27 April 2017

Tanzania: It's Time Banks and Govt Jointly Tackled Bad Loans

Photo: The Citizen
Tanzanian Shillings.
opinion

The increase in the level of non-performing loans (NPLs) relative to commercial banks' total loans is bad for the economy and Tanzania needs to deal with the challenge as a matter of urgency.

NPLs refer to the sum of borrowed money that is either in default or close to being in default.

As the World Bank clearly advises in its 9th edition of 'Tanzania Economic Update', the NPLs-which grew from an average of 6.4 per cent in 2015 to 9.5 per cent in 2016 and reaching as high as 30 per cent in certain financial institutions-threaten the survival of some banks, the small ones especially.

As it is well known, not all debtors will happily repay their loans. Besides, some commercial banks may also not be aggressive enough in their loan recovery strategies. But similarly, NPLs are also a clear indication that the economy is performing below expectation.

They are a warning that companies and individuals that qualify for commercial bank loans are not earning much enough to enable them to pay back.

In the end, NPLs affect the entire economy. When businesses fail to repay loans, commercial banks will not issue new loans to them as they will concentrate on internal consolidation and improving asset quality.

Without loans, the productive sector won't grow. A retarded private sector translates into fewer jobs and less government revenue.

From commercial banks' point of view, increasing NPLs means that they will need to attract more capital so as to make sense in the regulator's books. This might be difficult to find, a situation that could result in collapse of affected banks.

The government is not required to regard NPLs as a problem for commercial banks. All players need to analyse why NPLs are on the rise and come up with ways of preventing them from rising further.

This will help the entire economy.

FIGHT MALARIA, SAVE LIVES

Tanzania joined the global community on Tuesday to mark the World Malaria Day. The top-most event was the decision to launch the first large-scale malaria vaccine trials in Africa.

At least 490,000 people worldwide were killed by malaria in 2015. This figure is huge. It means more efforts need to be taken to prevent loss of lives through malaria.

This is why the malaria vaccine trials are important. According to the World Health Organisation (WHO), the trials will be conducted in Kenya, Malawi and Ghana.

Under the programme, 360,000 children will be vaccinated between 2018 and 2020. It is hoped that the injectable vaccine RTS,S could provide limited protection against the disease.

Even as these trials are launched, different means of preventing malaria must remain in force. These include the use of treated mosquito nets, destroying mosquito breeding grounds and use of anti-malarial drugs and repellents.

Africa, Tanzania included, need to welcome and support these efforts, because over 90 per cent of all the deaths due to malaria happen in the continent.

We also need to continue educating the people on their role in preventing malaria. The government must continue supporting research and set aside sufficient funds for medicines and medical equipment.

The private sector too must support initiatives geared at eliminating malaria across the country.

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