President Magufuli warns underperforming banks . . .Pull your socks up or close

PRESIDENT John Magufuli yesterday said that the country needs few strong financial institutions to fuel economic development, rather than having several small banks that are underperforming.

The Head of State was speaking during the official opening of CRDB Bank’s new Chato Branch in Geita Region. He said the country needs at least three large banks with strong financial muscles and wide network, instead of having too many small banks that fail to offer required services.

“Small underperforming banks should find ways of merging with big ones ... since my government will not issue taxpayers’ money to bail out a failed bank,” Dr Magufuli said. He commended the Bank of Tanzania (BoT)’s recent move of revoking licences for five banks. “This should be normal practice for any failing bank, I commend BoT for that decision,” he said.

He added, “Banking business is like any other venture. If a business goes wrong you close shop! Period.” He said that the country has more than 50 banks, but less than ten of them control over 70 per cent of the market.

The two leading ones are CRDB and NMB banks, commanding almost 30 per cent of the market share. He suggested that CRDB starts buying out or entering into joint ventures with small banks, so as to rescue them from bankruptcy. Dhow Financials Chief Executive Officer, Prof Mohammed Warsame said the move was a good idea as it is a global phenomenal.

“Central banks normally raise core capital requirement to force consolidation,” Prof Warsame said, adding that this way, the market remains with strong banks that have power to issue huge loans. “Small banks issue small loans, but big ones will have muscles to lend huge investment projects. By having large banks, it quickens the industrialisation pace,” Prof Warsame added.

In recent years, cross-sections of economists and bankers have come up with the idea of trimming the number of banks to let few leads. Also, the President used the platform to discourage unplanned demonstrations that disturb the country’s peace and tranquility.“Let them try to demonstrate. I took an oath to serve and protect the Constitution; those who will dare to demonstrate will be dealt with accordingly,” said the Head of State.

He called upon ‘wananchi’ to embrace patriotism and avoid tarnishing the country’s good image. President Magufuli also asked the banks to re-look and reduce interests on loans so as to spearhead development. People are afraid of taking loans due to high interest rates; CRDB, you are the leader in the industry, please revisit your rates,” he said.

Earlier, the Deputy Minister for Finance, Dr Ashatu Kijazi, said the government was working around the clock to increase national financial inclusion rate especially in the banking sector.

“The rate is still low at 16.7 per cent of bankable population; we are working closely with the sector to uplift it,” Dr Kijazi told the Head of State. Meanwhile, Dr Magufuli is expected in Kahama District, Shinyanga Region, tomorrow. The Head of State, among other things, is expected to commission Isaka to Lusahunga road.

Shinyanga Regional Commissioner (RC), Ms Zainab Telack told reporters that the President will arrive in the region in the afternoon and start his tour by commissioning the road. Ms Telack added that the Head of State will also open Kahama Oil Industry, which is located in Kahama District.