THE Central Bank has placed Yetu Microfinance Bank Plc under statutory administration after the bank failed to meet regulatory requirements regarding liquidity and capital adequacy.
"To permit Yetu Microfinance Bank to continue with banking operations while under the state of shortage of liquidity and undercapitalisation is detrimental to the interest of depositors and poses systemic risk to the stability of the financial system," the central bank said in a statement yesterday.
It said suspension of the operations of the Dar es Salaam Stock Exchange (DSE) listed Yetu Microfinance, came after noticing dwindling of the capital for the pro-poor lender.
Financial markets analysts started to see the underperforming of Yetu Microfinance since 2020. The microfinance bank posted successive net losses in the last three years due to the huge cost of funding, loan impairments and ever-increasing operating expenses.
"The most notable red flag from their latest published report (quarter four of last year) was the loans to deposits ratio of 390 per cent, even when we include borrowings, loans were still at 139 per cent of the total," Imani Muhingo, Head of Research and Financial Analytics at Alpha Capital told Daily News on Sunday.
Vertex International Securities, Advisory and Capital Markets Manager, Ahmed Nganya, said Yetu Microfinance's liquidity and capital adequacy ratios were below the required thresholds of 12.50 per cent and 20 per cent respectively.
"It's clear that it was a matter of time before the Bank of Tanzania decides to place the bank under its administration," Mr Nganya said adding:
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"However, despite some valid questions on Yetu's governance practices, it is visibly clear that third-tier financial institutions, microfinance banks included are operating on edge".
The banking industry is hugely dominated by larger banks--CRDB, NMB and Standard Chartered, which pushes these smaller institutions to take many risks in issuing loans.
"We think sector consolidation is bound to continue as we expect dominoes for these smaller institutions to continue to fall," Mr Nganya told 'Daily News'.
The central bank suspended Yetu's board of directors and management and appointed a statutory manager to manage the affairs of the lender.
"Thus," BoT statement said, "Yetu Microfinance will not be open for normal business for a period not exceeding 90 days during which the Bank of Tanzania will determine an appropriate resolution option".
The central bank also assures the public that it will continue to protect the interests of depositors and maintain the stability of the banking sector.
