Commercial banks were denied access to unsecured credit worth 227 billion/-

The results of the audit of the annual report for the financial year 2020/21 indicate that applications from commercial banks have been received by the Bank of Tanzania (BoT) for the assessment, credit assessment assessment of l financial institution and project due diligence was performed as required, however, guarantees were not approved.

According to the report signed by CAG Charles Kichere and tabled in the National Assembly a week ago, the lack of approval of guarantees for the applications submitted was caused by the fact that the scheme had not been operational since 8 July 2018 due to agency expiration. agreement between the Ministry of Finance and Planning and the BOT.

“As a result, the main objectives of the program to promote export-led economic development in general by encouraging high-value exports that will generate high levels of employment and foreign exchange earnings have not been adequately achieved. “, we read in part in the report.

On the other hand, the audit noted that the Tanzania Agriculture Development Bank (TADB) through the Smallholder Credit Guarantee Scheme (9SCGS), provided 71 smallholders with guaranteed loans with more than the fixed limit of 50 million/- without justification in accordance with the guidelines.

It was noted that individual smallholder farmers were guaranteed loans of up to 2.5 billion/- contrary to the requirements of the guidelines. A total of 14.10 billion loans were guaranteed to non-qualified customers.

“Additionally, BoT through Export EGCS issued loans worth 84 billion/- with collateral above required rates. This practice limits the granting of loans to many customers and increases the risk in the event of default,” the report states.

The CAG also found that there was inadequate coordination in the establishment and operations of government funds and programs (GFPs). Review of the National Economic Empowerment Council (NEEC) 2021 report showed that there were 55 government funds and programs dealing with economic empowerment in Tanzania.

It was noted that 88% (46 out of 52) of government funds and programs were actively providing loans, guarantees, grants and other economic empowerment initiatives. 12% (6 out of 52) of government funds and programs have focused on loan recovery and are not granting new loans.

The audit also revealed that 9 out of 12 loan funds targeted almost the same category as they all focused on small businesses.

This was due to the fact that the coordination was not adequate and that each fund or program carried out its activities separately without taking into account what the other funds offered.

This, according to the CAG, has resulted in duplication of efforts, inadequate funding for some funds and the existence of various performance weaknesses by funds and programs.

The audit generally found that the responsible authorities, namely: Ministry of Investment, Industry and Trade (MIIT), National Economic Empowerment Council (NEEC), Ministry of Finance and Planning (MoFP) and the respective Implementing Entities (IEs), have not and effectively managed GFPs.

Given these challenges, there is no guarantee that GFPs have achieved or will achieve the intended goal of empowering people economically through lending.

CAG Charles Kichere recommends that the Ministry of Finance and Planning strengthen its activity monitoring mechanism to ensure adequate planning and periodic oversight of the overall performance of GFPs and take timely action and follow-ups of GFPs to ensure funds are used for purposes not intended.

“The Ministry of Finance should expedite the establishment of an independent entity/board to manage the export credit guarantee program to enable the BOT to fulfill its regulatory role;

There should be liaison with BOT to ensure that all claims for export credit guarantee programs are verified and paid,” recommends CAG Kichere.

About Ruben V. Albin

Check Also

liabilities and net worth of commercial banks? – ictsd.org

The main source of bank liabilities is its capital (including cash reserves and, in many …