CAG report: Agriculture bank diverted cash for loans
Dar es Salaam. While farmers in Tanzania are facing lack of funding from financial institutions, the Tanzania Agricultural Development Bank (TADB), which was specifically established to finance the sector, diverted huge amounts of cash to unintended purposes. According to the Controller and Auditor General (CAG) audit report for the financial year 2016/17, the bank did not adequately perform the functions for which it was established.
“Instead of issuing loans to the agriculture sector, which is its core business line, the bank has been investing a great part of its funds in fixed deposit accounts,” the CAG report says.
The report shows that as at 31st December 2016, the bank placed Sh54.70 billion in fixed deposit accounts, which is almost 91 per cent of the total advance toward share capital.
In September 2014, the government granted an advance of Sh60 billion to the Tanzania Agricultural Development Bank in order to improve agricultural funding, which has remained the core challenge for the sector’s growth.
“I have noted that the Bank has not been adequately performing the functions for which it has been established. Instead of issuing loans to the agriculture sector, which is its core business line, it has been investing a great part of its funds in fixed deposit accounts,” said CAG.
“My further review noted that out of the bank’s total loan portfolio of Sh3.95 billion, loans and advance to staff stood at Sh1.71 billion while Sh2.23 billion went to the agriculture sector as loans,” he said.
The CAG says tying up funds in fixed deposit accounts and loans to staff impaired the bank’s ability to achieve its strategic goals.
TADB is, therefore, advised to consider investing a great part of its funds in enhancing its core business of lending to the agriculture sector rather than in fixed deposit accounts and loans to staff.
The Tanzania Agricultural Development Bank was established in September 2011 under the Companies Act of 2002 with the principal function of catalyzing delivery of finance and related non-finance services and facilities to the agriculture sector in Tanzania. The bank’s functions are to provide short, medium and Long-term facilities to the agricultural sector; catalyze credit delivery to the agricultural sector and thereby accelerate agricultural growth.
Other functions includes to lead as an apex agriculture financing bank, in capacity building strategies and programmes to strengthen the agriculture financing value chain; to finance seasonal agriculture operations, fisheries, beekeeping and livestock activities.
