Here’s How to Profit From Tanzania’s Quiet Rise

It might be time to brush up on your Swahili.

Tanzania looks to be one of the world’s biggest economic success stories over the next five years. While its dynamic neighbor to the north grabs most of the headlines, the unassuming East African nation has strung together 12 consecutive years of +6% GDP growth. And there’s no end in sight.

Here’s a stock that both local and foreign investors can buy to participate in the country’s expansion.

CRDB Bank and Tanzania's Growth

It might be time to brush up on your Swahili.

Tanzania looks to be one of the world’s biggest economic success stories over the next five years.

While its dynamic neighbor to the north grabs most of the headlines, the unassuming East African nation has strung together 12 consecutive years of +6% GDP growth.

And there’s no end in sight.

The discovery of huge offshore natural gas deposits and steadily improving governance suggest Tanzania’s growth story will continue well into the next decade. The IMF predicts the economy will expand 7.2% in 2014.

Bankrolling Tanzania’s Growth

One company that stands to benefit from Tanzania’s rise is CRDB Bank.

CRDB Bank began its life as the government-owned Cooperative Rural Development Bank. In 1996, it was privatized and restructured with the help of the Danish aid agency, DANIDA, which continues to hold a 21.5% stake in the bank.

Since then it has grown into the country’s second-largest bank with 103 branches and total assets of roughly $2.2 billion. It listed on the Dar es Salaam Stock Exchange in 2009.

While it offers a complete range of banking services, its strategic focus has been on retail and small business customers, especially in the agricultural sector.

It’s a market segment with huge potential. Tanzania’s central bank estimates that more than 87% of the country’s 45 million citizens are unbanked. To tap this opportunity, CRDB unveiled an agency banking platform last year. By partnering with the national postal service, it extended its reach deep into the country’s rural areas without costly investment in new branches.

The bank’s vision extends beyond Tanzania’s borders, too.

CRDB Bank and Tanzania's Growth
Photo by Stig Nygaard

In late 2012, it ventured outside its home market for the first time, opening a branch in neighboring Burundi, which is dependent on imports from Tanzania’s port city of Dar es Salaam. The branch has performed exceptionally thus far, encouraging management to consider expansion elsewhere in the region.

CRDB Bank (Buy) the Numbers

So, how did it perform in 2013?

Much like its home country, its performance wasn’t flashy. Earnings per share rose a yawn-inducing 5.7%. It’s important to note, however, that the bank opened 10 new branches during the period, which contributed to a 19% jump in non-interest expense.

Management had targeted 17% asset growth for 2013. It fell a bit short of that mark with just a 15% increase, but it remains on target to double in size within five years.

And the quality of those assets improved markedly. Non-performing loans as a percentage of total loans fell to 6.1% from 6.9% at the end of 2012.

Moreover, its return on assets is a stellar 3.7%, well above the management’s 3% target and one that puts it among East Africa’s most profitable banks.

One for the Vault?

Much of CRDB Bank’s attractiveness stems from the fact that it is one of just a few shares on the Dar es Salaam Stock Exchange that can be bought by foreigners. Foreign ownership of Tanzanian stocks is capped at 60% with the remainder being reserved for local investors. Most other stocks listed on the DSE have already butted up against that threshold, but foreigners own less than 17% of CRDB’s shares.

What’s more, with a P/E ratio of 8.1 and a price/book ratio of 1.8, I believe the stock offers decent value for long-term investors considering the size of the market open to it.

The shares currently trade at a price of TZS315.00. In my view, they are worth TZS375.00 per share. If they should reach that price, buyers here would collect a 19% capital gain.

The bank hasn’t yet announced its dividend for 2013, but, barring a big change to dividend policy, I expect it to be roughly 13 shillings per share. So, investors can collect a 3.8% dividend yield while they wait for the market to digest CRDB’s value.

Your Turn

Are you a fan of CRDB Bank? What other ways can investors participate in Tanzania’s steady growth? I’d love to hear your thoughts in the comments!

Related Reading

How to Invest on the Dar es Salaam Stock Exchange
Will Kenyan Bank Stocks Sizzle or Fizzle in 2014?

20 thoughts on “Here’s How to Profit From Tanzania’s Quiet Rise”

  1. Hi Ryan, this is very interesting as are most of your posts – thanks. Do you think tanzania breweries is undervalued? Would you buy it? Thanks for your insight .

    1. Hi Ben,

      Tanzania Breweries and Tanzania Cigarette Company have both surpassed the allowable % of foreign ownership. Foreigners own just less than 65% of TBL and 75% of TCC. So, unless you’re Tanzanian, the shares are off limits for now.

      All the best,

  2. It is very surprising that many Tanzanians are reluctant to invest in the stock market while it is has produced such good returns.

    1. True. The Dar es Salaam Stock Exchange has returned nearly 60% in US$ terms over the past three years. What do you think is holding Tanzanians back from being more involved on the market?

      1. Most Tanzanians are not aware of the stock market. The DSE is trying its best to educate the public. Another problem is that it is difficult to buy shares from upcountry Tanzania unless you are in Dar. I bought some shares thru the CRDB Bank upcountry six weeks ago but have not received my certificates as I write this. I don’t know if the transaction was concluded or not!

        1. Many thanks for the “on the ground” info, Abasi. I wasn’t aware that one could purchase shares through CRDB Bank. I wonder how that works. Do they partner with one of the licensed brokers?

          1. Yes Ryan, CRDB Bank partners with Solomon Stockbrokers. You fill a form specifying which shares you wish to purchase and at what price. You deposit the money at the bank and they send all necessary documents to their Dar es Salaam head office. Head office sends the documents to the broker. Among your documents should be a copy of your ID or Passport. Driving licence can also do. I have done this before and it worked perfectly; only this time it has taken longer than expected!

  3. Hi.. I have seen your article. It’s good research. What are your thoughts on Tanzania as a developing country?

    1. I’m a big fan of Tanzania. It’s got a large, young population, an improving infrastructure base, lots of natural resources, a fiscally conservative government, and increasing integration with the rest of the East African region. Poverty is still a huge problem, though.

    1. Ndugu Rupe, nafikiri hapa ulitaka kuuliza kama huyu jamaa anaishi Tanzania, lakini hapa umendika kama anaondoka Tz, au siyo? Samahani kama sijakuelewa!

  4. Hello ryan

    What do you think of nmb bank vs crdb. What are the main differences between the two banks. Do they serve different customer bases. Can foreigners own nmb


    1. Hi Jubilant,

      I would suggest that before beginning to invest in shares, you first make sure that you are 1) earning more than you are spending, 2) have paid off all credit card debt, 3) and save an emergency fund equal to about six months of living expenses. Investing in shares can be risky, so these steps will help ensure that you are on a sound financial footing and able to withstand an unexpected loss.

      I’ve recently begun a series of posts for new investors. You can read the first article here:

      Hope this helps and best wishes!

    1. I really like DTB. One of the best managed East African banks, in my view. It’s not a pure play on Tanzania as the listed entity is the holding company which operates primarily in Kenya, but definitely a company worth a close look.

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