Dar shuts five community banks to protect financial stability

Tanzania President John Pombe Magufuli; he is on record ordering his central bank to take action against failing financial institutions

Dar, Tanzania: Tanzania’s central bank on Thursday revoked the licenses of five “critically undercapitalised” community banks to protect financial stability.

There are about 40 commercial banks and a dozen community banks, which target savings from specific communities or sectors such as farming, but the financial sector is largely dominated by just a handful of big banks.

The central bank said it would liquidate the Covenant Bank for Women (Tanzania) Ltd, Efatha Bank Ltd, Njombe Community Bank Ltd, Kagera Farmers’ Cooperative Bank Ltd and Meru Community Bank Ltd.

“The aforesaid banks are critically undercapitalised,” the central bank said in a statement.

It said continuation of operations of the banks in their current capital position was “detrimental to the interests of depositors and poses a risk to the stability of the financial system.”

None of the institutions were immediately available for comment.

The closure of the banks comes after President John Magufuli ordered the central bank to take action against failing financial institutions.