The Bank Of Tanzania (BOT) has taken possession of Mbinga Community Bank, revoked its banking business license, and placed it under compulsory liquidation.
The measures have been taken upon determination that the bank is critically undercapitalized and insolvent, hence violating the requirements of the Banking and Financial Institutions Act of 2006, BOT explains in its notice to the public.
“Continuation on the bank’s operations in its current capital and liquidity conditions is detrimental to the interest of its depositors and poses risks to the stability of the financial system,” the note reads.
BOT has appointed the Deposit Insurance Board (DIB) as the liquidator, effective 12th May 2017 and ask the depositors, creditors and debtors of the bank to be patient as the liquidator puts in place arrangements to handle their affairs.
Mbinga Community Bank opened doors on 30th July 2003 as a regional unity bank with its headquarter in Mbinga, in the Ruvuma region, South West of Tanzania, bordering Malawi to the West and Mozambique to the South. The regions is famous for its arabica coffee production.
The bank’s shareholders include individuals, coffee curing company, NGOs, farmers groups, SACCOS and Mbinga district council.
The vision of the bank is to be a lead microfinance bank for the development of Ruvuma region and its mission is to provide financial services for the promotion of economic prosperity and self-reliance among the rural and urban disadvantaged communities in Ruvuma region.
Mbinga is the second bank that seese its license revoked this month.
Earlier in May 2017, BOT revoked the license of FMBE bank after ithe US District Court for the District of Columbia found it guilty of money laundering.
Earlier in October 2016, BOT put government-owned bank Twiga Bancorp in receivership for lack of adequate capital.
Currently, the Tanzanian banking sector is affected by high volumes of non-performing loans (NPLs) and limited liquidity and lending capacity.
Many banks showed in their results for Q1 2017, NPLs far above the 10% threshold set by BOT.
In its latest Monthly Economic Review, BOT indicated that credit to private sector dropped to TZS 678.2 billion for the year ending February 2017 from TZS 3.09 trillion in the same period last year.
Charles Kimei, CEO of CRDB Bank – the largest bank in Tanzania – and Chairman of the Tanzania Bankers Association (TBA), explained, when in conversation with the International Banker, that because of the current difficulties in obtaining good working capital, small banks will be forced somehow to go into acquisitions or mergers.