By Henry Lyimo
President John Magufuli has said banks are partly to blame for the rising rate of default on loan repayment as they did not carry out proper due-diligence before lending.
Speaking at the 10th National Business Council meeting in Dar es Salaam on Saturday, President Magufuli said had the banks carried out their homework properly they would not be struggling with the rising rate of non-performing loans which reached an average of 9.5 in the first quarter of this year above industry benchmark of five per cent.
“Unless you change, the problem will persist,” he said at the 40-member dialogue with equal representation from the private and public sectors.
Three banks have over 50 per cent of non-performing loan ratio in this year’s quarter one as banks loan repayment default rate have soared to record high.
President Magufuli said Tanzania Agricultural Development Bank, which is struggling with high rates of defaults was an example of banks which did not carry out proper due diligence to borrowers before lending and had provided loans to nonagricultural activities.
He said the government was making efforts to beef up capital for the bank but it was disappointing to see the bank providing loans to nonagricultural activities.
TADB was launched in 2015 to provide short, medium to long-term financing to the agricultural sector. He decried a growing tendency by some people to acquire big chunks of land for investments in large scale agriculture but end up using the tracts as collaterals to secure loans which are used for nonagricultural purposes.
He said the government would not allow the tendency to continue because it is not in the best interest of the nation. President Magufuli also accused some greedy traders of hoarding sugar, expecting to cash in on artificial shortage, few days before the beginning of the holy month of Ramadan.
He said the government had issued sugar import permits to local producers in efforts to solve the problem of hoarding by importers but it had not worked as they had eventually sold the permits to the same importers.
He earlier said the government had confidence in the private sector except for a few dishonest businessmen who are involved in corruption and tax evasion. The massive crackdown on corruption and tax evasion by big businesses should not be construed as the government had lacked trust in the private sector, he said.
“I know the government that I am leading trusts the private sector except, perhaps, for a few tax cheats… ” he said at the meeting that involved members of the business community and the government leaders.
His response followed remarks put earlier by the Chairman of the Tanzania Private Sector Foundation (TPSF), Reginald Mengi that there seems to be lack of trust between the government and the private sector based on a misconception by some government leaders that all the business people are bent on breaking the law and evade tax.
“This is not true. The truth is there are a few among us who have the bad habit of evading tax and breaking the law. But most of us respect the values and laws and we pay the required taxes,” Mr Mengi said, adding it was important to debunk the wrong notion as soon as possible so as to build a strong private sector.
President Magufuli said the government understood there were a few dishonest traders who are involved in shoddy deals and corruption.
He said the on-going crackdown on corruption and sleaze in the government was important on the development of the private sector because it levelled the playing field among traders in various sectors.
“A few traders were evading tax and were colluding with some figures in the government and in the Tanzania Revenue Authority (TRA).
These became very powerful and were frustrating businesses. So if these are people complaining about lack of trust from the government, yes, they are right,” he said. “But majority are trustful business people. I want to assure you that the government will cooperate with you by 100 per cent.”