The Bank of Tanzania said it plans to target individuals and government officials with new measures to reduce non-performing loans.
Tanzania’s central bank is taking measures to stabilise the banking industry, including merging small banks with insufficient capital.
Tanzania’s non-performing loans stood at 9.36% of total loans in March, nearly double the recommended threshold of 5%. According to the ministry of finance, bad loans accounted for 10.50% of all loans in March 2020.
In a statement late on Sunday, the bank said its investigations had revealed some bank employees had been directly responsible “for issuing loans without following procedures, fraud/corruption, or other practices that were tantamount to lacking integrity”.
The report stated that commercial banks would be compelled to take legal action against such employees, and the Tanzanian regulator would blacklist them and prevent them from working in the financial sector.
Government officials with non-performing loans have been ordered to notify their employers so that appropriate action can be taken.
“High rate of non-performing loans is among major causes of high lending rates and may lead to instability of the banking sector,” the statement issued by Governor Florens Luoga said.
According to the International Monetary Fund, nearly half of Tanzania’s 45 banks were vulnerable to adverse shocks and risk insolvency in the event of a global financial crisis in December 2018.