Tanzania: BoT chief commends bank over liquidity levels

NON-PERFORMING loans to total loans have remained within prudential limits and banks managed to maintain liquidity targets, the Governor of the Bank of Tanzania (BoT) Prof Benno Ndulu has said.

"All major financial soundness indicators of the banking sector, like capital adequacy ratio, asset quality, liquidity ratio and profitability levels remained strong," he said.

Prof Ndulu said this in his opening remarks at the Sixth Gilman Rutihinda Memorial Lecture held in Dar es Salaam.



There is no doubt, said Prof Ndulu that the strong economic performance and stability that the nation has experienced over the past decade owes much to reforms that have taken place in the financial sector.

The reforms were spearheaded by late governor Rutihinda.

He said a combination of the strength of the bank's supervisory abilities and limited links with the global financial markets helped to keep financial sector strong and sound as the world went through the most severe financial crisis.

The Tanzania Bankers Association (TBA) Chairperson, Mr Lawrence Mafuru said prudent domestic financial policies helped the nation to emerge out well in the world economic crisis.

"Commercial banks have re-emerged taking risks again and increased credits to the private sector whose contribution to the economy is largely recognized," said Mr Mafuru.

However, the BoT Financial Stability Report for March, this year, indicated that the ratio of Non-performing Loans to Gross Loans deteriorated to 9.3 per cent as of December 31, last year, from level 6.7 per cent recorded in the previous year.

According to the report, the larger part of the portfolio impairment stemmed from loans to fishing, agriculture, mining and tourism related businesses.

For example, during the second quarter of last year, the level of non-performing loans in the mining sector was about 43 per cent while that of agriculture was 30 per cent.

A follow-up examination on key banks revealed that a number of loans granted to sectors that had been affected by the global financial crisis had not been properly classified and provided for as required by the relevant prudential regulations and thus, directed the banks to take appropriate adjustments, said the report.