MWANGA, Tanzania – Mwanga Community Bank Limited (MCBL) has been advised to change its status into commercial bank if it is to grow its portfolio and have a stronger balance sheet.
A former Prime Minister and First Vice President of Tanzania, Cleopa Msuya recently provided this advice during the bank’s Annual General Meeting at Mwanga in Moshi.
“I would like to advise the management that to grow and improve its portfolio, the bank has to change from being the people’s bank to a commercial bank,” he said.
Msuya told East African Business Week the change will enable the bank to spread its wings in other regions. He said it will also help MCBL grow faster.
The bank’s Managing Director, Abby Ghuhia, also advised MCBL shareholders to go an extra mile and list on the Dar es Salaam Stock Exchange (DSE).
Ghuhia told East African Business Week the move will help the bank to find more investors who can inject capital and increase efficiency.
Board Chairman, Ibrahim Seushi, said it would take some time before the programe is implemented.
The Auditor and Examiner of the Bank of Tanzania (BoT), Ephraim Mwasanguti said: “The proposal to expand the scope of the bank and change MCBL to a commercial bank is viable and realistic.”
Mwasanguti said according to the conditions of BoT, the bank should raise its capital to Tsh15billion (about $9.02 million).
Seushi said by 2014, the bank will have raise the amount of deposits, lending, revenue, control expenses and bad debts.
He said: “We expect to increase deposits, loans, shares through our service centres opened in Moshi, Same, and Hedaru as it is in our Business Plan of 2013-2017.”
In 2015 the bank intends to increase deposits by 15% and reach Tsh9.79billion ($5.88million) from the figure recorded in 2013.
“Until June 2014 we have mobilized deposits amounting to Tsh9.57 billion ($5.75 million), which is equivalent to an increase of Tsh1,090 million ($655,245), equivalent to 12%,” Seushi said.
He said clients increased from 24,455 as of December 31 2013 to 28,513 as of 30 June 2014 or a 17% growth.
He asked shareholders to increase their deposits to benefit from a presently good interest rate.
With regard to ratio of loans to deposits, Mwasanguti said according to BoT’s regulations, the figure should not exceed 80%, but the MCBL has already surpassed that level.
“Deposits in your bank are not impressive, this is because there is no good ratio of deposits and loans,” he told shareholders.
Seushi said the banks’ statistics show that the lending rate in June is higher than the deposit rate.
According to bank’s chief the bank’s total assets increased by 32% to Tsh10.46billion (about $6.29million) in 2013 from Tsh7.99 billion (about $4.80million) in 2012.
However, he argued that the goals of the interest income in 2013 were surpassed-Tsh423 million (about $254,283) equivalent to 32% due to an increase in loans. Interest costs were more than the targets by 8% which is equivalent to Tsh49million (about $29,516).
“The whole expenditure was below targets by 7% although operational costs were high due to expansion of operations in the region after establishing service centers in Moshi, Same and Hedaru,” he said.
The goals of profit before tax were reached and surpassed by Tsh46 million (about $27,653) equivalent to 218% due to the achievement of interest income and expenditure to be below projections.
Normal deposits increased and surpassed the targets at Tsh2.81 billion (about $1.69 million) equivalent to 21% and thus facilitate lending targets to be attained and surpassed at Tsh670 million (about $402,765), equivalent to 11%.
“The total assets of MCBL exceeded the targets by Tsh1,514 million (about $910,129), equivalent to 17% while share capital targets were not met by Tsh205 million (about $123,234), equivalent to 27%,” he noted.
“The challenge we face is that many customers fail to pay their loans according to the agreement as a result that bank is making provision expense ranging from 5% -100% of the loan depending on period of outstanding installment unpaid , for compliance with the laws of the BoT, he said.
Another challenge to MCBL is to increase actual bank capital (core capital), to reach Tsh2 billion (about $1.20million) by December 2017, as he called upon shareholders to increase their shares in order to enable the bank to grow and achieve its goals of strategic business plan.