Ecobank changes policies after soaring bad loans

DAILY NEWS REPORTER 10 MAY 2017

ECOBANK Tanzania said yesterday high non-performing loans (NPLs) have necessitated a change in its approach and strategy in a bid to recover from bad debt trap.

The bank last year struggled with high NPLs which prolonged to this year’s quarter one to become the second with highest figure of 57 per cent behind Efatha Bank 63 per cent. The industry benchmark is 5.0 per cent.

The Ecobank Tanzania acting Managing Director, Mr Raphael Benedict, admitted NPLs portfolio had increased over the past year to necessitate a restructuring in order to recover from the current situation.

“We have made significant progress in recovering a number of loans over the past three months and we believe the systems we have put in place will yield more positive results within the next few months,” Mr Benedict said in a statement.

The bank saw a rise in NPLs which had since necessitated a change in its approach and strategy, and a restructuring of its functions in order to recover from the current situation.

In the first quarter of this year Ecobank Tanzania reported NPLs of 57 per cent up from 38 per cent in similar quarter last year. The bank ended up making a loss of 4.75bn/- up from a loss of 1.26bn/-.

An economist, Dr Hildebrand Shayo, said high NPL levels ultimately have a negative impact on bank and lending to the economy affecting balance sheet quality, profitability and capital. “…The first quarter financials give the impression that bank’s risk controls for loans are unsuccessful because the banks own disproportionate levels of bad loans. “There is no one size fits all approach. Different banks pursue different strategies in relation to different types of loans,” Dr Shayo said.

However, Mr Benedict said in order to serve its customers better, Ecobank Tanzania, invested heavily in digital products offering and payment solutions. Regarding business down scaling in some areas in Africa as Ecobank Group recently announced, Mr Benedict said the bank has no intentions of closing operations in the country. “This was our commitment when we began operations seven years ago, and it still remains our commitment to date”, said Mr Benedict.

He added that the bank’s strong foundation backed by major shareholders ensured the bank is a strong, reliable and credible financial partner that can weather any storm.

Ecobank’s major shareholders include Nedbank of South Africa 21 per cent, Qatar National Bank 20 per cent, Public Investments Corporation of South Africa 14 per cent and International Finance Corporation, an arm of the World Bank 14 per cent.