LOANS amounting to 209.05bn/- were secured by collateral with forced sale values amounting to 52.06bn/- resulting in a mismatch of 156.99bn/- at the TIB Development Bank, a key audit report asserts.

The Controller and Auditor General (CAG) makes this affirmation in a recent review encompassing the Azania Bank, the Tanzania Commercial Bank (TCB), and the Tanzania Agricultural Development Bank (TADB) for the year ending 31 December 2024.

The report says that this mismatch of loan amounts and realized collateral is in non-compliance with Section 29 of the Banking and Financial Institutions Act, (CAP 342). It has raised significant concerns regarding loan management practices and adherence to regulatory requirements in a range of public financial institutions.

Loans exposure of 19.63bn/- had the collateral held by the bank expiring and/or not been updated contrary to regulation 54 (a) (vii) of the Banking and Financial Institutions (Development Finance) Regulations, 2021, it stated.

At the Tanzania Commercial Bank (TCB) the CAG found a mismatch of 12.46bn/- between collateral values recorded in the register and customer loan files, the report indicates. It also identified six cases where pledged securities for term loan facilities involving 20.31bn/- were secured with uninsured securities such as legal mortgage, and that "securities pledged for 13 facilities involving 47.14bn/- were not adequately verified."

At Azania Bank the CAG' noted a mismatch of 277.07bn/- between the values indicated in the collateral register of 786.27bn/- and the values in the supporting collateral documents of 509.20bn/-, it stated.

These anomalies were attributable to inadequate management of the collaterals and lack of regular reconciliation between collaterals register and supporting documents in the file, the report declared.

There were also instances of outdated valuation reports, outdated financial information for debentures or not periodically updated that were used to secure the loans, it specified.

Inadequate collateral documents create a credit risk that the bank may not be able to recover the loan in the event of default, it said, recommending that Azania Bank, TCB and TIB Development Bank take extensive measures in this regard.

Strengthening controls over the management of pledged collaterals, ensuring that collaterals are fully insured and updated promptly after their insurance expires is especially important, it said.

Ensuring that credit exposures are adequately covered by pledged securities, and performing periodic valuation of the pledged securities are similarly critical, along with requesting additional security whenever the value of provided security falls below the required limit, it stressed.

Non-compliance with operational regulations set by the Bank of Tanzania (BoT) was indicated, as the audit analysis pointed out that TCB had a total capital ratio of its total risk-weighted assets of 13.41 percent below the required ratio of 14.5 percent, the BoT minimum threshold.

The bank's trust accounts of mobile money operators amounting to 129.18bn/- was equal to a 97 percent ratio against the 50 percent required ratio of its core capital, a situation that contravenes Para 51 of extant Electronic Money Regulations issued by the central bank to reduce the concentration risk, it said.

It also criticized TCB's cost to income ratio standing at 76.31 percent against the required ratio of 55 percent, attributing these deviations to inadequacy of capital that forced the bank to be non-compliant with regulatory requirements.

There are doubts arising on efforts of the TCB management’s ongoing engagement with shareholders and plans for a 2026 IPO to address capital challenges. The CAG recommended that TCB Bank engage with shareholders to request recapitalisation with a view to ensure compliance with the regulatory requirements.

It similarly needs to conduct comprehensive research to support informed decision-making on raising funds through an initial public offering (IPO), it stated, while analysts believe seeking a major shareholder from the private sector would be the preliminary safeguard of its share values.

Finally, the CAG expressed deep reservations that the key accounting officers inhibit access of information to the CAG, underlining that they should be “charged the surcharge because it is against Article 143(3) of the Constitution of the United Republic of Tanzania 1977." This provision underscores the importance of transparency and cooperation with the national audit process, the report intoned.