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In Summary

  • High NPLs in the industry, according to stakeholders, were precipitated by clients’ failure to repay them in the wake of a change in the management of the economy. 
Dar es Salaam. Lenders are striving to reduce rates of non-performing loans (NPLs), which averaged 12.52 per cent as at September 30 last year.

High NPLs in the industry, according to stakeholders, were precipitated by clients’ failure to repay them in the wake of a change in the management of the economy.

Banks now target groups and retired public servants for lending.
Some banks are worried about lending money to contractors working with the government due to the latter’s delays in paying the former.
TPB Bank corporate affairs manager Noves Moses told The Citizen that with the current situation banks were targeting low-risk borrowers, with retired public servants topping the list.

“Our main customers are retired employees since it is easy to monitor them because they have a fixed pension fund, providing a guarantee to us that they cannot easily go bankrupt.

“We are also very smart in fund collection as our loan managers are keen on tracking borrowers’ progress.”

The bank, according to her, is strict and selective in issuing loans.

Yetu Microfinance official Janet Muya said: “It’s easy to follow up on payments by lending money to groups of people. In case one member is declared bankrupt, others will be held responsible. This approach has been proved successful. Our bank has been doing quite well for the past many years.”
Ecobank Tanzania managing director Mwanahiba Mzee recently told The Citizen that the bank was cautious on lending to risky sectors.

She cited agriculture, which she said, required closed supervision as many farmers had little skills and security was weak.

“If we are to reduce NPLs, it’s high time we followed up on our customers to find out if the loans were used as intended. It is good to support the sector by dealing with farmers’ associations and not individuals on the grounds. It is easier to follow up on the former than the later.”

The sector, according to analysts depends much on weather and thus it carries higher risks than any other industry. It is difficult for banks to finance due to poor performance.

Stakeholders urged the government to create reliable markets.

However, late last year NMB Bank expressed its commitment to issuing more loans to agribusiness to help speed up industrialization.

The bank’s managing director, Ms Ineke Bussemaker, said: “We are seeing positive developments of this front as more producers join the value chain. We believe that this is significant as agricultural development is a stimulus to industrialization.”

She was also optimistic of the performance in the banking industry despite high NPL rates.

A banker said government delays in paying contractors who borrowed from commercial banks was contributing to high rates of NPLs.

“We don’t easily lend contractors anymore because their delays in repayment strain our ability to lend to the small and medium enterprises sector that is driving private sector credit growth.”

But stakeholders believe with more government spending, the sector would be stimulated.

A fortnight ago, the permanent secretary in the Ministry of Industry, Trade and Investment, Prof Elisante ole Gabriel, called on bankers to be innovative.“Each bank should create a competitive advantage that its rivals cannot duplicate.”

He said the services industry was challenging since it was dealing with intangible securities as the main business of banks is lending.

He called for proper management of value chain, cost chain, profitability chain, supply chain and human chain.

“It is survival for the fittest in the banking industry. No room for losers as they will automatically be kicked out of the market,” said Prof ole Gabriel.
Seven banks have been closed in the last three years.

Covenant Bank, Efatha Bank, Njombe Community Bank, Kagera Farmers Cooperative Bank and Meru Community Bank were closed down early this year. Twiga Bancorp operations were taken over by the Bank of Tanzania in October 2016 and Mbinga Community Bank which was closed last May.

The Bank of Tanzania confirmed that those banks were undercapitalised, against the requirements of Banking and Financial Institutions Act, 2006.

During the inauguration of the Chato CRDB Bank last month, President John Magufuli warned financial institutions that underperformance would lead to the revocation of licences. He also reiterated that the government would not bail out ailing businesses.

He advised them to consider merging to survive and grow.
The Citizen 

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