Bank of Africa clocks a decade, urged to lend to small industries

24Nov 2017
Prosper Makene
The Guardian
Bank of Africa clocks a decade, urged to lend to small industries

AS Bank of Africa Tanzania marks a decade of service in the country, the government has urged the institution to give priority to small industry investors when processing loans.

Minister for Industry, Trade and Investment Charles Mwijage shares a light moment with BoA Bank Board Chairperson Ambassador Mwanaidi Maajar (C) and Managing Director, Ammishaddai Owusu-Amoah at the 10th anniversary ceremony in Dar es Salaam. Photo: Prosper Makene.

Minister for Industry, Trade and Investment, Charles Mwijage said earlier this week that small scale industries are the real engine to propel the economy to rapid growth as the nation races towards graduating into a middle income semi industrialised economy by 2025.

“As you know, industrialistion in Tanzania is mainly focused on the processing of agricultural commodities,” Mwijage said at cherry party to mark BoA Bank’s 10th anniversary. He said in order to fulfil such an ambitious government agenda, commercial banks should be taken aboard as counterpart financiers of such long term projects.

“We expect banks to help fund projects that will drive our economy forward, so we can achieve this aspiration,” he noted pointing out that by 2025, the target is to have 40 percent of the workforce employed in manufacturing.

The Industry minister further explained that the involvement of banks in the agricultural sector is also paramount to provide access to loans by mainly smallholder subsistence farmers who need to graduate and become commercial farmers who will feed the industries.

“The important role of banks in supporting national development has been almost unchanged since the early years. Bank financing and support to private sector investment have ensured that the country maintains sustained economic growth,” he underscored.

He also said that according to the International Monetary Fund, in 2016, Tanzania’s banking sector performed relatively well in terms of the levels of capital and liquidity ratios.

“The reported ratios were above the national requirement of 10 and 20 percent respectively,” he said.

Mwijage however warned banks against an increase in the number of non-performing loans (NPLs) from 6.6 percent at the end of 2015 to 8.7 percent by end of 2016 which indicated the falling quality in the types of assets that banks acquire.

As a result, Bank of Tanzania has set benchmarks to ensure that commercial banks with a big number of NPLs reduces the overall ratio to not more than 5 percent by 2018, with quarterly reviews on the progress of the initiative.

The Central Bank has already cut the minimum reserve ratio to 8 percent from 10 percent, to provide liquidity to banks which will in turn expand their lending base to the private sector to spur growth.

 

On his part, BoA Tanzania Managing Director, Ammishaddai Owusu-Amoah said that  in the past 10 years of their operations in the country, they moved from a bank with total assets of 90bn/- to over 600bn/-.

“In 10 years we have increased loans from 24bn/- to 300bn/- as well as improving deposits from 73bn/- to over 390bn/- and now we are targeting 7bn/- in profit this year,” Amoah said.