Saturday, November 30, 2013

Banks fail to recover 40 pct of loans given to individuals

Bank of Tanzania (BoT)
Almost 40 percent of all loans extended to various individuals by commercial banks in past years have not been recovered due to lack of reliable information of defaulters, a renowned debt collection expert has said.

Speaking to The Guardian over the phone yesterday, Joseph Mambia said most of the loan takers don’t exist, died or have shifted from their original areas, making it difficult for commercial banks to recover their outstanding debts.

“We have been collecting debts on behalf of various commercial banks in Tanzania, the major challenge we’re facing is lack of reliable data of borrowers,” he said.
Mambia who is the Managing Director of Harvest Tanzania said there are some dishonest borrowers who did not provide actual information, making it difficult for the banks to recover their money.

He urged the government to engage locals in the newly established Credit Reference Bureau (CRB) which would help trace information of various borrowers.

“We all understand that the CRB has started operation, it could be much better if we are included in the bureau because we understand our country much better than foreigners,” he stated.

He also cautioned banks and financial institutions which have launched crackdown on loan defaulters to conduct the campaign more carefully as it might put them at a bigger risk.

Nowadays, there is an increasing number of banks demanding that loan defaulting customers, especially former employees, repay the money borrowed some years back.
“These banks have been using various ways to get back the borrowed money from their customers,” he said.

One of the most common methods used is the announcement of account holders and their pictures on various media, particularly newspapers.

“This is not a recommendable method, since the law does not allow them to do so. Also, there is danger that the banks will be at risk of losing since they might not have detailed information regarding the loan defaulters,” he said.
He urged commercial banks intending to recover their loaned money to employ debt collectors instead.

Financial experts say, once it becomes operational, the bureau would alleviate or minimize the problem of unpaid loans for a long time.

It is expected that the CRB which is under Bank of Tanzania (BoT) would support commercial banks to establish whether debtors are creditworthy, a move that is also expected to curb loan defaulting. 

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