IFM experts counsel banks on handling bad loan

06Dec 2017
Francis Kajubi
The Guardian
IFM experts counsel banks on handling bad loan

COMMERCIAL banks should re- structure periods when borrowers have to repay loans while reducing lending rates to address the prob- lem of growing non performing loans.

IMF MBA graduates of past years. File photo.

Institute of Finance Management Deputy Rector responsible for Academic Research and Consultancy, Dr Emmanuel Mnzava said the on- going auctioning of collateral will not solve the problem for in the long run.

Dr Mnzava said currently, the economy is cash crunched hence auctioning collateral which includes property of the defaulters may not attract the best prices. 

He was speaking to The Guardian at the side- lines of a graduation ceremony for 28 graduates of the 15th MBA in International Business program organized by the IFM. He attributed an increase of NPLs as being a result of lack of financial manage- ment skills by majority borrowers.

“The interest rate of most lenders range be- tween 18-21 percent, banks and other financial

institution need to rethink on either reducing it even by two percentage points. With the current economic environment, borrowers can’t afford to repay their loans hence the growing NPLs,” Dr Mn- zava said while warning if nothing changes such loans will only grow bigger.

Amani Stephen, one of the 28 graduates urged bankers to refrain from auctioning defaulters’ securities because they may end up recovering the loan but without value for money.

“Image someone owes the bank 500m/- then his assets are worth 800m/- but being sold at 450m/- only because of liquidity shortage in the market,” Stephen noted stressing that restructur- ing the grant repaying period may be a much bet- ter option.

Addressing the audience earlier, IFM Govern- ing Council Vice Chairperson, Juliana Lema said the MBA program is a result of a negotiated part- nership between the Dar es Salaam based insti- tute and Institute of Indian Foreign Trade (IIFT).

“The first batch of MBA International Business was admitted in 2001 with 18 students.

The enrollment increased to 21 students in 2002 and 31 in 2003. It rose to 55 students in 2004, reaching 59 in 2007. The number of gradu- ates from this program now stands at more than 600 who are currently working in different fi- nancial institutions in and out the country,” said Lema.

IIFT Representative in the country, Dr Satinder Bhatia who was the guest of honour said that, “We therefore believe that this program has pro- duced manpower which is capable of handling international business in a competitive world and challenging business environment.”

According to the World Bank’s Tanzania Eco- nomic Update released last month, Non Perform- ing Loans topped 11 percent in June 2017 from 8.2 percent in June 2016 which is above the accept- able level of 5 percent as per Bank of Tanzania.

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