The causes of non-performing loans (NPLS) in development banks in Tanzania: a case of Tanzania investment bank (TIB)

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University of Dar es Salaam
The broad objective of this study was to identify bank specific and macroeconomic causes of nonperforming loans in development banks in Tanzania. Based on the broad objective, a number of specific research questions were developed. To achieve this broad objective, the study used mixed research approach. More specifically, the study used survey of employees of banks, structured survey of documents of bank reports and unstructured interview of senior bankers. The findings revealed that, poor credit assessment, failed credit monitoring, high interest rates, government interference, economic trend, compromised integrity, weak institutional capacity and risk projects financed by the banks ascribe to the causes of loan default/nonperforming loan. From the findings, the study recommends that Banks should put in place a vibrant credit process that would encompass issues of proper customer selection, robust credit analysis, authentic sanctioning process, proactive monitoring and follow up and clear recovery strategies for sick loans. Also, banks should put in place a clear policy framework that addresses issues of conflict of interest, ethical standards, check and balance in decision making process for all those involved in the credit process ensure its implementation thereof. Furthermore, it is recommended that banks should pursue a balanced approach of profit maximization and risk management lest they engage in aggressive lending and unhealthy competition that would lead to selecting borrowers that would default.
Available in print form, East Africana Collection, Dr. Wilbert Chagula Library, Class mark (THS EAF HG3397.S53)
Bank failures, Banks and banking, Investment banking, Tanzania
Sifuni, E. (2014) The causes of non-performing loans (NPLS) in development banks in Tanzania: a case of Tanzania investment bank (TIB), Master dissertation, University of Dar es Salaam. Dar es Salaam.