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| Mr Mafuru--NBC Chief |
Rising financial discipline and responsible borrowing are among the major factors that
have greatly contributed to reduce nonperforming loans.
Commercial
banks and financial institutions are obliged to loan prudently to earn profit
and avoid being plunged into heavy losses, thus protecting depositors’ funds.
Bankers
say that the fall in the incidences of non-performing loans is a result of
major drives to consolidate their balance sheets, following cases of some
lending institutions having suffered from increased impaired losses and
advances in the past.
“There
is a growing awareness and sensitivity in the use of money borrowed from
lending institutions…that also contributed to declining defaulting rate,” says
Tanzania Bankers Association (TBA) Chairman Laurence Mafuru.
He
charges that there is rising financial discipline among borrowers who use the
borrowed money responsibly to generate extra income for paying back the debt.
Commercial
bank’s continued efforts to create financial awareness and take actions against
defaulters helped to reduce the rate of nonperforming loans.
“If
borrowers are aware of their obligation to payback the loan and if the economy
is growing positively, defaulting rate will eventually be minimal – and the
level of the nonperforming loans will fall,” says Mr Mafuru.
According
to the International Monetary Fund (IMF) Country Report- Third Review under the
Policy Support Instrument, the banks’ efforts to strengthen debt collections
have intensified deployed strategies to pull the defaulting rate down.
“Nonperforming loans were eight percent of
total loans at end-
September,
down from nearly 10 percent at the beginning of the year, reflecting efforts to
strengthen loan collection and tighten underwriting standards,” states the
report.
Bank
of Tanzania’s (BoT) efforts to ensure compliance with regulations on loan
classification and loss recognition, particularly for commercial banks with
higher defaulting rate, coupled with revised risk-based supervisory framework
helped check high defaulting rate.
The
IMF report says that the financial sector remains well-capitalised, with
overall capital of 17.4 percent of risk-weighted assets.
According
to the central bank’s 2011 Financial Stability Report, the 2009 second half
witnessed a decline of nonperforming loans to 6.7 per cent from 7.8 of the
previous period.
However,
the 2010 first half saw an upward trend of nonperforming loans due to limited
debt service by businesses whose profitability was impacted by the global
financial crunch.
Source:
The Daily News,www.dailynews.co.tz, reported by Sebastian Mrindoko
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