Mbinga bank depositors heave sigh of relief as reimbursement begins

ABDUEL ELINAZA

DEPOSITORS of the embattled Mbinga Community Bank, which is under liquidation, can now heave a sigh of relief as the Bank of Tanzania (BoT) has announced plans to start reimbursing them from next Monday.

BoT disclosed that the reimbursement will be conducted by Deposit Insurance Board (DIB) which the Mbinga Community Bank was placed under, since this May, this year, due to capital inadequacy.

The Central Bank said, however, that the top amount to be reimbursed per depositor is 1.5m/-, which is in accordance with the limit provided under the Banking and Financial Institutions Act of 2006.

“Reimbursement of insured deposits to depositors will be made at Mbinga Community Bank in Mbinga, Ruvuma,” a statement issued by DIB stated, yesterday.

On the other hand, the notice said that payment of depositors’ claims in excess of 1.5m/- “will be dealt with after collection of liquidation proceeds,” in accordance with the Banking and Financial Institutions Act.

In May, the Central Bank revoked the Mbinga Community Bank’s licence after it became undercapitalised and facing acute liquidity problems, to warrant further operation continuance.

“The capital and liquidity shortfalls threaten the money sector and endangers the safety of customer deposits,” BoT said in the statement. BoT also revealed that it will continue to protect the interests of depositors, aiming at bringing resilience in the financial sector.

But, economists-cumbankers warned that financial institutions, especially community banks, had slim chances of survival after BoT increased capital requirements and introduced operational risk buffers.

The economists’ alarm was raised based on the increasing ratio of non-performing loans that in quarter some banks registered over 50 per cent. NPLs headwind threatens the survival of some banks as they struggle with insufficient capital, thus limiting their credit expansion drive.

In this year’s first quarter, three banks registered more than 50 per cent of NPLs ratio compared to industry benchmark of 5.0 per cent. Efatha Bank, linked to Efatha Ministry and Foundation, has the highest NPLs in this year’s Q1 at 63 per cent increased by almost five times from the same period, last year.

The second on the list was EcoBank Tanzania after reporting NPLs of 57 per cent in Q1, this year, up from 38 per cent in similar quarter last year. Tanzania Women’s Bank, which Controller and Auditor General (CAG) suggested the Central Bank intervention, reported NPLs ratio of 52 per cent, which also went up from 43 per cent of last year’s Q1.