16,743 9,900
Commission - mobile banking 7,344   7,916
Government service fees 3,540 4,405
215,816 203,003
Fees and commission expense  
Financial charges (46,663)   (36,721)
Net fees and commission income 169,153   166,282

11. OTHER INCOME

GROUP AND BANK

2019 2018
TZS’ Millions TZS’ Millions
Bad debts recovery 8,603 6,784
Miscellaneous income 921 666
Profit on disposal of property and equipment 131 143
Rental income 16 22
Dividend on TMRC equity investments 31 32
9,702 7,647

12. EMPLOYEE BENEFITS EXPENSE (GROUP AND BANK)

GROUP AND BANK
2019 2018
TZS’ Millions TZS’ Millions
Salaries and allowances 105,590 99,313
Other emoluments 60,919 51,800
Pension costs - defined contribution plan 16,070 15,036
182,579 166,149

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13. OTHER OPERATING EXPENSES

(a) GROUP
2019 2018
TZS’ Millions TZS’ Millions
Administrative expenses 69,316 61,491
Operating lease rent 274 21,824
Utilities 14,810 19,705
Security expenses 10,658 11,416
Marketing and advertising expenses 6,493 7,402
Repairs and maintenance 40,617 43,417
Traveling expenses 7,471 9,137
Management contract expenses 2,707 3,843
Other expenses 1,292 3,828
Auditors’ remuneration 676 671
Directors’ remuneration:  
- Fees 120 119
- Others 135 190
154,567 183,043
(b) BANK
Administrative expenses 69,114 67,319
Operating lease rent 274 21,824
Utilities 14,810 19,705
Security expenses 10,658 11,416
Marketing and advertising expenses 6,493 7,402
Repairs and maintenance 40,617 43,417
Traveling expenses 7,471 9,137
Management contract expenses 2,707 3,843
Other expenses 1,292 3,828
Auditors’ remuneration 676 671
Directors’ remuneration:  
- Fees 120 119
- Others 133 190
154,365 188,871

14. DEPRECIATION AND AMORTISATION

(a) GROUP
2019 2018
TZS’ Millions TZS’ Millions
Depreciation of property and equipment (Note 24(a)) 48,998 42,275
Amortization of right-of-use assets (Note 26(a)) 10,935 -
Amortization of intangible assets (Note 25) 13,434 13,629
73,367 55,904

(b) BANK
Depreciation of property and equipment (Note 24(b)) 47,028 40,304
Amortization of right of use assets (Note 26(b)) 13,146 -
Amortization of intangible assets (Note 25) 13,434 13,629
73,608 53,933
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15. CURRENT INCOME TAX

(a) INCOME TAX EXPENSE - GROUP

Income tax expense for the year is arrived at as follows:

2019 2018
TZS’ Millions TZS’ Millions
Current tax:
In respect of current year (Note 15(c)) 85,921 57,319
Over provision in prior period (71) -
85,850 57,319
Deferred tax:  
In respect of current year (Note 27(a)) (15,093) (9,715)
In respect of prior year (Note 27(a)) 365 (4,203)
(14,728) (13,918)
71,122 43,401

The tax on the Group’s profit differs from the theoretical amount that would arise using the statutory income tax rate as
follows:

2019 2018
TZS’ Millions TZS’ Millions
Profit before income tax 215,861 144,362
 
Tax calculated at the statutory income tax rate of 30% (2018: 30%) 64,758 43,309
 
Tax effect of:  
Depreciation on non-qualifying assets 511 927
Expenses not deductible for tax purposes 4,611 3,368
Dividend income (9) -
Utilisation of provision charged to retained earnings on IFRS 9 adoption 886 -
Net (under)/over provision of deferred and current tax in prior year 365 (4,203)
 
Income tax expense 71,122 43,401

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15. CURRENT INCOME TAX (CONTINUED)

(b) INCOME TAX EXPENSE - BANK

Income tax expense for the year is arrived at as follows:

2019 2018
TZS’ Millions TZS’ Millions
Current tax:
In respect of current year (Note 15(d)) 84,848 57,215
 
Deferred tax:  
In respect of current year (Note 27(b)) (15,076) (10,443)
In respect of prior year (Note 27(b)) (851) (2,794)
(15,927) (13,237)
68,921 43,978

The tax on the Bank’s profit differs from the theoretical amount that would arise using the statutory income tax as follows:

2019 2018
TZS’ Millions TZS’ Millions
Profit before income tax 211,088 141,641
Tax calculated at the statutory income tax rate of 30% (2018: 30%) 63,326 42,492
Tax effect of:  
Depreciation on non-qualifying assets 511 927
Expenses not deductible for tax purposes 5,058 3,353
Dividend income (9) -
Utilisation of provision charged to retained earnings on IFRS 9 adoption 886 -
Net over provision of deferred tax in prior year (851) (2,794)
Income tax expense 68,921 43,978
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15. CURRENT INCOME TAX (CONTINUED)

(c) CURRENT TAX (LIABILITIES)/ASSETS – GROUP

2019 2018
TZS’ Millions TZS’ Millions
At start of the year 13,066 1905
Current year tax expense (Note 15(a)) (85,850) (57,319)
Tax paid 60,418 68,480

Tax (payable)/recoverable (12,366) 13,066

(d) CURRENT TAX (LIABILITIES)/ASSETS – BANK

At start of the year 13,188 1923
Current year tax expense (Note 15(b)) (84,848) (57,215)
Tax paid 56,357 68,480

Tax (payable)/recoverable (15,303) 13,188

16. EARNINGS PER SHARE

(a) GROUP

The calculation of the basic earnings per share was based on the net profit attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding during the year, calculated as follows:
2019 2018
TZS’ Millions TZS’ Millions
Net profit attributable to shareholders 144,618 100,510
Weighted average number of shares in issue in millions (Note 35) 500 500
Basic and diluted earnings per share 289.24 201.02

(b) BANK

Net profit attributable to shareholders 142,167 97,663

Weighted average number of shares in issue in millions (Note 35) 500 500
Basic and diluted earnings per share 284.33 195.33
There being no dilutive or dilutive potential share options, the basic and diluted earnings per share are the same.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17. DIVIDEND PER SHARE

Dividends are not recognized as a liability until they have been ratified at the Annual General Meeting. The Directors
propose payment of a dividend of TZS 96 per share, amounting to TZS 48,000 million out of 2019 profit. In 2018, dividend
of TZS 66 per share, amounting to TZS 33,000 million was approved and paid.

18. CASH AND BALANCES WITH BANK OF TANZANIA

(GROUP AND BANK)

The calculation of the basic earnings per share was based on the net profit attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding during the year, calculated as follows:
2019 2018
TZS’ Millions TZS’ Millions
Cash in hand
- local currency 432,519 358,414
- foreign currency 65,712 44,295
Balances with Bank of Tanzania  
- local currency 378,588 152,829
- foreign currency 72,225 112,785
Statutory Minimum Reserves (SMR)* 392,096 402,099
1,341,140 1,070,422
Current 1,341,140 1,070,422

*The SMR deposit is not available to finance the Bank’s day-to-day operations and hence excluded from cash and cash
equivalents for the purpose of the cash flow statement (See Note 36). Cash in hand and balances with Bank of Tanzania
are non-interest bearing.

19. PLACEMENTS AND BALANCES WITH OTHER BANKS

(GROUP AND BANK)

2019 2018
TZS’ Millions TZS’ Millions
Balances with banks abroad 208,309 113,569
Placement with local banks  
- Local currency 56,017 60,822
264,326 174,391

Current 264,326 174,391

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20. (a) LOANS AND ADVANCES TO CUSTOMERS

2019 2018
TZS’ Millions TZS’ Millions
Salaried workers loans (SWL) 2,177,717 1,823,158
MSE loans 356,111 365,777
Other consumer loans 142,629 130,355
Large corporate entities 670,109 693,019
SME loans 227,830 224,635
Agribusiness loans 188,720 136,056

Gross loans and advances to customers 3,763,116 3,373,000

Less: allowance for impairment (173,110) (131,599)
Net loans and advances to customers 3,590,006 3,241,401

Analysis of loans and advances to customers by maturity

Maturity analysis is based on the remaining periods to contractual maturity from year-end

2019 2018
TZS’ Millions TZS’ Millions
Maturing:
Within 1 year 1,005,332 1,023,215
Between 1 year and 5 years 1,551,984 1,428,335
Over 5 years* 1,032,690 789,851
3,590,006 3,241,401

REPEAT
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20. (b) LOANS AND ADVANCES TO CUSTOMERS (BANK)

2019 2018
TZS’ Millions TZS’ Millions
Salaried workers loans 2,177,717 1,823,158
MSE loans 356,111 365,777
Other consumer loans 142,629 130,355
Large corporate entities 675,791 703,412
SME loans 227,830 224,635
Agribusiness loans 188,720 136,056

Gross loans and advances to customers 3,768,798 3,383,393

Less: allowance for impairment (173,110) (131,599)
Net loans and advances to customers 3,595,688 3,251,794

Analysis of loans and advances to customers by maturity

Maturity analysis is based on the remaining periods to contractual maturity from year-end

2019 2018
TZS’ Millions TZS’ Millions
Maturing:
Within 1 year 1,011,014 1,028,411
Between 1 year and 5 years 1,551,984 1,433,532
Over 5 years* 1,032,690 789,851
3,595,688 3,251,794
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20. (b) LOANS AND ADVANCES TO CUSTOMERS (BANK) (CONTINUED)

Movement in the Other

allowance account Corporate MSE SME SWL consumer Agribusiness Total
for losses on loans: loans

TZS’ TZS’ TZS’ TZS’ TZS’ TZS’ TZS’

Millions Millions Millions Millions Millions Millions Millions

At 1 January 2019 66,554   18,574   11,685   20,360   4,838   9,588   131,599

Increase in allowance
35,595 5,717 11,291 21,590 4,416 20,241 98,850
for loan impairment*

Write-offs (17,303) (14,280) (6,551) (14,806) (3,322) (1,077) (57,339)

At 31 December
84,846 10,011 16,425 27,144 5,932 28,752 173,110
2019

At 1 January 2018 75,960   9,170   4,230   23,485   1,100   5,745   119,690

Increase in allowance
57,447   18,926   18,726   18,577   6,067   15,513   135,256
for loan impairment

Write-offs (66,853) (9,522) (11,271) (21,702) (2,329) (11,670) (123,347)

At 31 December
66,554   18,574   11,685   20,360   4,838   9,588   131,599
2018
*The decrease in impairment charge during the year was due to improvements in portfolio management and incorporation
of collateral information into modeled impairment consideration.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

21. (a) GOVERNMENT SECURITIES AT AMORTISED COST

(GROUP AND BANK)

2019 2018
TZS’ Millions TZS’ Millions
Treasury Bills:
Maturing within 91 days 95,553 93,889
Maturing after 91 days 177,254 154,551
272,807 248,440
Treasury Bonds:
Maturing within 91 days 9,577 18,591
Maturing after 91 days 462,143 457,912
471,720 476,503
744,527 724,943
Current 348,368 428,861
Non-current 396,159 296,082
744,527 724,943
Interest on recapitalization bond is received semi-annually at a variable rate, a maximum of 15.4% and a minimum of 7.8%
computed as a weighted average of interest rate on Treasury Bills over the last six months. Treasury Bills and Bonds are
debt securities issued by the Government of the United Republic of Tanzania and during the yeard the effective interest
rate was 12.6% (2018: 13.3%).

Government securities with face value of TZS 9,277 million (2018: TZS 6,477 million) with maturity date of 12 October 2024
and 1 March 2025 are pledged as securities to borrowing advanced by TMRC.

The movement in investment securities may be summarized as follows:

2019 2018
TZS’ Millions TZS’ Millions
At 1 January 724,943 919,099
Additions 583,552 558,758
Matured securities (563,968) (752,914)
At 31 December 744,527 724,943
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21. (b) GOVERNMENT SECURITIES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

(GROUP AND BANK)

The Group has invested in various treasury bonds that are designated at fair value through other
comprehensive income. The movement in these securities is as follows:

2019 2018
TZS’ Millions TZS’ Millions
At 1 January 15,242 870
Interest income 1,617 1,597
Realised gain on fair valuation credited to P&L 1,100 1,033
Unrealised fair valuation gain credited to OCI (Note 35 (v)) 240 260
Additions 76,340 50,090
Disposed (77,512) (38,608)
 
At 31 December 17,027 15,242
 
Non-current 17,027 15,242

22. EQUITY INVESTMENTS

(a) GROUP
Investment at FVOCI

2019 % 2018 %
TZS’ Millions Share-holding TZS’ Millions Share-holding
Tanzania Mortgage Refinance Company
2,920 9.73 2,920 9.73
Limited (TMRC)

TMRC is a private company and there is no quoted market price available for the shares. On adoption of IFRS 9 the
investment was re-measured at fair-value through other comprehensive income. Fair value was determined by observing
a recent transaction in the market. As at 31 December 2019, the Bank had 1,800,000 shares in TMRC.

The Bank has equity investments in TMRC and a subsidiary named Upanga Joint Venture Company Limited.

(b) BANK

The Bank has equity investments in TMRC and a subsidiary named Upanga Joint Venture Company Limited.
(i) Investment in a subsidiary

2019 % 2018 %
Company name TZS’ Millions Share-holding TZS’ Millions Share-holding

Upanga Joint Venture Company Limited 39,639 88 39,639 88

REPEAT
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22. EQUITY INVESTMENTS (CONTINUED)

(b) BANK
(i) Investment in a subsidiary (continued)

There are no contingent liabilities relating to the Bank’s interest in the subsidiary.

There are no restrictions to the Bank in gaining access or use of assets of the subsidiary and settling liabilities of the Group.

The subsidiary listed above has share capital consisting solely of ordinary shares. The country of incorporation; the United
Republic of Tanzania is also their principal place of business.

There were no significant judgements and assumptions made in determining the Bank’s interest in the subsidiary.

Set out below is the summarised financial information of Upanga Joint Venture Company Limited (“UJVC Limited”), a
subsidiary of the Bank.

Summarised statement of financial position 2019 2018

TZS’ Millions TZS’ Millions
Current
Total current assets 11,523 18,075
Current liabilities (12,836) (8,774)
Total net current assets /(liabilities) (1,313) 9,301

Non-current
Assets 36,125 38,998
Liabilities - (14,067)
Total non-current net assets 36,125 24,931
Total net assets 34,812 34,232

Summarised statement of comprehensive income 2019 2018

TZS’ Millions TZS’ Millions
Revenue 6,033 6,033
Cost of sales (142) (115)
Finance costs (778) (1,083)
Administrative expenses (2,031)
(2,008)
Loss on foreign exchange - (53)
Tax (charge)/credit (1,056) 577
Profit after tax 2,026 3,351
Allocated to non- controlling interest 120 451
Non-controlling interests have no protective rights that can significantly restrict the Bank’s ability to access or use the
assets and settle the liabilities of the group.
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22. EQUITY INVESTMENTS (CONTINUED)

(b) BANK
(i) Investment in a subsidiary (continued)

Summarised statement of comprehensive income 2019 2018

TZS’ Millions TZS’ Millions
Net cash generated in operations (959) 18,354
Net cash used in investing activities - -
Net cash used in financing activities (5,889) (6,059)
Net increase/(decrease) in cash and cash equivalents (6,848) 12,295
Cash and cash equivalents at start of the year 12,387 91
Cash and cash equivalents at end of the year 5,539 12,386
(ii) Investment at fair value through other comprehensive income

2019 % 2018 %
Company name TZS’ Millions Share-holding TZS’ Millions Share-holding
Tanzania Mortgage Refinance Company
2,920 9.73 2,920 9.73
Ltd

23. OTHER ASSETS

(a) GROUP
2019 2018
TZS’ Millions TZS’ Millions
Prepayments 39,975 43,728
Service fees receivable 7,077 2,378
Staff imprest 64 33
Cheques and items for clearing 4,152 1,613
Other receivables 22,762 22,553
Balances with mobile network operators 17,490 16,018
Less: impairment allowance for other receivables (196) (1,568)
91,324 84,755

Current 90,560 75,884

Non-current 764 8,871

91,324 84,755

The movement in provision for impairment of other assets is as

follows:
At start of the year (1,568) (582)
Release/ (Charge) for the year 1,372 (986)
At end of year (196) (1,568)

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

23. OTHER ASSETS (CONTINUED)

(b) BANK
2019 2018
TZS’ Millions TZS’ Millions
Prepayments 39,896 43,627
Service fees receivable 7,077 2,378
Staff advance 64 33
Cheques and items for clearance 4,152 1,613
Balances with mobile network operators 17,490 16,268
Other receivables 19,174 16,018
Less: Allowance for impairment of other receivables (196) (1,568)
87,657 78,369
Current 86,893 69,498
Non-current 764 8,871
At end of the year 87,657 78,369

The movement in allowance for impairment of other receivables is as follows:

At start of the year (1,568) (582)
Release/ (Charge) for the year 1,372 (986)

At end of the year (196) (1,568)

Other assets have not been pledged as security for liabilities.

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24. PROPERTY AND EQUIPMENT

(a) GROUP

Computers, Capital
 Own  Leasehold Motor
  furniture and   work in   Total
building improvement vehicles
equipment progress

Year ended 31 December TZS’ TZS’ TZS’ TZS’ TZS’ TZS’

2019 Millions Millions Millions Millions Millions Millions
COST

At 1 January 2019 151,554 59,355 18,411 197,211 16,438 442,969

Additions 1,095 747 - 5,197 5,610 12,649
Transfers from work in 5,387 7,400 10 9,637 (22,434) -
progress
Transfer from - - 315 8,920 744 9,979
prepayments
Disposal - - (75) (3,826) - (3,901)
At 31 December 2019 158,036 67,502 18,661 217,139 358 461,696
DEPRECIATION

At 1 January 2019 30,382 23,304 12,875 110,708 - 177,269

Charge for the year 7,023 7,326 2,724 31,925 - 48,998
Disposal - - (68) (3,672) - (3,740)
At 31 December 2019 37,405 30,630 15,531 138,961 - 222,527

NET BOOK VALUE

At 31 December 2019 120,631 36,872 3,130 78,178 358 239,169

The capital work in progress relates to the ongoing projects of branch remodeling. No property and equipment of the
Group and Bank has been pledged as security for liabilities.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24. PROPERTY AND EQUIPMENT (CONTINUED)

(a) GROUP (CONTINUED)

Computers, Capital
 Own  Leasehold Motor
  furniture and   work in   Total
building improvement vehicles
equipment progress

Year ended 31 December TZS’ TZS’ TZS’ TZS’ TZS’ TZS’

2018 Millions Millions Millions Millions Millions Millions
COST

At 1 January 2018 102,571 32,679   16,933 132,615 130,591 415,389

Additions 43 10   129   12,082   13,266   25,530

Transfers from work in 48,940 26,666   48   52,530   (128,184)   -

progress

Transfer from - -   1,846   5,222   1,483   8,551

prepayments

Transfer to intangible - -   -   (2,321)   (718)   (3,039)

assets*

Disposal - -   (545)   (2,917)   -   (3,462)

At 31 December 2018 151,554   59,355   18,411   197,211   16,438   442,969
DEPRECIATION

At 1 January 2018 23,950   19,627   10,248   84,408   -   138,233

Charge for the year 6,432   3,677   3,061   29,105   -   42,275
Disposal -   -   (434)   (2,805)   -   (3,239)
At 31 December 2018 30,382   23,304   12,875   110,708   -   177,269

NET BOOK VALUE

At 31 December 2018 121,172   36,051   5,536   86,503   16,438   265,700

The capital work in progress relates to the on-going projects of branch remodelling and equipment for new data centre
and network equipment at Head office. No property and equipment of the Group and Bank has been pledged as security
for liabilities.

*The transfer to intangible assets represents the cost of software portion of the asset which was initially capitalized with
its hardware.
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24. PROPERTY AND EQUIPMENT (CONTINUED)

(a) GROUP (CONTINUED)

Computers, Capital
 Own  Leasehold Motor
  furniture and   work in   Total
building improvement vehicles
equipment progress

Year ended 31 December TZS’ TZS’ TZS’ TZS’ TZS’ TZS’

2019 Millions Millions Millions Millions Millions Millions

COST

At 1 January 2019 108,534 59,355   18,411   197,211   16,436   399,947

Additions 1,095 747   -   5,197   5,610   12,649
Transfers from work in
5,387 7,400   10   9,637   (22,434)   -
progress
Transfer from
- -   315   8,920   744   9,979
prepayments
Disposal - -   (75)   (3,826)   -   (3,901)

At 31 December 2019 115,016 67,502   18,661   217,139   356   418,674

DEPRECIATION

At 1 January 2019 25,455   23,304   12,874   110,709   -   172,342

Charge for the year 5,053 7,326   2,724   31,925   - 47,028
Disposal - -   (68)   (3,672)   - (3,740)
At 31 December 2019 30,508   30,630   15,530   138,962   -   215,630

NET BOOK VALUE

At 31 December 2019 84,508   36,872   3,131   78,177   356   203,044

The capital work in progress relates to the ongoing projects of branch re-modelling. No property and equipment of the
Group and Bank has been pledged as security for liabilities.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24. PROPERTY AND EQUIPMENT (CONTINUED)

(a) GROUP (CONTINUED)

Computers, Capital
 Own  Leasehold Motor
  furniture and   work in   Total
building improvement vehicles
equipment progress

Year ended 31 December TZS’ TZS’ TZS’ TZS’ TZS’ TZS’

2018 Millions Millions Millions Millions Millions Millions

COST

At 1 January 2018 59,551 32,679 16,933 132,615 130,591 372,369

Additions 43   10   129   12,082   13,266 25,530
Transfers from work in
48,940   26,666   48   52,530   (128,184) -
progress
Transfer from
-   -   1,846   5,222   1,483 8,551
prepayments
Transfer to intangible
-   -   -   (2,321)   (718) (3,039)
assets*
Disposal -   -   (545)   (2,917)   - (3,462)

At 31 December 2018 108,534   59,355   18,411   197,211   16,438 399,949

DEPRECIATION

At 1 January 2018 20,994 19,627 10,247 84,409 - 135,277

Charge for the year 4,461   3,677   3,061   29,105   - 40,304
Disposal -   -   (434)   (2,805)   - (3,239)
At 31 December 2018 25,455   23,304   12,874   110,709   - 172,342

NET BOOK VALUE

At 31 December 2018 83,079 36,051   5,537 86,502 16,438 227,607

The capital work in progress relates to the on-going projects of branch remodelling and equipment for new data centre
and network equipment at Head office. No property and equipment of the Group and Bank has been pledged as security
for liabilities.

*The transfer to intangible assets represents the cost of software portion of the asset which was initially capitalized with
its hardware.
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25. INTANGIBLE ASSETS (GROUP AND BANK)

Computer Work in
INTANGIBLE ASSETS (GROUP AND BANK) Total
Software progress
TZS’ TZS’ TZS’
Millions Millions Millions

2019
Cost:
At 1 January 58,958 1,978 60,936
Additions 3,173 7,794 10,967
Transfer from work in progress 8,066 (8,066) -
Transfer from prepayments 2,005 - 2,005

At 31 December 72,202 1,706 73,908

Amortisation
At 1 January 39,695 - 39,695
Charge for the year 13,434 - 13,434
At 31 December 53,129 - 53,129

Net book value 19,073 1,706 20,779

2018
Cost:
At 1 January 37,018 8,949 45,967
Additions 8,518 3,412 11,930
Transfer from work in progress 10,383 (10,383)   -
Reclassified from property and equipment 3,039 - 3,039

At 31 December 58,958 1,978 60,936

Amortisation
At 1 January 26,066 - 26,066
Charge for the year 13,629 - 13,629
At 31 December 39,695 - 39,695

Net book value 19,263 1,978   21,241

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

26. LEASES

The statement of financial position shows the following amounts relating to leases:

2019 2018
TZS’ Millions TZS’ Millions

(a) RIGHT-OF-USE ASSETS (GROUP)

At start of the year – On IFRS 16 adoption 37,707 -
Additions 2,649 -
Amortisation charge (10,935) -
  -
At the end of the year 29,421 -

(b) RIGHT-OF-USE ASSETS (BANK)

At start of the year – On IFRS 16 adoption 172,681 -

Additions 2,649
Amortisation charge (13,146) -
  -
At the end of the year 162,184 -

(c) LEASE LIABILITIES (GROUP)

At start of the year – On IFRS 16 adoption 34,545 -

Additions 2,649
Finance cost 3,034 -
Payment during the year (12,243) -
At the end of year 27,985 -

Current 8,177 -
Non-current 19,808 -
27,985

(d) LEASE LIABILITIES (BANK)

At start of the year – On IFRS 16 adoption 157,077 -

Additions 2,649
Finance cost 8,547 -
Payment during the year (12,243) -
At the end of year 156,030 -
-
Current 8,177 -
Non-current 147,853 -
156,030 -
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26. LEASES (CONTINUED)

The statement of financial position shows the following amounts relating to leases:

2019 2018
TZS’ Millions TZS’ Millions

(e) GROUP
Amortisation of right-of-use assets - Note 14 (a) 10,935 -
Finance cost – included as interest expense - Note 8(a) 3,034 -
Expense relating to short-term leases - Note 13 (a) 274 -
  -
At the end of the year 14,243 -

(f) BANK

Amortisation of right-of-use assets - Note 14 (b) 13,146 -

Finance cost – included as interest expense - Note 8(b) 8,547 -
Expense relating to short-term leases - Note 13 (b) 274 -
  -
At the end of the year 21,967 -

All leases relate to building properties used as office, branch or ATM outlets. Total cash flow for leases in 2019 amounted
to TZS 12,243 million. There was no acquisition of right-of-use assets during the year.

27. (a) DEFERRED TAX ASSETS (GROUP)

Deferred income tax is calculated on all temporary differences under the liability method using a principal tax rate
of 30%. The movement on the deferred income tax account is as follows:

2019 2018
TZS’ Millions TZS’ Millions

At start of year 62,132 43,338

(Debit)/credit to profit or loss:
In respect to current year (Note 15(a)) 15,093 9,715
In respect of prior year: Under/(Over) provision (Note 15(a)) (365) 4,203
Impact of IFRS 9 adoption – to retained earnings - 5,308
Debit to OCI
Current year – charged to OCI (72) (432)
 
At the end of year 76,788 62,132

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

27. (a) DEFERRED TAX ASSETS (GROUP) (CONTINUED)

Deferred income tax asset and deferred income tax credit to the profit or loss are attributed to the following items:

Credited to Credited to
Charged 31
1 January profit or Retained
to OCI December
loss earnings

TZS’ TZS’ TZS’ TZS’ TZS’

Millions Millions Millions Millions Millions
Year ended 31 December 2019
Deferred income tax asset
Property and equipment 7,673 1,842 - - 9,515
Provisions 55,571 13,080 - - 68,651
Other temporary differences (652) (194) - - (846)
Fair valuation gain – debt instruments (106) - (72) - (178)
Fair valuation gain– equity instruments (354) - - - (354)
62,132 14,728 (72) - 76,788

Year ended 31 December 2018

Deferred income tax asset

Property and equipment 6,056 1,617 - - 7,673
Provisions 37,310 12,953 - 5,308 55,571
Other temporary differences - (652) - - (652)
Fair valuation gain – debt instruments (28) - (78) - (106)
Fair valuation gain– equity instruments - (354) - (354)
43,338 13,918 (432) 5,308 62,132

2019 2018
TZS’ Millions TZS’ Millions

Expected to be recovered within 12 months 6,767 6,660

Expected to be recovered after 12 months 70,021 55,472
76,788 62,132
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27. (b) DEFERRED TAX ASSETS (BANK)

Deferred income tax is calculated on all temporary differences under the liability method using a principal
tax rate of 30%. The movement on the deferred income tax account is as follows:

2019 2018
TZS’ Millions TZS’ Millions
At start of year 61,229 43,116
Credit/(Debit) to profit or loss:  
In respect to current year (Note 15(b)) 15,076 10,443
In respect of prior year: Over provision (Note 15(b)) 851 2,794
Impact of IFRS 9 adoption – to retained earnings - 5,308
Debit to OCI:  
In respect of current year (72) (432)
At the end of year 77,084 61,229

Deferred income tax asset and deferred income tax credit to the profit or loss are attributed to the following
items:
Credited
to retained
Credited to Charged to
Year ended 31 December 1 January earnings 31 December
profit or loss OCI
2019 on IFRS 9
Adoption
TZS’ Millions TZS’ Millions TZS’ Millions TZS’ Millions TZS’ Millions
Deferred income tax asset
Property and equipment 6,356 - 1,841 - 8,197
Provisions 55,333 - 13,069 - 68,402
Other temporary differences - - 1,017 - 1,017
Fair valuation gain – debt (106) - - (72) (178)
instruments
Fair valuation gain – equity (354) - - - (354)
instruments
61,229 - 15,927 (72) 77,084

Year ended 31 December

2018
Deferred income tax asset
Property and equipment 6,056 - 300 - 6,356
Provisions 37,088 5,308 12,937 - 55,333
Fair valuation gain – debt
(28) - - (78) (106)
instruments
Fair valuation gain – equity
- - - (354) (354)
instruments
43,116 5,308 13,237 (432) 61,229

2019 2018
TZS’ Millions TZS’ Millions
Expected to be recovered within 12 months 6,783 6,614
Expected to be recovered after 12 months 70,301 54,615
77,084 61,229

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

28. DEPOSITS FROM CUSTOMERS

(a) GROUP

2019 2018
TZS’ Millions TZS’ Millions
Current accounts 1,886,794 1,696,480
Personal accounts 2,249,390 2,002,879
Time deposit accounts 780,367 615,861
4,916,551 4,315,220

Current 4,302,295 4,150,494

Non-current 614,256 164,726

(b) BANK
Current accounts 1,892,521 1,708,866
Personal accounts 2,249,390 2,002,879
Time deposit accounts 780,367 615,862
4,922,278 4,327,607

Current 4,308,022 4,162,881

Non-current 614,256 164,726
 
4,922,278 4,327,607

29. DEPOSITS DUE TO OTHER BANKS (GROUP AND BANK)

2019 2018
TZS’ Millions TZS’ Millions
Deposits from other banks 33,446 4,475
Short-term money market borrowings - 16,295
33,446 20,770

30. OTHER LIABILITIES

(a) GROUP

2019 2018
TZS’ Millions TZS’ Millions
Sundry liabilities 66,254 64,989
Accrued expenses 33,355 35,019
Bills payable 2,133 2,139
Impairment provision for off-balance sheet items (Note 6.1.5(e)) 6,562 5,002
108,304 107,149

Current 108,304 107,149

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30. OTHER LIABILITIES (CONTINUED)

(b) BANK

2019 2018
TZS’ Millions TZS’ Millions
Sundry liabilities 64,846 51,514
Accrued expenses 33,355 35,019
Bills payable 2,133 2,139
Impairment provision for off-balance sheet items (Note 6.1.5(e)) 6,562 5,002
106,896 93,674

Current 106,896 93,674

31. PROVISIONS (GROUP AND BANK)

2019 2018
TZS’ Millions TZS’ Millions
Provision for losses from legal cases 2,230 3,519

Movement in provision
At the start of year 3,519 2,784
Charged during the year (1,289) 735
 
At end of year 2,230 3,519

The amounts represent provision for certain legal claims brought against the Bank by third parties in the course of business.
In the directors’ opinion, after taking appropriate legal advice, the outcome of these legal claims will not give rise to any
significant loss beyond the amounts provided as at 31 December 2019.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

32. BORROWINGS (GROUP AND BANK)

2019 2018
TZS’ Millions TZS’ Millions
Borrowings:

- EIB Loan (i) 18,130 32,700

- FMO Loan (ii) 66,729 124,200
- Triodos (iii) 28,332 28,332
- NMB Bond (iv) 106,745 64,802
- TMRC (v) 11,700 6,700
- IFC (vi) 40,267 40,250
Accrued interest 4,542 4,404
276,445 301,388

Current 119,902 158,132

Non-current 156,543 143,256
276,445 301,388
As at 31 December 2019, the Group had no borrowing at default.

(i) European Investment Bank (EIB) loan

As at 31 December 2019, the Bank had a borrowing balance from EIB of TZS 14,293 million (2018: TZS 25,093 million)
being accumulation of TZS loans payable semi-annually within four to seven years at effective interest rate of 8.51% (2018:
8.37%). In addition, as at 31 December 2019, the Bank had a borrowing balance from EIB of USD 1.7 million (2018: USD 3.3
million) equivalent to TZS 3,837 million (2018: TZS 7,607 million) being accumulation of various USD loans payable over a
period of four to seven years at a fixed interest rate. The effective interest rate of the loan during the year was 3.25% (2018:
3.25%). The loans were taken for the purpose of better Assets Liability management. The loans are unsecured.

As at 31 December 2019, the Bank was compliant with all the lender’s covenants.

(ii) Financierings-Maatschappij voor Ontwikkelingslanden N.V (FMO) loan

The Bank borrowed from FMO in 2013 loan of USD 65 million repayable semi-annually and carries a floating rate based
on six months LIBOR rate. The effective interest rate is 5.3%. The loan was taken for the purpose of better Assets Liability
management. The loan is unsecured. As at 31 December 2019 the balance was fully repaid (2018: USD 13 million equivalent
to TZS 29,900 million).

In 2015, the Bank obtained additional unsecured loan of USD 35 million repayable semi-annually within five to six years
and carries a floating rate based on six months LIBOR rate. The effective interest rate was 5.5%, during the year. The
outstanding balance as at 31 December 2019 was USD 14 million equivalent to TZS 32,214 million (2018: USD 21 million
equivalent to TZS 48,300 million).

Moreover in 2018, the bank drew down tranche 2 of the 2015 contract amounting to USD 25 Million repayable semi-
annually within five to six years and carries a floating rate based on six months LIBOR rate. The effective interest rate was
5.5%, during the year. The outstanding balance as at 31 December 2019 was USD 15 million equivalent to TZS 34,515
million (2018: USD 20 million equivalent to TZS 46,000 million).

As at 31 December 2019, the Bank was compliant with all the lender’s covenants.
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32. BORROWINGS (GROUP AND BANK) (CONTINUED)

(iii) Triodos B.V.

In 2018, the Bank borrowed from Triodos an amount of TZS 28.3 billion repayable semi-annually from the year 2020 and
carrying a fixed rate. The effective interest rate is 14.4%. The loan was taken for the purpose of better Assets Liability
management. The loan is unsecured. As at 31 December 2019 the balance was TZS 28,332 million.

As at 31 December 2019, the Bank was compliant with all the lender’s covenants.

(iv) NMB Bond

Retail Bond

On 10 June 2019, the Bank issued the third tranche of this program. The Bank issued a TZS 25 billion 3-year bond targeted
towards the retail investor segment; offering a gross coupon rate of 10% and issued at par. The coupon on the bond
is paid quarterly. The offer period closed on 08 July 2019 with market demand exceeding expectations. The bond was
oversubscribed by 233% with the Bank receiving applications from investors amounting to TZS 83.3 billion.

Corporate Bond

On 28 December 2018 and 29 December 2018, the Bank issued the second tranche of the Medium-Term Note (MTN)
program amounting TZS 17,096 million and TZS 5 billion respectively via a private placement. The issue was targeted
towards corporate investors at a gross coupon rate of 13.5% for a period of 3 years.

The bonds are unsecured and are tradable on the Dar es Salaam Stock Exchange (DSE).

The proceeds of the bond issue will be used for on-lending to the Bank’s customers who include individuals, micro, small
and medium sized enterprises as well as large corporate and Government institutions.

As at 31 December 2019, TZS 53,155 million on the MTN program was not issued by the Bank. Subsequent tranches will be
issued as and when the Bank requires and when market conditions are conducive.

The issuance of the bonds is part of the Bank’s strategy to diversify its funding sources.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

32. BORROWINGS (GROUP AND BANK) (CONTINUED)

(v) Tanzania Mortgage Refinance Company Limited

At the end of 2017, the Bank had borrowed from Tanzania Mortgage Refinance Company Limited (TMRC) a renewable
loan of TZS 1.7 billion maturing in 48 months and carries a fixed rate of 11.5% p.a. The loan is secured by specific debenture
over the portfolio of mortgage loans covering at least 125% of the loan amount.

During the year, the Bank secured an additional TZS 5 billion loan with a 3-year tenor at a fixed interest rate of 11.5%.
The loan is secured by a portfolio of treasury bonds with a coverage ratio of at least 105.3% and minimum remaining tenor
of 3 years from the date of disbursement.

The loans were taken to re-financing a portfolio of mortgage loans. The effective interest rate of the loans is 11.5%.

As at 31 December 2019 the balance was TZS 11.7 billion (2018: TZS 6.7 billion).

(vi) International Finance Corporation (IFC)

In 2018, the bank obtained a short-term loan from IFC amounting to USD 17.5 million repayable in 2020 in one bullet and
carries a floating rate based on three months LIBOR rate. The effective interest rate during the year was 4.1%. The loan was
taken to better Assets Liability management. The loan is unsecured. In 2019, the loan was renewed. As at 31 December
2019 the balance was USD 17.5 million equivalent to TZS 40,268 million (2018: USD 17.5 million equivalent to TZS 40,250
million).

As at 31 December 2019, the Bank was compliant with all the lenders covenants.

33. SUBORDINATED DEBT (GROUP AND BANK)

In 2018, the Bank borrowed an amount of TZS 68,190 million from International Finance Corporation (IFC). The loan is
repayable semi-annually after lapse of 5 years grace period and carries a fixed rate. The loan was taken to improve the Tier
II capital of the Bank. The loan is unsecured. As at 31 December 2019 the balance was TZS 68,190 million.

As at 31 December 2019, the Bank was compliant with all the lender’s covenants.

2019 2018
TZS’ Millions TZS’ Millions
Principal 68,190 68,190
Accrued interest 2,808 2,782
   
70,998 70,972
Charged during the year (1,289) 735
 
At end of year 2,230 3,519

Non-current 70,998 70,972

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34. (a) NET DEBT RECONCILIATION (GROUP)

2019 2018
TZS’ Millions TZS’ Millions
The analysis and movement of the Group net debt is as follows;
Cash and cash equivalents (Note 36) 1,213,370 842,714
Borrowings repayable within one year (122,710) (177,961)
Borrowings repayable after one year (224,733) (194,399)
Lease liabilities due after 1 year (8,150) -
Lease liabilities due within 1 year (19,856) -

Net debt 837,921 470,354

Cash and cash equivalents (Note 36) 1,213,370 842,714

Gross debt – fixed interest rate (267,188) (174,372)
Gross debt – variable interest rate (108,261) (197,988)
 
Net debt 837,921 470,354

Assets Liabilities from financing activities

Cash and cash Total
  Borrowings Lease liabilities
equivalents
  TZS’ Millions  TZS’ Millions  TZS’ Millions  TZS’ Millions 
At 1 January 2019 842,714 (372,360) - 470,354
Acquisition of lease – IFRS 16
- - (37,251) (37,251)
adoption adjustment
Cash flows – principal 370,716 25,077 12,398 408,191
Net movement in accrued interest -  (160) (3,153) (3,313)
Foreign exchange adjustment (60) -  -  (60)
         
Net debt 1,213,370 (347,443) (28,006) 837,921
         
At 1 January 2018 1,002,394 (336,930) - 665,464
Cash flows – principal (166,541) (30,835) - (197,376)
Net movement in accrued interest -  (4,595) - (4,595)
Foreign exchange adjustment 6,861 - - 6,861
         
Net debt 842,714 (372,360) - 470,354

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

34. (b) NET DEBT RECONCILIATION (BANK)

2019 2018
TZS’ Millions TZS’ Millions
The analysis and movement of the Bank’s net debt is as follows;
Cash and cash equivalents (Note 36) 1,213,370 842,714
Borrowings repayable within one year (122,710) (177,961)
Borrowings repayable after one year (224,733) (194,399)
Lease liabilities due after 1 year (8,150) -
Lease liabilities due within 1 year (147,880) -

Net debt 709,897 470,354

Cash and cash equivalents (Note 36) 1,213,370 842,714

Gross debt – fixed interest rate (395,212) (174,372)
Gross debt – variable interest rate (108,261) (197,988)
 
Net debt 709,897 470,354

Assets Liabilities from financing activities

Cash and cash Total
Borrowings Lease liabilities
equivalents
TZS’ Millions  TZS’ Millions  TZS’ Millions  TZS’ Millions 
At 1 January 2019 842,714 (372,360) - 470,354
Acquisition of lease – IFRS 16 adoption
- - (159,762) (159,762)
adjustment
Cash flows – principal 370,716 25,077 12,398 408,191
Net movement in accrued interest -  (160) (8,666) (8,826)
Foreign exchange adjustment (60) -  -  (60)
         
Net debt 1,213,370 (347,443) (156,030) 709,897
         
At 1 January 2018 1,002,394 (336,930) - 665,464
Cash flows - principal (166,541) (30,835) - (197,376)
Net movement in accrued interest -  (4,595) - (4,595)
Foreign exchange adjustment 6,861 - - 6,861
         
Net debt 842,714 (372,360) - 470,354
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35. CAPITAL AND RESERVES

(i) Share capital

2019 2018
TZS’ Millions TZS’ Millions
Authorised
625,000,000 ordinary shares of TZS 40 each 25,000 25,000
Called up and fully paid
500,000,000 ordinary shares of TZS 40 each 20,000 20,000

(ii) Retained earnings

Retained earnings consist of undistributed profits from previous years.

(iii) General banking risk reserve

General banking risk reserve represents an amount set aside to cover additional provision for loan losses required to
comply with the requirements of the Bank of Tanzania. This reserve is not available for distribution.

(iv) General reserve

General risk reserve represents 1% provision charged on all current credit accommodation and other risk assets as required
by the Bank of Tanzania regulations, 2014. General Reserve is created by transferring the amount from retained earnings.
This reserve is not available for distribution. The requirement to maintain this reserve was abolished from 1 July 2019
through a BOT circular.

(v) Fair valuation reserve

The reserve is made up of fair valuation of financial assets.

This reserve is not available for distribution to shareholders.

2019 2018
TZS’ Millions TZS’ Millions
Movement in fair valuation reserve is as follows:
At 1 January
- As previously stated 881 (127)
- Fair valuation adjustments due to IFRS 9 adoption - 1,180
- Deferred tax adjustment due to IFRS 9 adoption - (354)
- As stated after IFRS 9 adoption 881 699
 
Fair valuation gain 240 260
Deferred tax on fair valuation gain (72) (78)
168 182
 
At 31 December 1,049 881

There was no reclassification adjustment made in respect to components of other comprehensive income.

REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

36. CASH AND CASH EQUIVALENTS (GROUP AND BANK)

2019 2018
TZS’ Millions TZS’ Millions
Cash and balances with Bank of Tanzania (Note 18) 1,341,140 1,070,422
Less: Statutory Minimum Reserves (Note 18) (392,096) (402,099)
Placement and balances with other banks (Note 19) 264,326 174,391
1,213,370 842,714

Cash and balances with Bank of Tanzania (Note 18) 1,341,140 1,070,422
Less: Statutory Minimum Reserves (Note 18) (392,096) (402,099)
Placement and balances with other banks (Note 19) 264,326 174,391
1,213,370 842,714

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than 91 days maturity
from the date of acquisition including: cash and balances with Bank of Tanzania and Placement with other banks. Cash and
cash equivalents exclude the cash reserve requirement held with the Bank of Tanzania.

37. NOTES TO THE STATEMENT OF CASH FLOWS

(a) GROUP

2019 2018
Note TZS’ Millions TZS’ Millions
Operating activities
Profit before tax 215,861 144,362

Adjustment for:

Depreciation and amortization 14 73,367 55,904

Profit on disposal of property and equipment 11 (131) (143)
Realised gain on government security available for sale (1,100) (1,033)
Interest income from government security available for sale 21(b) (1,617) (1,597
Interest expense on lease 8 3,034 -
Interest expense on borrowings 8 33,942 32,466
Effect of movement in foreign exchange 60 (6,861)
323,416 223,098
Movement in operating assets:
- Statutory Minimum Reserve 10,003 (5,440)
- Loans and advances to customers (348,605) (484,410)
- Other assets (21,716) (28,572)
- Deposits from customers 601,331 43,162
- Deposits due to other banks 12,676 21,515
- Other liabilities 1,156 16,202
- Provisions 31 (1,289) 735
Cash generated from/(utilized in) operations 576,972 (213,710)
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37. NOTES TO THE STATEMENT OF CASH FLOWS (CONTINUED)

2019 2018
Note TZS’ Millions TZS’ Millions
(a) BANK
Operating activities
Profit before tax 211,088 141,641
Adjustment for:
Depreciation and amortization 14 73,609 53,933
Profit on disposal of property and equipment 11 (131) (143)
Realised gain on government security available for sale 21(b) (1,100) (1,033)
Interest income on government security available for sale 21(b) (1,617) (1,597)
Interest expense on lease 8 8,547 -
Interest expense on borrowings 8 33,942 32,466
Effect of movement in foreign exchange 60 (6,861)
324,398 218,406
Movement in operating assets:  
- Statutory Minimum Reserve 10,003 (5,440)
- Loans and advances to customers (343,894) (479,487)
- Other assets (36,876) (30,040)
- Deposits from customers 594,671 55,458
- Deposits due to other banks 12,676 21,515
- Other liabilities 13,222 5,143
- Provisions 31 (1,289) 735
Cash generated from /(utilized in) operations 572,911 (213,710)

38. (a) FINANCIAL INSTRUMENTS BY CATEGORY (GROUP)

Amortised Fair Value

Total
Cost through OCI
TZS’ Millions TZS’ Millions TZS’ Millions
As at 31 December 2019
Financial assets
Cash and balances with Bank of Tanzania 1,341,140 - 1,341,140
Investment securities – at amortised cost 744,527 - 744,527
Investment securities – FVOCI - 17,027 17,027
Placement and balances with other banks 264,326 - 264,326
Loans and advances to customers 3,590,006 - 3,590,006
Equity investments - 2,920 2,920
Other assets (excluding prepayment) * 51,350 - 51,350
5,991,349 19,947 6,011,296
As at 31 December 2018
Financial assets
Cash and balances with Bank of Tanzania 1,070,422 - 1,070,422
Investment securities – at amortised cost 724,943 - 724,943
Investment securities – FVOCI - 15,242 15,242
Placement and balances with other banks 174,391 - 174,391
Loans and advances to customers 3,241,401 - 3,241,401
Equity investments - 2,920 2,920
Other assets (excluding prepayment) * 41,028 - 41,028
5,252,185 18,162 5,270,347
REPEAT
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

38. (a) FINANCIAL INSTRUMENTS BY CATEGORY (GROUP) (CONTINUED)

2019 2018
Financial liabilities at amortised cost TZS’ Millions TZS’ Millions
Deposits from customers 4,916,551 4,315,220
Deposits from banks 33,446 20,770
Borrowings 276,446 301,388
Subordinated debt 70,998 70,972
Lease liabilities 28,006 -
Other liabilities (excluding non-financial other liabilities) ** 96,369 96,377
5,421,816 4,804,727
*Prepayments are excluded from other assets balance, as this analysis is for financial instruments only.

**Non-financial liabilities are excluded from other liabilities balance, as this analysis is for financial instruments only.

38. (b) FINANCIAL INSTRUMENTS BY CATEGORY (BANK)

Amortised Fair Value

Total
Cost through OCI
TZS’ Millions TZS’ Millions TZS’ Millions
As at 31 December 2019
Financial assets
Cash and balances with Bank of Tanzania 1,341,140 - 1,341,140
Investment securities at amortised cost 744,527 - 744,527
Investment securities at FVOCI - 17,027 17,027
Placement and balances with other banks 264,326 - 264,326
Loans and advances to customers 3,595,688 - 3,595,688
Equity investments - 2,920 2,920
Other assets (excluding prepayment) * 47,762 - 47,762

5,993,443 19,947 6,013,390

As at 31 December 2018
Financial assets
Cash and balances with Bank of Tanzania 1,070,422 - 1,070,422
Investment securities at amortised cost 724,943 - 724,943
Investment securities at FVOCI - 15,242 15,242
Placement and balances with other banks 174,391 - 174,391
Loans and advances to customers 3,251,794 - 3,251,794
Equity investments - 2,920 2,920
Other assets (excluding prepayment) * 34,742 - 34,742

5,256,292 18,162 5,274,454

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38. (b) FINANCIAL INSTRUMENTS BY CATEGORY (BANK) (CONTINUED)

2019 2018
Financial liabilities at amortised cost TZS’ Millions TZS’ Millions
Deposits from customers 4,922,278 4,327,607
Due from banks 33,446 20,770
Borrowings 276,446 301,388
Subordinated debt 70,998 70,972
Lease liabilities 156,030 -
Other liabilities (excluding non-financial other liabilities) ** 96,116 82,902
5,555,314 4,803,639

*Prepayments are excluded from other assets balance, as this analysis is for financial instruments only.

**Non-financial liabilities are excluded from other liabilities balance, as this analysis is for financial instruments only.

39. CONTINGENT LIABILITIES AND COMMITMENTS (GROUP AND BANK)

(a) Loan commitments guarantee and other financial facilities

In common with other banks, the Bank conducts business involving acceptances, letters of credit, guarantees, performance
bonds and indemnities. The majority of these facilities are offset by corresponding obligations of third parties.

As at 31 December 2019, the Bank had the contractual amounts of off-balance sheet financial instruments that commit it
to extend credit to customers, guarantee and other facilities, as follows: -

2019 2018
TZS’ Millions TZS’ Millions
Commitments
Guarantees and Indemnities 202,752 212,113
Undrawn Commitments 113,934 129,355
Acceptances and letters of credit 335,968 200,899
652,654 542,367
Acceptances and letters of credit

An acceptance is an undertaking by a bank to pay a bill of exchange drawn on a customer. The Bank expects most
acceptances to be presented, and reimbursement by the customer is normally immediate. Letters of credit commit the
Bank to make payments to third parties, on production of documents, which are subsequently reimbursed by customers.

(b) Legal claims

Some previous loan customers and ex-employees are suing the Bank for various reasons. With the exception of amounts
disclosed in Note 31, the amounts claimed in both situations are not material and professional advice indicates that it is
unlikely that any significant loss will arise.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

39. CONTINGENT LIABILITIES AND COMMITMENTS (GROUP AND BANK) (CONTINUTED)

(c) Capital commitments

As at 31 December 2019, the Bank had capital commitments of TZS 14,218 million (2018: TZS 37,158 million) in respect of
new branches, branch remodeling, equipment and information technology. The expenditure contracted as at the end of
reporting period but not yet incurred is as follows:

2019 2018
TZS’ Millions TZS’ Millions

Information technology 10,223 29,436

Branch and business centres remodeling 1,107 4,238
Others including equipment, vehicles and furniture 2,888 3,484
14,218 37,158

The Bank’s management is confident that future net revenues and funding will be sufficient to cover these commitments.

40. EFFECTIVE INTEREST RATES OF FINANCIAL ASSETS AND LIABILITIES (GROUP AND BANK)

The effective interest rates for the principal financial assets and liabilities at 31 December 2019 were as follows:

2019 2018
% %
Government securities 12.63 13.54
Deposits with banking institutions 1.20 5.23
Loans and advances to customers 15.51 15.41
Customer deposits 1.91 1.74
Deposits from banks 0.07 8.45
Borrowings 9.77 8.72
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41. RELATED PARTY TRANSACTIONS AND BALANCES

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 year-end, and related expense and income for the year
are as follows:

(a) Loans and advances to related parties

At 31 December 2019 there were no loans issued to companies controlled by the Directors or their families. Advances to
customers at 31 December 2019 include loans to key management personnel and related entities as follows:

GROUP 2019 2018

Key management personnel TZS’ Millions TZS’ Millions

At start of year 1,287 1,527

Advanced during the year 2,703 768
Repaid during the year (1,627) (1,008)

At end of year 2,363 1,287

Interest income earned 214 78

BANK Key management personnel Related companies

2019 2018 2019 2018
TZS’ Millions TZS’ Millions TZS’ Millions TZS’ Millions
At start of year 1,287 1,527 10,590 15,316
Advanced during the year 2,703 768 - -
Repaid during the year (1,627) (1,008) (4,908) (4,726)

At end of year 2,363 1,287 5,682 10,590

Interest income earned  214 78 778 1,100

Provision recognized in respect of loans given by the Group and Bank to key management personnel amounted to TZS 2.8
million (2018: TZS 2 million). Mortgage loans issued to key management were secured and the rest were unsecured. These
loans carry off-market interest rates ranging between 5% and 9% and are repayable on demand. As at 31 December 2019,
the Group and Bank held collateral valued at TZS 1,323 million (2018: TZS 2,556 million).

The Bank had advanced loans of USD 12.3 million (2015: USD 7.3 million and 2013: USD 5 million) to its subsidiary Upanga
Joint Venture Company Limited (UJVC) to meet costs of construction of its headquarters. The loan is repayable in 84
months and attracts a fixed interest rate of 8% p.a. (for the first three years) and floating rate at six months LIBOR + 7.5%
p.a. from year four to the last year of the facility. As at the year-end, outstanding loan balance was TZS 5,682 million
equivalent to USD 2.5 million (2018: TZS 10,590 million equivalent to USD 4.6 million). As at 31 December 2019, the bank
held a provision of TZS 137 million (2018: TZS 14 million) against this loan. The loan is secured by a landed property
collateral valued at TZS 59,840 million.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

41. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

(b) Deposits from related parties

Directors and key

GROUP
Management personnel
2019 2018
TZS’ Millions TZS’ Millions

Deposits at the beginning of the year 273 390

Deposits received during the year 5,575 3,144
Deposits repaid during the year (5,292) (3,261)
Deposits as at the end of the year 556 273

Interest expense 5 4

Directors and key

BANK Related companies
Management personnel
2019 2018 2019 2018
TZS’ Millions TZS’ Millions TZS’ Millions TZS’ Millions
Deposits at the beginning of the year 273 390 12,489 92
Deposits received during the year 5,575 3,144 1,558 21,553
Deposits repaid during the year (5,292) (3,261) (8,287) (9,156)
Deposits as at the end of the year 556 273 5,760 12,489

Interest expense 5 4 - -
The above deposits are unsecured, carry variable interest rate and are repayable on demand. Related companies included
in this disclosure is Upanga Joint Venture Company Limited.

(c) Transactions and balances with Rabobank (GROUP AND BANK)

Based on the management service contract approved by the Board, a total of TZS 2,707 million (2018: TZS 3,843
million) was paid to Rabobank during the year as management and technical assistance expenses. Management fees
payable as at year-end was TZS 781 million (2018: TZS 458 million).

Nostro balances with Rabobank at year-end amounted to TZS 66,103 million (2018: TZS 17,523 million). There was no
inter-bank balance due to Rabobank as at year-end. The Bank incurred expenses amounting to TZS 505 million (2018:
TZS 512 million) refundable from Rabobank.

(d) Transactions and balances with Upanga Joint Venture (BANK)

During the year, the Bank incurred operating lease expenses amounting to TZS 6 billion (2018: TZS 6 billion) to
Upanga Joint Venture Limited. As at 31 December 2019, the Bank had prepaid rent amounting to TZS 5,977 million
(2018: TZS 12,067 million).
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41. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

(e) Key management compensation

Directors and key

GROUP AND BANK
Management personnel
2019 2018
TZS’ Millions TZS’ Millions
Salaries and other short-term benefits 3,975 3,760
Post-employment benefits - defined contribution plan 124 348
4,099 4,108
Key management personnel are described as those persons having authority and responsibility for planning,
directing and controlling the activities of the Bank, directly or indirectly. The compensation made to expatriates from
Rabobank is included in the management service contract highlighted in part (e) below and therefore excluded in
the above benefits.

(f) Transactions and balances with Government of Tanzania (GROUP AND BANK)

The Government of Tanzania owns 31.8% (2018: 31.8%) equity in the Bank and has significant influence. The Bank
invested in government securities during the year and at the year-end the amount receivable from the Government
of Tanzania in the form of treasury bills and bonds amounted to TZS 761,554 million (2018: TZS 740,185 million).
Interest earned from investment in government securities during the year was TZS 94,067 million (2018: TZS 98,181
million). The Bank also accepts deposits from various Government institutions and agencies, which do not attract
interest.

(g) Directors’ remuneration (GROUP AND BANK)

Fees and other emoluments paid to Directors of the Bank during the period amounted to TZS 254 million (2018: TZS
309 million). Details of payment to individual directors is shown in the table below.

DIRECTORS FEES &

DIRECTORS Board BARCC BCC BHR&RC BEC REMUNERATION
TZS 2019
PROF. JOSEPH SEMBOJA 7 - - - 3 31,770,000
MR. GEORGE MANDEPO 4 - 4 - - 11,110,000
MRS. MARGARET IKONGO 8 6 2 4 2 44,829,000
MR. LEONARD MUSUSA 7 10 7 - - 42,982,000
MR. MATHIAS MAGWANYA 8 4 - 3 3 38,308,000
MR. GEORGE MULAMULA 8 10 7 - - 40,781,000
MR. RIK REISINGER 5 - 5 2 - 11,117,250
MR. JOS VAN LANGE 2 3 - - - 11,117,250
MS. CHRISTINE GLOVER 8 - 11 4 4 22,234,500

42. EVENTS AFTER THE REPORTING PERIOD

There were no events after the reporting period that had material impact to the consolidated and Bank financial statements.

REPEAT
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Contact
Information
and Distribution
Network
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COMPANY INFORMATION AND KEY CONTACTS

1. HEAD OFFICE 3. RETAIL BANKING

Ohio/Ali Hassan Mwinyi Road BUSINESS BANKING
P.O. Box 9213, Dar es Salaam Business Banking
Tel: (General): +255222322000 | Fax: +255222112148 P.O. Box 9213, Dar es Salaam
Tel: (General): +255 22 2322000 | Fax: +255 22 2112148
2. WHOLESALE BANKING
GOVERNMENT BUSINESS PERSONAL BANKING
P.O. Box 9213, Dar es Salaam P.O. Box 9213, Dar es Salaam
Tel: (Direct): +255 22 2161157 Tel: (General) : +255 22 2322000 | Fax: +255 22 2112148
Tel: (General): +255 22 2127362
ALTERNATIVE CHANNELS
INSTITUTIONAL BANKING P.O. Box 9213, Dar es Salaam
P.O. Box 9213, Dar es Salaam Tel: (General): +255 22 2322000 | Fax: +255 22 2112148
Tel: (General): +255 22 2322000 | Fax: +255 22 2112148
FOREIGN EXCHANGE
TRANSACTIONAL BANKING P.O. Box 9213, Dar es Salaam Tel: (Direct): +255 22 2322020
P.O. Box 9213, Dar es Salaam Fax: +255 22 2112149
Tel: (General): +255 22 2322000 | Fax: +255 22 2112148
MONEY MARKETS
CORPORATE BANKING P.O. Box 9213, Dar es Salaam
P.O. Box 9213, Dar es Salaam Tel: (Direct): +255 22 2322010 | Fax: +255 22 2112149
Tel: (General): +255 22 2322000 | Fax: +255 22 2112148
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NETWORK DISTRIBUTION

4. DAR ES SALAAM ZONE

REGION BRANCH/UNIT CONTACT ADDRESS TEL. DIRECT TEL. GENERAL FAX NO.

DSM P.O. Box 4887, Dar es Salaam 022 2128684 022 2128685 022 2128687

Bank House P.O. Box 9031, Dar es Salaam 022 2115054 022 2116924 022 2116487

Ilala P.O. Box 25431, Dar es Salaam 022 2203194 022 2203195 022 2128542

Kariakoo P.O. Box 15195, Dar es Salaam 022 2180149 022 2180034 022 2180090

Magomeni P.O. Box 10930, Dar es Salaam 022 2170070 022 2172646 022 2170622

Morogoro Road P.O. Box 9064, Dar es Salaam 0222113585 022 2138945 022 2128542

Muhimbili P.O. Box 65589, Dar es Salaam 0222152055

Mwenge P.O. Box 31597, Dar es Salaam 022 2700927 022 2700931 022 2700928

Temeke P.O. Box 45075, Dar es Salaam 022 2856852 022 2856181 022 2856915

University P.O. Box 35199, Dar es Salaam 022 2410183 022 2410183 022 2410183

Mbagala P.O. Box 45067, Dar es Salaam 0736990193 0736990191 07360990192

Msasani P.O. Box 33841, Dar es Salaam 022 2668871 022 2666191 022 2668872

NMB House P.O. Box 2653, Dar es Salaam 022 2324124 022 2324125/7 022 2161006

Ubungo P.O. Box 10930, Dar es Salaam 022 2461849 022 2461847 022 2461849

Tegeta P.O. Box 66787, Dar es Salaam 022 2926300 022 2926301 022 2926302

Congo Street P.O. Box 15195, Dar es Salaam 022 2181812 022 2181814 022 2181813

Kurasini P.O. Box 9031, Dar es Salaam 022 2850981 022 2850984 022 2850985

Sinza P.O Box 31597, Dar es Salaam 022 2773426 022 2773553 022 2773430

Mandela Road P. O BOX 8918, Dar es Salaam 022 80808097 022 808098 022 808099

Maktaba Square P.O. Box 2653, Dar es Salaam 022 2129234/5 00 2129234 /5

Mbezi P.O. Box 60167, Dar es Salaam 022 2926332 022 2926333 022 2926334

Mlimani City P.O. Box 34115, Dar es Salaam 022 232 4120 022 232 4121

Airport P.O. Box 40951, Dar es Salaam 022 2844384 022 2844385 022 2844387

Oysterbay P.O. Box 162409 Dar es Salaam 022 2324147 022 2324146

Tandika P.O. Box 45075 Dar es Salaam 022 2856141 022 2161582

Gongolamboto 022 232 4192

Ohio P.O. Box , Dar es Salaam 022 2322726

TPA P.O. Box , Dar es Salaam 022 2161030

Kigamboni 022 2324174

Mbezi Louis 022 232 4213

 OUR STRATEGY & SUSTAINABILITY& CORPORATE CORPORATE CORPORATE FINANCIAL CONTACT &
214 BUSINESS PERFORMANCE SOCIAL RESPONSIBILITY GOVERNANCE INFORMATION STATEMENTS ADDRESSES

ZANZIBAR Mwanakerekwe P.O. Box 4608 Pemba 024 2234693 024 2234692 024 2234693

Chake Chake P.O. Box 153, Pemba 024 2452052 024 2452954 024 2452433

Zanzibar Town P.O Box 4608, Zanzibar 024 2239402 024 2239403 024 2239404

5. EASTERN ZONE

REGION BRANCH/UNIT CONTACT ADDRESS TEL. DIRECT TEL. GENERAL FAX NO.

MOROGORO P.O. Box 1066, Morogoro 023 2613479 023 2613601 023 2613600

Ifakara P.O. Box 33, Ifakara 023 2931554 023 2931552 023 2931553

Kilombero P.O. Box 142, Kidatu 023 2931542 023 2931541

Kilosa P.O Box 3, Kilosa 023 2623017 023 2623233 023 2623073

Mahenge P.O. Box 61, Mahenge 022 232 4101 022 232 4102

Mahenge P.O. Box 61, Mahenge 0767 713392 0719 498119

Turiani P.O. Box 167, Turiani 023 2931101 023 2931102 023 2931100

Mvomero P.O. Box 478, Morogoro 023 2628734 023 2628735 023 2628733

Wami P.O. Box 84, Morogoro 023 2613534 023 2613177 023 2613849

Mt. Uluguru P.O. Box 81, Morogoro 023 2614407 023 2614408 023 2614406

Gairo P.O. Box 12, Gairo 022 2211326 022 2211327

Msamvu P.O. Box 976, Morogoro 022 2324257 022 2324258

COAST Bagamoyo P.O. Box 76, Bagamoyo 023 2440128 023 2440071 023 2440055

Chalinze P.O. Box 34, Chalinze 023 2402922 023 2402923 023 2402922

Kibaha P.O. Box 30430, Kibaha 023 2402833 023 2402832 023 2402832

Kibiti P.O. Box 5, Kibiti 023 2010922 023 2010081 023 2010912

Kisarawe P.O. Box 28053, Kisarawe 023 2401035 023 2401020

023 2011331 023 2010172 023 2010171

Mkuranga P.O. Box 51, Mkuranga 23 2110092 023 2110093 023 2110094

Mlandizi P.O. Box 30430 Kibaha 022 2211339 022 2211340

 OUR STRATEGY & SUSTAINABILITY& CORPORATE CORPORATE CORPORATE FINANCIAL CONTACT &
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6. CENTRAL ZONE CENTRAL ZONE

REGION BRANCH/UNIT CONTACT ADDRESS TEL. DIRECT TEL. GENERAL FAX NO.

DODOMA P.O. Box 888, Dodoma 026 2322260/ 026 2323544

Bahi P.O. Box 33, Ifakara 022 232 4054 023 2931552 023 2931553

Makole P.O. Box 30430 Kibaha 022 232 4072 022 2211340

Chamwino 022 232 4051

Kondoa P.O. Box 95, Kondoa 026 2360306 026 2360020 026 2360306

Kongwa P.O. Box 200, Kongwa 026 2320431 026 2320477 026 2320477

Kibaigwa P.O. Box 29, Kibaigwa

Mpwapwa P.O. Box 77, Mpwapwa 026 2320633 026 2320782 026 2320797

Dodoma P.O. Box 1482, Dodoma 026 2322067 026 2322405 026 2322219

Bunge P.O. Box 1482, Dodoma 026 2320010

UDOM P.O. Box 277, Dodoma 026 2310107 026 2310108

Mazengo P.O. Box 2591 Dodoma 026 2321185 026 2321186 026 2321189

SINGIDA Kiomboi P.O. Box 44, Kiomboi 026 2532296 026 2532650 026 2532159

Manyoni P.O. Box 47, Manyoni 026 2540328 026 2540145 026 2540328

Singida P.O. Box 1040, Singida 026 2502100 026 2502104/5 026 2502100

Itigi P.O. Box 116, Itigi 026 2540327 026 2540304 026 2540104

Ikungi P.O. Box 528 Ikungi 022 2324057

MANYARA Mbulu P.O. Box 33, Mbulu 027 2533090 027 2533064 027 2533090

Babati P.O. Box 70, Babati 027 2531113 027 2531027 027 2531113

Kibaya P.O. Box 53, Kibaya 027 2555433 027 2552030 027 2555433

Katesh P.O. Box 82, Katesh 027 2531697 027 2530077 027 2530076

Simanjiro P.O. Box 9527, Simanjiro 0272555692 027 2555693 027 2555693

Haydom P.O. Box 33, Mbulu 026 2540145

7. NORTHERN ZONE

REGION BRANCH/UNIT CONTACT ADDRESS TEL. DIRECT TEL. GENERAL FAX NO.

ARUSHA P.O. Box 1256, Arusha 027 2508079 027 2508516 027 2548275

Clock Tower P.O. Box 3093, Arusha 027 2502599 027 2508521 027 2545184

Karatu P.O. Box 50, Karatu 027- 2534037 027 2534030 027 2534024

Ngarenaro P.O. Box 15741 Arusha 027 2548457 027 2548854 027 2548573
 OUR STRATEGY & SUSTAINABILITY& CORPORATE CORPORATE CORPORATE FINANCIAL CONTACT &
216 BUSINESS PERFORMANCE SOCIAL RESPONSIBILITY GOVERNANCE INFORMATION STATEMENTS ADDRESSES

Monduli P.O. Box 20, Monduli 027 2538069 027-2538031 027 2538069

Loliondo P.O. Box 60, Loliondo 027 2535207 027 2535070 027 2535207

Namanga P.O. Box 8500, Namanga 027 2539503 027 2539505 027 2539504

Arusha Market P.O. Box 11168, Arusha 027 2547331 027 2547332 027 2547330
Arusha Business
P.O. Box 632, Arusha 027 2545741 027 2545740 027 2545743
Centre
Usa River P.O. Box 131, Arusha 027 2541085 027 2541086 027 2541087

Mererani P.O. Box 5123, Arusha 022 2211002 022 2211003

Sanya Juu P.O. Box, Arusha 022 2161668

Ngaramtoni P.O BOX 16806 Ngramtoni 022 2324793 022 2329711

Mto wa Mbu P.O BOX 65 Mto wa Mbu 022 2324790 022 2324791

KILIMANJARO Hai P.O. Box 129, Hai 027 2756129 027 2756129 027 2750649

Mwanga P.O. Box 93, Mwanga 027 2750115 027 2757747 027 2757689

Nelson Mandela P.O. Box 1121, Moshi 027 2752421 027 2755199 027 2751546

Rombo P.O. Box 25, Mkuu-Rombo 027 2757114 027 2757147 027 2757114

Same P.O. Box 74, Same 027 2758138 027 2758136 027 2750002

Mawenzi P.O. Box 1825, Moshi 027 2751063 027 2751061 027 2751081

Tarakea P.O. Box 11 Tarakea 027 2757566 027 2757566 027 2757826

Himo P.O. Box 183 Himo 027 2757605 027 2757605 027 2757608

Hedaru

Mbuyuni

TANGA Handeni P.O. Box 123, Handeni 027 2641761 027 2641740 027 2641761

Korogwe P.O. Box 165, Korogwe 027 2650068 027 2646364 027 2650095

Lushoto P.O. Box 24, Lushoto 027 2640097 027 2640024 027 2640149

Madaraka P.O. Box 1396, Tanga 027 2646452 027 2644371 027 2643793

Mkwakwani P.O. Box 5056, Tanga 027 2646484 027 2646485 027 2646483

Mombo P.O. Box 140Mombo 027 2641540 027 2641576 027 2641518

Muheza P.O. Box 414, Muheza 027 2641480 027 2641177 027 2641480

Pangani P.O. Box 90, Pangani 027 2630055 027 2630307 027 2630092

Kilindi P.O. Box 46, Kilindi 0788 800404 0788 800405

P.O. Box 103 Kwemuae,
Bumbuli 022 23244757
Bumbuli-Lushoto
Mkata 022 2324101
 OUR STRATEGY & SUSTAINABILITY& CORPORATE CORPORATE CORPORATE FINANCIAL CONTACT &
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8. HIGHLANDS ZONE

REGION BRANCH/UNIT CONTACT ADDRESS TEL. DIRECT TEL. GENERAL FAX NO.

MBEYA P.O. Box 792, Mbeya 025 2502527 025 2504347 025 2502853

Chunya P.O. Box 65, Chunya 025 2520019 025 2520048 025 2520019

Ileje P.O. Box 17, Ileje 025 2570021 025 2570234 025 2570021

Kyela P.O. Box 74, Kyela 025 2540023 025 2540094 025 2540023

Mbalizi Road P.O. Box 282, Mbeya 025 2500890 025 2502547 025 2502413

Mbarali P.O. Box 75, Rujewa 025 2590196 025 2590052 025 2590051

Mbozi P.O, Box 4, Mbozi 025 2580022 025 2580041 025 2580022

Mount Loleza P.O. Box 922, Mbeya 025 2502879 025 2502880 025 2502879

Mwanjelwa P.O. Box 1768, Mbeya 025 2502826 025 2502462 025 2500070

Tukuyu P.O. Box 180, Tukuyu 025 2552149 025 2552253 025 2552149

Tunduma P.O. Box 140, Tunduma 025 2530665 025 2530049 025 2530665

Usongwe P.O. Box 4623, Mbeya 025 2560120 025 2560121 025 2560122

Mlowo 0737 225162

Mkwajuni 022 2324787/8 0713 954775

Kasumulu P.O.BOX 74 Kyela 0713 141519

IRINGA 026 2772108 026 2772011 026 2772108

Kilolo P.O. Box 2332, Kilolo 026 2968012 026 2968011

Mkwawa P.O. Box 52, Iringa 026 2702036 026 2702038 026 2702054

Ruaha P.O. Box 26, Iringa 022 232 4857 022 232 4858

NJOMBE Makete P.O. Box 24, Makete 026 2740027 026 2740028 026 2740101

Njombe P.O. Box 413, Njombe 026 2782785 026 2782778 026 2782785

Makambako P.O. Box 1030, Makambako 026 2730388 026 2730006

Ludewa P.O. Box 10, Ludewa 026 2790102 026 2790019 026 2790102

Wanging’ombe P.O BOX 413 Njombe 022 2324387 0754 231334

KATAVI Mpanda P.O. Box 55, Mpanda 025 2820315 025 2820034 025 2820315

Mlele P.O.box 55 Mpanda 0764 232773

RUKWA Nkasi P.O. Box 12, Namanyere 025 2830010 025 2830007 025 2830010

Sumbawanga P.O. Box 37, Sumbawanga 025 2800256 025 2800258 025 2800256

Kalambo P.O. Box 37, Sumbawanga 022 2324372 0784 407933

Laela P.O. Box 37, Sumbawanga 022 2324372 0753 491817

 OUR STRATEGY & SUSTAINABILITY& CORPORATE CORPORATE CORPORATE FINANCIAL CONTACT &
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9. LAKE ZONE

REGION BRANCH/UNIT CONTACT ADDRESS TEL. DIRECT TEL. GENERAL FAX NO.

MWANZA P.O. Box 1580, Mwanza 028 2501050 028 2500867 028 2500691

Geita P.O. Box 10, Geita 028 2520442 028 2520021 028 2520442

Kenyatta Road P.O. Box 1444, Mwanza 028 2500387 028 2502592 028 2501736

Magu P.O. Box 12, Magu 028 25301

Misungwi P.O. Box 122, Misungwi 0732 980747 073 2980747

Nansio P.O. Box 61, Nansio 028 2515051 028 2324524 028 2515091

Katoro P.O. Box, Katoro

Nyamongo P.O. Box, Nyamongo 022 2324566

Ngudu P.O. Box 68, Ngudu 028 2983109 028 2983108 073 2980919

Pamba Road 022 2324579 022 234644

Regional Drive P.O. Box 537, Mwanza 028 2541106 028 2541107 028 2541108

Sengerema P.O. Box 96, Sengerema 028 2590075 028 2590248 028 2590025

PPF Agency P.O. Box 1444 Mwanza 028 2506030 028 2506030 028 2506030

Rock City P.O. Box 7201 Mwanza 028 2981110

Igoma P.O. BOX 1055 Mwanza 022 2324629 022 2324630

MARA Bunda P.O. Box 53, Bunda 028 2621152 028 2621039 028 2621153

Butiama P.O. Box 35 Butiama 022- 221 1026

Mugumu P.O. Box 4, Mugumu 732985970

Musoma P.O. Box 561, Musoma 028 2620807 028 2620806

Tarime P.O. Box 108, Tarime 028 2690918 028 2690062 028 2690100

Rorya P.O. Box 68, Shirati

Buzuruga P.O. Box 1450, Mwanza 028 2570482 028 2570482 028 2570484

Rorya P.O. Box 68 Rorya 022 221 1027

KAGERA Biharamulo P.O. Box 27, Biharamulo 028 2225017 028 2225017 028 2225155

Bukoba P.O. Box 1552, Bukoba 028 2220176 028 2220154 028 2220417

Kayanga P.O. Box 69, Karagwe 028 2227111 028 2227162 028 2227111

Muleba P.O. Box 8, Muleba 028 2224170 028 2224012 028 2224020

Ngara P.O. Box 92, Ngara 028 2226049 028 2226223 028 2226013

Chato P.O. Box 68, Chato 028 2982532 028 2982541 028 2982542

Misenyi P.O. Box 56, Misenyi 0732 983453 028 2222323 028 2222331

Rusumo P.O. Box , Rusumo 028 2982862

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Kyerwa P.O. Box 8, Kyerwa 022 2324647

Kaitaba 022 2324539

Nkwenda P.O. Box 08, Nkwenda Kyerwa 022 2324647

Mtukula P.O. Box 56, Kyaka 022 232 4078

Kabanga P.O. Box 92, Ngara 022 2321106

10. WESTERN ZONE

REGION BRANCH/UNIT CONTACT ADDRESS TEL. DIRECT TEL. GENERAL FAX NO.

TABORA P.O. Box 681, Tabora 026 2606423 026 2606424 026 2606425

Igunga P.O. Box 80, Igunga 026 2650054 026 2650027 026 2650024

Mihayo P.O. Box 211, Mihayo 026 2604158 026 2604376 026 2604925

Nzega P.O. Box 163, Nzega 026 2692340 026 2692322 026 2692340

Sikonge P.O. Box 32, Sikonge 073 2988362 0732 988362 073 2988483

Urambo P.O. Box 156, Urambo 0732 988259 0732 988336 073 2988256

Nkinga P.O. Box 01, Nkinga 022 2324474

KIGOMA Kasulu P.O. Box 70, Kasulu 028 281 0111 028 2810026 028 2810345

Kibondo P.O. Box 69, Kibondo 028 2820216 028 2820023 028 2820216

Kigoma P.O. Box 1067, Kigoma 028 2803328 028 2804705 028 2804586

Uvinza P.O. Box 3, Uvinza 022 2324455

SIMIYU Bariadi P.O. Box 2, Bariadi 028 2700533 028 2700004 028 2700175

Maswa P.O. Box3, Maswa 028 2750372 028 2750321 028 2750372

Mwanhuzi P.O. Box 48, Meatu 028-2795292 028-2795080 028 2795292

Itilima P.O. Box 2, Bariadi 022 2324471

SHINYANGA Manonga P.O. Box 811, Manonga 028 2763629 028 2763439 028 2763441

Mwadui P.O. Box 324, Mwadui 028 2763461 028 2763461

Kakonko P.O. Box, Kakonko 022 2211323/4

Kaliua P.O. Box, Kaliua 0737 214715/4

Kishapu P.O. Box, Kishapu 028 2770021/16

Kahama P.O. Box 183, Kahama 028 2710063 028 2710083 028 2710103

Kahama Business Center

GEITA Bukombe P.O. Box 134, Bukombe 028 2520702 028 2520703 028 2520702
 OUR STRATEGY & SUSTAINABILITY& CORPORATE CORPORATE CORPORATE FINANCIAL CONTACT &
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11. SOUTHERN ZONE

REGION BRANCH/UNIT CONTACT ADDRESS TEL. DIRECT TEL. GENERAL FAX NO.

MTWARA P.O. Box 625, Mtwara 023 2333329 023 2334020 023 2333667

Masasi P.O. Box 105, Masasi 023 2510024 023 2510058 023 2510024

Mtwara P.O. Box 508, Mtwara 023 2333951 023 2333946 023 2333983

Ndanda P.O. Box 7, Ndanda 0717 407538

Nanyumbu P.O . Private Bag, Nanyumbu 025 2675005 025 2675003

Newala P.O. Box 60, Newala 023 2410561 023 2410261 023 2410221

Tandahimba P.O. Box 15, Tandahimba 023 2410090 023 2410089 023 2410091

Mtwara Business Center P.O. Box 625, Tanu Rd. Mtwara 023 2334852

LINDI Kilwa P.O. Box 13, Kilwa-Masoko 023 2013072 023 2013056 023 2013072

Lindi P.O. Box 1021, Lindi 023 2202188 023 2202474 023 2202018

Liwale P.O. Box 82, Liwale 073 2933304 073 2933123

Nachingwea P.O. Box 102, Nachingwea 0732 933139 073 2933297 073 2933139

Ruangwa P.O. Box 100, Ruangwa 0788 800403 0788 800406 0732 933136

RUVUMA Litembo Private Bag, Litembo 073 2950567 073 2950540 0732 950567

Mbinga P.O. Box 4, Mbinga 025 2640072 025 2640466 025 2640306

Songea P.O. Box 641, Songea 025 2602466 025 2602486 025 2602469

Tunduru P.O. Box 24, Tunduru 025 2680067 025 2680086 025 2680186

Namtumbo P.0. Box 66 Namtumbo 025 2602848 025 2602890 025 2602858

Madaba P.O. Box 1, Madaba 022 2324415

 OUR STRATEGY & SUSTAINABILITY& CORPORATE CORPORATE CORPORATE FINANCIAL CONTACT &
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NMB BANK PLC

HEAD OFFICE

Ohio/Ali Hassan Mwinyi Road

P.O. Box 9213, Dar es Salaam
Tel: (General): +255222322000
Fax: +255 22 2112148 www.nmbbank.co.tz

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