THE landscape for the capital market is set to change radically with the entry of the Mwalimu Commercial Bank, the bank by the teachers and for the teachers, to the country’s thriving financial market for equities.
The bank, currently on final stages of preparations before starting operations, launched its Initial Public Offer (IPO) last week and analysts suggest it would lead to changes on the way equities are bought and sold at the Dar es Salaam Stock Exchange (DSE).
The bank, expected to list at the DSE alternative market in June, will double the number of investors in the equity market and boost market capitalization by 25 per cent. It has also led to the introduction of electronic services in buying shares, making Tanzania the first country in sub-Saharan Africa in introducing mobile phone platform in equity trading.
More than 200,000 members under the Tanzania Teachers’ Union (TTU), an organisation behind the establishment of the bank, will be shareholders of the new bank to double the number of the participants at the bourse to over 400,000, when the IPO is closed in June.
TTU announced that it would spend 11bn/- for buying its active members’ shares at the ongoing IPO which will boost the current DSE capitalisation of 23.5bn/- (13,188.91 million US dollars) by 25 per cent. According to analysts, with other things being equal, the bank is expected to hit the ground running as it will be stashed with deposits from teachers’ salaries which make close to 70 per cent of the total wage bill of about 4.0bn/- monthly.
The sponsoring broker, Core Securities, hints that MCB primary offer is expected to be oversubscribed by a large per centage due to the fact that it has a solid capital foundation. The bank has at hand 17bn/- and wants to rise another 8.0bn/- to have a total of 25bn/- as starting capital.
Bank of Tanzania capital threshold is 15bn/-. The Core Securities Chief Executive Officer, Mr George Fumbuka, said the IPO is expected to be oversubscribed as share left for the public to buy is only 8.0bn/-, which might not be sufficient.
“If the big buyers, pension funds, throw their weights on this, the amount is relatively little… then we have teachers who their union has given them an offer of 100 shares each. Little is remaining,” Mr Fumbuka said.
The Tanzania Teachers’ Union announced that it will spend 11bn/- for buying its active members’ shares at the ongoing IPO. The 100 shares cost 50,000/-.
TTU has over 200,000 active members. Once listed at Enterprise Growth Market (EGM) it will boost DSE market capitalization by 25 per cent and transforms capital market landscape in the country. DSE is one of the smallest bourses in Africa out of about 30 stock exchanges.
Capital Markets and Securities Authority (CMSA) Chief Executive Officer, Nasama Massinda said if all active members of the Tanzania Teachers’ Union (TTU) who are about 200,000 buy shares of the bank, the participants in the equity capital markets are expected to double.
“This is going to be a significant transformation in the Tanzanian capital markets landscape and will facilitate attainment of one of the goals of National Financial Inclusion Framework. The authority, also, recognises the role and importance of teachers and the fact that most live in different regions, districts and villages in the country.
It thus considered appropriate to start using the Electronic Trading System using mobile phones to buy shares. “In this regard, teachers can buy shares of Mwalimu Bank in formation while marking students’ exercise books at their work stations whether in towns or villages,” Ms Massinda said.
The CEO has it that buying shares using mobile phones is a significant transformation in the development of capital markets, not only in the country but the rest of East Africa. “CMSA is making history because Tanzania becomes the first country in the East African Community (EAC) region to facilitate purchase of shares in an IPO using mobile phones,” she said.
DSE Chief Executive Officer Mr Moremi Marwa said once MCB is listed at the bourse in June they will introduce a mobile phone platform to buy and sell shares at secondary market.
“The platform will be introduced once the listing of Mwalimu bank is completed, and one can buy and sell any share at the bourse using mobile phones — just like buying electricity,” Mr Marwa said. Successful completion of the IPO of Mwalimu Bank information is expected to increase the number of companies that have issued shares to the public to 23.
Having more companies and participants in the capital markets, facilitates increase in the level of savings, investment, employment, government revenue and this in turn increases the level of social and economic development in the country.
DSE was in January named as the third leading performing bourse in Africa, after Uganda and South Africa, when measured by capital gain returns in US dollar terms.
The bourse registered a capital gain return of 3.8 per cent, which was overtaken by Uganda Securities Exchange (USE) with 5.1 per cent in the list of 15 bourses in Africa. USE is followed by Johannesburg Stock Exchange (JSE) at 4.3 per cent.
