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Tuesday, 7 January 2020

The Historical Perspective of Banking in Tanzania and East Africa

The history of banking business in Tanzania and East Africa at large can be traced far back before colonialism.    The economies of East Africa before the advent of Colonialism were characterized by subsistence economy, there was the petty commodity production, in some areas there was trade due to Arab Influence commonly known as the “East African Long-distance trade.” Owing to the blooming of trade and Commerce in the Eastern part of Africa, some banking practices had begun by mid- 19th Century, and developed in the dominions of the Sultan of Zanzibar in East Africa.

The history of banking business in Tanzania and East Africa at large can be traced far back before colonialism.

The economies of East Africa before the advent of Colonialism were characterized by subsistence economy, there was the petty commodity production, in some areas there was trade due to Arab Influence commonly known as the “East African Long-distance trade.” Owing to the blooming of trade and Commerce in the Eastern part of Africa, some banking practices had begun by mid- 19th Century, and developed in the dominions of the Sultan of Zanzibar in East Africa.



In Tanzania, this development began in 1840 when the Oman Arabs moved their capital from Muscat to Zanzibar and took control there. Gradually Zanzibar commercial prosperity grew un-waveringly, with the township becoming a central point in the region, The first bank in East Africa was established in Zanzibar known as The Credit Bank.   In some other towns one could find money, for example, the Sultan of Kilwa minted money (copper coins) but the use of money was not widespread. Due to trade connections with India, the Indian Rupee was in use in Tanganyika, Kenya, and Uganda. However commercial banks could not emerge in the East African economies since they were imposed by the colonial masters.

With the coming of colonialism in East Africa, the business of banking expanded to greater heights. Example in Tanganyika by 1905 two banks were established Deutch-Ostafrikanische bank in Dar es Salaam and, in 1911, Handlesbank fur Ostafrica in Tanga. An official savings bank was also formed.

When the British became masters of East Africa countries, the economies of these countries had been devastated by war. To revamp the East African Economies, the British had to strengthen the Financial Institutions. The first step taken was to set up the East African Currency Board which was geared towards rectifying 1919-1920 Financial Crises. The Board was generally charged with supervising the monetary system in East Africa.

The East African Currency Board operated until the East African countries established central Banks for their respective countries by Acts of Parliament upon attainment of independence. In Tanzania, the Bank of Tanzania was established in 1965 under the Bank of Tanzania Act Similarly, the Central Bank of Kenya and Uganda Central Bank were also established in 1966. 



In Tanzania, Later after independence, there was an establishment of public cooperations such as National co-operative and development bank, the national co-operative bank, and the national development credit agency. In 1967 with the adopt both economic and ideological strategy was nationalized and NBC emerged from The Tanzania Bank of Commerce Limited. 

Several Commercial banks have emerged in East Africa both private-owned as well as state-owned, facilitated by various Laws enacted to enable these banks to operate while its primary activities include providing financial services to customers while enriching its investors. 

Read also: What is wrong with the popular view that a bank is a place where people can keep their money?
Do you think the banking business in East Africa is growing enough to meet contemporary demands? comment below

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