Bank of Tanzania, the central bank of the country, has decided to revoke the licences of five community banks and terminate their operations for being undercapitalised and to protect the financial interests of depositors.

The central bank will liquidate the assets of Covenant Bank for Women (Tanzania), Efatha Bank, Njombe Community Bank, Kagera Farmers’ Cooperative Bank and Meru Community Bank.

Bank of Tanzania has appointed the Deposit Insurance Board (DIB) as the liquidator of the banks.

Bank of Tanzania in its statement said that further continuation of their operations could have been harmful for the depositors’ interest as well as triggered new risks to the stability of the financial system.

In a news conference, the Bank of Tanzania Governor Ben Ndulu said that the central bank will compensate the depositors soon.

However, only those customers who had depositing insurance will be compensated.

The announcement follows the orders of Tanzanian president John Magufuli to close down non-performing financial institutions.

With the closure of these five banks, Tanzania terminated licence of eight institutions since last year.

In June 2017, the central bank issued new rules that require the banks to hold more capital to tackle the growing increase in non-performing loans in the country.