DAR ES SALAAM, May 12 (Reuters) - Tanzania's central bank has revoked the license of a small community bank operating in the south of the country as part of a drive to clean up the financial sector, it said on Friday.
The closure of the institution, which had assets of 383.4 million shillings ($171,928.25) at the end of 2014, comes the same week the central bank shut a commercial bank that was being investigated by U.S. authorities for money laundering.
The central bank said it had revoked the license for Mbinga Community Bank Plc, stopped its operations and appointed the state-owned Deposit Insurance Board as its liquidator from Friday.
"The measure has been taken upon determination by the Bank of Tanzania that the bank is critically undercapitalised and insolvent," the central bank said.
Mbinga is one of several microfinance institutions licensed by the central bank. It specialized in serving farmers in the southern Tanzanian region of Ruvuma.
The East African country has about 40 commercial banks and 10 community banks, but its financial sector is dominated by just a handful of big banks.
Analysts said lower-than-expected growth in business activity as a result of tight fiscal measures being implemented by the government had affected the banking sector.
"The big commercial banks are fine and will survive this temporary situation, but most of the community banks in Tanzania are in intensive care unit and could collapse," said Haji Semboja, a professor of economics at the University of Dar es Salaam.
The problems for the microfinance banks have been compounded by a downturn in the agriculture sector after a period of drought, Semboja said, adding this had led to lower demand for financial services among farmers.
The central bank said on Monday it had revoked the license of FBME bank after the money-laundering probe conducted by U.S. officials. ($1 = 2,230.0000 Tanzanian shillings) (Reporting by Fumbuka Ng'wanakilala; Editing by Duncan Miriri)