Yetu Microfinance chief reacts to BoT suspension

BoT placed Yetu microfinance under statutory administration for 3 months. PHOTO | COURTESY

What you need to know:

  • Mr Millinga reiterated the significance of microfinance and community banks in pushing for access to financial services and improve productivity

Dar es Salaam. The founder and chief executive officer of Yetu Microfinance Bank, which was recently put under the administration of the central bank, described the move as a surprise to the financial institution which was in the helm of sourcing more financing to improve capital.

Mr Altemius Millinga, who is also one of the depositors in the bank, said the bank was in different stages of raising funds from other partners to beef up their capital, adding that the regulatory control of the bank had stopped everything so far.

Mr Millinga said he was suspended from the bank, along other four senior staff, since September and the bank remained under a central bank official until December 12, 2022 when the statutory administration was announced.

The bank is listed on the Dar es Salaam Stock Exchange (DSE) and crossed to Afrinex Exchange of Mauritius.

“At the time of my suspension, we were working on a prospectus to raise Sh4 billion at Afrinex Exchange and we were negotiating with three other investors,” said Mr Millinga.

The bank went through on-site examination in June last year followed by a special examination in September, according to Mr Millinga.

“If the examination reports were availed to management and board, maybe we could have been in a better position to predict the December 12, 2022 governor’s surprise decision.”

The Bank of Tanzania (BoT) placed the microfinance lender under statutory administration for three months starting December 12, 2022, accusing it of failure to meet regulatory requirements regarding liquidity and capital adequacy.

“To permit Yetu Microfinance Bank Plc to continue with banking operations while under the state of shortage of liquidity and undercapitalization is detrimental to the interest of depositors and poses systemic risks to the stability of the financial system,” the central bank stated.

The move means the bank will not be open for normal business for a period of 90 days during which the BoT will determine an appropriate option.

The central bank said that such a decision aimed at protecting the interests of depositors and maintain stability of the banking sector.

How Yetu started

Mr Millinga along with five colleagues founded an NGO called Youth Self Employment Foundation (Yosefo) in 1997, with the aim of providing youth and women with access to credit and training them how to create their own employment.

In 2014, Yosefo established a company call Yetu Microfinance Ltd which in 2015 issued an IPO and subsequently got listed on the DSE before securing a banking licence in February 2017.

According to Mr Millinga, the bank’s total shareholders fund was Sh7.597 billion as per its 2021 audit report against the regulatory requirement of Sh5 billion. It then dropped to Sh6.8 billion at the end of the second quarter (June 30, 2022).

The bank has 12,350 shareholders who dominate the deposits and loans of the institution.

“Unlike commercial banks, our clients are our borrowers, shareholders and depositors. Our depositors were shocked to learn that Bank of Tanzania was putting our bank under statutory administration in order to protect depositors because we are the borrowers and we also own shares.”

Mr Millinga is now uncertain about the future of the microfinance bank as there is “no ongoing business while costs such as rent, salaries and other expenses remain constant.”

Microfinance policy

“If a commercial bank takes over, the clients will continue to lose their only hope for financial inclusion because it does not have a mission to serve the unbanked, like community banks do.”

This situation reminds him of the impact of closing of community banks such as Mbinga, Njombe and Meru.

“The customers of the banks which were closed remain excluded by the banking system… I think there is a better way of managing challenges in such banks.”

Mr Millinga reiterated the significance of microfinance and community banks in pushing for access to financial services and improve productivity of smallholder farmers, artisan fishermen, and SMEs.