DAR ES SALAAM (Reuters) – Tanzania’s central bank said it would target indiciduals and government officials in new measures to reduce non-performing loans.

Bank of Tanzania took steps to stabilize banking, such as the merger of small banks with insufficient capital.

In March 2019, Tanzania’s non-performing loans accounted for 9.36%, almost twice as much as the recommended threshold (5%). According to ministry of finance, the proportion of bad loans was 10.50% as of March 2020. 

The bank said in a statement late on Sunday its investigations had found employees of some banks and financial institutions were directly responsible for “issuing loans without following procedures, fraud/corruption or other practices that are tantamount to lack of integrity”.

The regulator will blacklist them and prohibit them from operating in Tanzania’s financial sector.

For appropriate action, the central bank stated that it had directed financial institutions to disclose details of officials in government who are liable for non-performing loan defaults to their employers.

“High rate of non-performing loans is among major causes of high lending rates and may lead to instability of the banking sector,” the statement issued by Governor Florens Luoga said.

In December 2018, the International Monetary Fund stated that nearly 50% of Tanzania’s 45 banks were at risk of adverse shocks, and could insolvency in case of financial crisis.