Annual general report of the controller and - Parliament of Tanzania

9.8 Weaknesses in Management of BOT Loans for Refinancing
Facility
In order to promote agriculture and production for export,
the Government had established a facility in which
qualifying local companies could obtain business loans with
appointed commercial banks under the Guarantee of the
Government. The Bank of Tanzania (BOT) was managing the
guarantee scheme for the Government. Later, the
Government issued Treasury Special Bonds to suit the same
purpose.
Presently, there are six companies (four in flower export,
one in vegetable export and one in animal husbandry and
general Agriculture export) benefiting from this facility.
However, we noted the following major anomalies
regarding the management of the facility on the part of the
Bank and which poses risk to the Bank on its discharge of
fiduciary duty over the facility.
Execution of Agency Agreements between the Bank and
appointed commercial banks which stipulate terms of
operations, responsibilities and risk and reward sharing
between the Bank and appointed commercial banks are
delayed. Specifically, the Agency Agreement between the
Bank and Tanzania Investment Bank (TIB) was signed in May
2008 while TIB started operating the facility since 2006. In
the intervening period there was no any written agreement
on terms between the parties.
We also found that despite the fact that participating
commercial bank are managing the facility under the
guarantee of the Bank i.e. with no risk of non-recovery, the
Bank has not instituted any effective monitoring
mechanism. For example, presently BOT lacks
comprehensive records of assets/properties; neither does it
have/receive periodical monitoring information such as
financial statements of performance/reports of the
beneficiaries.
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Office of the Controller and Auditor General PA&oBs 2007/08 180