Dishonest banks risk total closure
President John Magufuli yesterday directed Bank of Tanzania (BoT) to impose severe penalties on commercial banks and financial institutions that engage in financial misconduct and keep a close eye on bureaus de change to ensure that they abide by the laws that govern their businesses.
The head of state issued the directives in Mtwara at the inauguration of the BoT branch that will serve the southern regions including Lindi, Ruvuma and Coast regions. He said that some banks have been engaging in financial misconducts thus causing losses to the government.
He called for severe penalties which should be imposed on them including closing down their businesses. "These banks have been established for the purpose of doing business and not stealing from Tanzanians. Stiff penalties should be imposed on them so that the move can serve as a lesson.
But the best punishment is to order them to close their businesses," the president insisted. He added that: "Financial institutions are crucial for the country's economy, but they must have integrity. It is better to have a few banks that have discipline instead of having many, some of which cause losses to the government." Dr Magufuli cited one of the banks in the country which was recently penalised by BoT for money laundering saying that although the bank paid a fine, this was not enough.
The president directed the BoT Governor, Prof Benno Ndulu, not to hesitate to close down such banks so as to instil a sense of discipline in the sector.
President Magufuli, however, directed the Central Bank to keep a close eye on the operations of bureaus de change as some of them have been linked to thefts and dealing in illicit drugs. "You should watch this area closely for the safety of our money for the benefit of all Tanzanians," the head of state said.
For his part, Finance and Planning Minister, Dr Philip Mpango, said that BoT branch in Mtwara will be a blessing to ensure reliable financial services to the southern regions and was in line with the national Five Year Development Plan of making Mtwara corridor an economic hub.
At Mtwara port during his third day of his official tour, President Magufuli praised the Ministry of Works, Transport and Communications for heeding his directive to persuade contractors to reduce the costs for construction of berth two at Mtwara port from 149bn/- to 137bn/-, translating to a decrease of 12bn/-.
“Initial quotations for construction of the berth and dredging to a depth of 15 metres were basically pegged at 149bn/-, but I directed the ministry to persuade the contractor to reduce the expenditure,” Dr Magufuli disclosed here after laying a foundation stone for the project.
The president spoke after witnessing the signing of documents for implementation of the project between Tanzania Ports Authority (TPA) and the contractor who won the bid. “Now that the contract has been signed, the contractor should start the work immediately.
We want this project, which is being implemented through taxpayers’ money, to be completed on time,” he instructed.
Expansion and dredging of the port is expected to take 21 months, but President Magufuli asked the contractor to fast-track its implementation and complete it before the set deadline.
“This project is being undertaken using locally sourced funds as per government budget which allocates 40 per cent of its funds to development projects,” the head of state stated.
Dr Magufuli explained further that completion of the 700-kilometre road network between Mtwara-Masasi-Tunduru and Mbamba Bay will ease transportation of goods from Mtwara port to Malawi and other neighbouring countries. “The route from Mtwara port to Nkatha Bay in Malawi is shorter for transporters compared to Beira port in Mozambique to Nkatha Bay. Expansion of the port will certainly increase the volume of cargo for this route,” Dr Magufuli pointed out.
The president also directed the management of TPA to ensure that the flow meter to be installed at the port is used to discharge “Through discharge of fuel at Mtwara we will have reduced the transportation costs from Dar es Salaam port, eventually leading to decreased pump prices for consumers,” he explained.
In another occasion, Dr Magufuli challenged financial institutions operating in the country to lower interest rates in order to attract more customers.
“Many people are refraining from accessing credit facilities due to the high interest rates charged by commercial banks. These institutions are mostly focused on trading with the government through treasury bills rather than dishing out loans to ordinary people,” he said. President Magufuli made the remarks while launching the Mtwara Business Centre which is operated by the National Microfinance Bank (NMB).
He hailed the banks for paying revenues amounting to 500bn/- and dividends of 16.5bn/- to the Treasury last year. The government of Tanzania owns 32 per cent shares in the bank which employs 3,449 people. Dr Magufuli instructed public institutions to trade with NMB, as by so doing the government will directly benefit from profits to be generated from the bank