Tanzania Bad debts in banks descend slightly

The banking sector recorded a slight drop in their non-performing loans (NPLs) of one percentage point to 7.4 per cent last year but that could not avert banks from setting aside part of their profits to cover bad debts.

The ratio is well below the East African bloc rate of 8.0 per cent, but above Tanzania’s benchmark of 5.0 per cent.

The Bank of Tanzania (BoT) Monetary Policy Statement issued recently shows that the lowest NPLs ratio to gross loans was during the last quarter of 2013, which was 6.7 per cent.

The highest, according to the report was in third quarter of last year that climbed to 8.4 per cent.

BoT said despite the NPLs to be above the threshold, the banking sector remained strong and sound with adequate liquidity and capital above regulatory requirements.

“However,” the repot said, “there was a slight deterioration in loan quality, which affected the ratio of gross nonperforming loans (NPLs) to gross loans”.

The bank Capital Adequacy Ratio, according to the central bank, was 16.6 per cent in last November compared with a minimum regulatory requirement of 10 per cent.

The bank also said the sector liquidity ratio was 37.1 per cent well above the minimum requirement of 20 per cent.

“The banking sector continues to expand and enjoy growth in the provision of banking services to a large population, and thereby promoting growth,” BoT said.

Continued usage of alternative banking services delivery channels has enabled banks to mobilise untapped resources from the unbanked and under banked populations.

This was partly evidenced by annual increase in the level of deposits, which almost doubled, from 1.09tr/- in November 2013 to 2.17tri/- in November 2014.

Regionally, IMF warned that Kenyan banks are not setting aside enough cash to shield themselves against the growing mountain of bad debts.

The IMF said in its latest statement that although Kenyan banks are profitable and wellcapitalised, failure to adequately provisioning for bad loans is raising eyebrows.

The latest Central Bank of Kenya (CBK) data shows that NPLs rose by 30.9 per cent last year to Sh107.1 billion in December — the highest in six years.

In Uganda NPLs to total gross loans ratio increased from 4.0 per cent to 5.8 per cent between June 2013 and June 2014.

Burundi recorded the highest levels of NPLs in the region last year, at 12.7 per cent. While Rwanda NPLs improved from 6.9 per cent by end of December 2013 to 6 per cent by end of 2014.

Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania

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