THE INSTITUTE OF FINANCE MANAGEMENT
FACULTY: ECONOMICS AND MANAGEMENT SCIENCE
PROGRAMME: BACHELOR OF ECONOMICS AND FINANCE(BEF)
SUBJECT: FINANCIAL MARKETS AND INSTITUTIONS
CODE: BFU 08503
YEAR: III
STREAM A
INDIVIDUAL ASSIGNMENT
NAME
BETTY MABINA
REGISTRATION NUMBER
IMC/BEF/1922197
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Identify broad categories of financial system in Tanzania.
Financial system is a system that allow the exchange of funds between financial market
participants such as lenders ,investors and borrowers .financial system operate at national
and global levels .also consists of institutional units and markets that interact ,typically Ina a
complex manner for the purpose of mobilizing funds for investment and providing facilities
including payment system for the financing of commercial activity .financial system contain
categories on its system in Tanzania starting by it’s board which group those categories as
follows .
Ministry of finance , manages the over all revenue, expenditure and financing of the
government of the United republic of Tanzania and provides the government with advice on
the broad financial affairs of Tanzania in support of the government economic and social
objectives. In this broad financial system divided into categories in Tanzania financial
system as follows.
Banks , are institution that deals in money and it’s substitutes and provides other
money related services. In it’s role as financial intermediary a bank accepts deposits and make
loans ,many banks provide related services such as financial management and products such as
mutual funds and credit card .examples of banks in Tanzania provide different financial services
which are CRDB bank , NMB bank, Akiba commercial bank,TPB bank .
Financial markets, market in which funds are transferred from people who have an
access of available funds to people who have a shortage of funds ,including the stock market ,
bond market ,forex market and derivatives market, financial markets are vital to the smooth
operation of capitalist economies . example of financial markets in Tanzania this comprise
money and capital market instruments traded in primary and secondary market.
Pension Funds, kind of saving scheme where an employee invest a small portion of income
salary into a designated saving plan, the main objective of this plan is to get a steady flow of
income after complete active years of service .examples of pension funds in Tanzania the GEPF
Retirement Benefit Fund, the LAPF pension fund, the National social security fund (NSSF), the
Pension fund( PPF) and public Service Pension fund (PSPF).
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Insurance, is a mean of protection from financial loss. It is a form of risk management primarily
used to hedge against the risk of a contingent or uncertain loss. Examples of insurance in
Tanzania ,life insurance ,health insurance ,and other insurance .in health sector contain four
insurance in Tanzania, National health insurance fund ( NHIF), Social health insurance Benefit
(SHIB)as established as a benefit under the nation at Social Security Fund (NSSF) and the
community health fund (CHF) and Tiba kwa kadi (TIKA).
Under each category describe the responsible regulatory authority.
Banks ,in this category the Bank of Tanzania (BOT) which is the central bank regulating banks
and financial institution and banks laws and regulations are form of government laws and
regulations which subject banks to certain requirements restrictions and guidelines .The Banks
of Tanzania is integrated regulator and supervisor of Banks , financial institution .Banks of
Tanzania establishes rules for financial institutions which implemented through regulations ,
guidelines and circulars.
Financial markets, under this category the Capital markets and security Authority (CMSA) is
charged with the oversight and regulations of the Tanzania financial services industry ,this
contain information on legislation including regulation and educational Programs for public and
businesses.
Pension Funds, under this issue now fall under SSRA for the time being the SSRA does not have
enough required capacity and skills, Therefore the arrangements is that of partnership between
the SSRA and the BOT on investment guidelines , which have been related since ( Bank of
Tanzania 2012,2015a).It must be noted that the SSRA has the final manded on investment
direction of Pension Fund in Tanzania while the BOT offers technical support in designing and
implementing investment related guidelines or policies. In the mandatory scheme the members
contribution rate 20 percent by law.
Insurance, under this category the Tanzania insurance Regulatory Act of 2009 established the
Tanzania Insurance Regulatory Authority (TIRA) and introduced a frame work outlining the
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duties of lnsurers,brokers, agents and loss adjusters ,the opening of the market and the
establishment of a dedicated regulator have resulted in a greatly altered arena.
Describe institutions operating in each category .
In Banks ,the institutions operate include Financial institutions and Non financial institutions.
Financial institutions ls a company engaged in the business of dealing with financial and
monetary transactions such as deposits ,loans , investments and currency exchange. And Non
financial institutions is a financial institution that does not have a full banking license and cannot
accept deposits from the public.
In Financial markets ,the institution operate under this category include central banks – Is a state
institution that usually has the power to regulate commercial banks ,create monetary policy and
provide financial services , Commercial banks are financial institutions that accepts deposits
offer checking account services make various loan ,Credit Union is a type of not for profit
financial institution controlled by it’s members the people who deposit money into it . and other
institution include saving and loans .
In Pension Fund , the institutions operating in this categories include .The GEPF Retirement
Benefit Fund(GEPF) is a government employee provident fund ,LAPF this became an
autonomous statutory corporate body under a body of board of trustees in July 2000,The
parastatal pension fund (PPF) was established by the parastatal pension Act No.14 of 1978 as
amended from time to time ,The national social security fund (NSSF) is the government agency
of Tanzania responsible for the collection ,safe keeping and distribution of retirement fund of all
employees in all sectors of Tanzania economy that do not fall under the government pension
schemes. And The Public Service Pension Fund (PSPF) of Tanzania is a social security scheme
established in 1999 to provide for collection of contribution and payment to terminal benefits to
members.
In Insurance , the instructions operation under this category consist of The GA Insurance
Tanzania limited was Incorporated in October 2013 and commenced business operations in April
2014 with a goal to be a customer centric organization ,The heritage insurance company
Tanzania limited this has become the largest private insurance company in Tanzania with after
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tax profit of Tshs 1.521billion, The jubilee insurance company of Tanzania limited is the first
private insurance company to be established in Tanzania following liberalisation of the Financial
sector in1998 , Metropolitan Tanzania insurance company limited and Reliance insurance ,co
Tanzania limited .
Explain major products or services offered these instructions .
In Banks , these institutions which are financial institutions this offer checking and savings
accounts, Mortgages ,loans and credit cards .and Non Financial institutions offered investment (
both collective and individual ),risk pooling , financial consulting ,brokering,money transmission
and check cashing.
In Financial market these institutions offered different product or services in central banks carry
out a nation’s monetary policy and control it’s money supply and commercial banks offer
services like checking and savings accounts ,loans and mortgages ,also credit union offer
services like bank offered.
In Pension Fund ,those institution like PSPF ,NSSF these offered early withdrawal
retirement,forced medical retirement,normal retirement and defferred retirement and other
different services .
In Insurance companies, there institutions such as jubilee insurance ,GA Insurance offered or
provided different services include car insurance, home insurance,life insurance health insurance
, liability insurance, disability insurance , pet insurance ,long – term care Insurance.
State benefits or services offered to economy .
Diversity in Business Ownership, Services also provide opportunities for women and minorities
to establish themselves in significant roles within companies or start their own businesses.
According to the SBA, 29 percent of all small businesses are owned by minorities and 36 percent
are owned solely by women. Many government loans and grants are available to members of
these groups, and the financial assistance goes a long way in helping them find the foothold they
need to start their own business ventures.
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Spur Innovation and Growth It is easy to see the benefits of business to society as a whole
because companies, particularly big corporations and manufacturers, are the producers of many
of the goods and services that the public consumes. However, it is often in the smaller companies
that big new ideas are pushed to the forefront by innovative entrepreneurs. Because they need to
stand out from the crowd to be competitive in the marketplace, small businesses create new,
unique products and solutions to problems. Mega-companies such as Facebook, Google, CocaCola and Amazon all started with a small group of innovative thinkers who dreamed big. As they
grew, they expanded their ranks and hired more local workers to run their businesses.
The banking system can create money. When business expands, more money is needed for
exchange transactions. The legal tender money of a country cannot usually be expanded quickly.
Bank money can be increased quickly and used when there is need of more money. In a
developing economy (like that of India) banks play an important part as supplier of money.
The banking system facilitates internal and international trade. A large part of trade is done on
credit. Banks provide references and guarantees, on behalf of their customers, on the basis of
which sellers can supply goods on credit. This is particularly important in international trade
when the parties reside in different countries and are very often unknown to one another.
Bank-based finance has a special role to play for many companies in need of funds, and thus
helps to ensure a well-balanced growth process. The economic literature on "relationship
banking" has demonstrated that banks can contribute to alleviating the impact of sudden
economic shocks on their clients. Banks stand ready to provide many customers with funds even
in adverse circumstances, e.g. when the liquidity of financial markets dries up.
Capital markets and institutions such as banks play a key role in the economy by controlling
risks and allocating savings to productive activities, facilitating economic development, and
enhancing overall welfare while running smoothly. The right mixture of the well-developed
financial market and the variety of capital products and resources available better fits the
requirements of investors, as well as those who are seeking capital and who has, have excess
capital. Thus fueling the engine of the economy or simply capital formation
Financial markets match buyers and sellers or lenders to buyers at a given time and reflect the
performance of the economy. Demand and supply are a function of the market. Businesses need
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capital to grow and to expand their respective business thus, where the financial market plays a
critical role in the buildup of capital and the production of goods and services providing access to
capital. In a well-developed and efficient market, the transaction costs are always lower with
efficient transfer of funds; it can be mean also a lower cost of financing and a safe return on
investment. In developing countries, which have limited financial market, the poor legal system,
transparency may make it more costly to raise capital and may lower the return on savings or
investments Vis a Vis the risk.
Conclusion , Financial system it broadly in expanded way and this financial sectors in Tanzania
has undergone substantial structural change, and it’s assets have expanded rapidly ,led by growth
in private credit and contribute much to the economy of Tanzania at large .
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REFERENCES
Saunders A (2007), Financial Institutions management; A risk Management Approach
Howells P (2007), Financial markets and Institutions
Howells P (2005), The economics of Money, Banks and Finances
Recent publications in Financial institutions and Financial Markets
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