By Azania Post Reporter
MORE education is needed to inform customers of financial institutions in Tanzania on the banking services particularly when the industry is not performing well in order to avoid losses and remove fear.
Speaking to Azania Post in an exclusive interview, some bank customers said they are not aware of the services and performance of commercial banks.
“What we know is to open an account, deposit and withdraw money or others seek for loans, but in case of under liquidation we are not aware,” said Santulo Mayeye from Njombe region.
He said yesterday the Bank of Tanzania (BoT) closed five community banks because of undercapitalization, but most customers do not understand their fate.
The closed institutions were Covenant Bank for Women (Tanzania) Limited, Efatha Bank Limited, Njombe Community Bank Limited, Kagera Farmers Cooperatives Bank Limited and Meru Community Bank Limited.
“We have deposited millions of shillings, but the BoT said we will be paid only shillings 1.5 million this is unacceptable, Mayeye said.
He said the BoT and bank officials must give their customers enough information about their money in case the bank fails to perform.
According to section 41 (a) of the Banking and Financial Institutions Act, No.5 of 2006 the BoT has appointed Deposit Insurance Board (DIB) as the liquidator of the said banks.
The DIB has commenced the process of stocktaking and verification of assets and liabilities of the said commercial banks.
All protected deposits not exceeding shillings 1.5 million will be reimbursed back to each customer upon completion of verification.
Speaking earlier, the outgoing BoT governor Prof Benno Ndulu said that before the move, they spoke with Community Banks Association of Tanzania (COBAT), urging them to join efforts and establish one large institution, and have the rest serve as branches, to reduce operational costs.
He said in 2012, BoT increased the minimum core capital requirement for community banks to 2bn/- from 250mil/- and they were given a five-year grace period to increase their capital.
“That period ended in June 2017, but we deliberately made a six-month extension to 31 December 2017, for them to have ample time to ponder our advice, but they made their choice and eight banks did not fulfil that requirements,” he explained.
He further explained that the five banks also failed to submit their strategic plans on how they could raise their capital, in conformity with its mandate, under Section 41 (a) of the Banking Financial Institutions Act, 2006.
The governor pointed out that continued operations under their current capital position was detrimental to the interests of depositors and posed a risk to the stability of the financial system.
Apart from five banks, Bot also issued three banks a grace period to increase their performance, they are Kilimanjaro Cooperative Bank Limited, Tanzania Women’s Bank (TWB) and Tandahimba Community Bank Limited.
Every bank and every financial institution which is licenced to carry on banking business in the country is required by law to be a member of the DIB.