Assessment of credit risk management in commercial banks in Tanzania: the case of NBC ltd

This study premised in evaluating the effectiveness of credit risk management in commercial banks in Tanzania taking NBC Ltd as a case. The study adopted a qualitative approach using a case study methodological design. The choice was manifested by the fact that, the bank is active in lending activities has both foreign and local characteristics in its operations, but more importantly, has been in operation for a relatively longer period than any other bank in Tanzania. The study findings identified that the bank has a well written credit policy which follows ABSA mother regulations but not forgetting the guidelines provided by the Central Bank of Tanzania (BOT). The credit is properly assessed in the bank and there is a proper risk grading system applied. The bank has set approval power to different personnel within the credit management structure. It also monitors concentrations that arise by location and type of customers in relation to bank loans and advances. In this case, the bank uses the Daily Value at Risk (DVarR) methodology to measure and control market risks. Basing on the study findings and knowing that things around us are changing at an accelerating rate, we consider it essential that the bank should have strong credit risk management policies and procedures that are sensitive to these changes. To improve the risk management culture further, NBC Bank Ltd should adopt some of the industry best practices that are not operational currently, which include a clear written lending guideline, segregation of the lending functions and the introduction of an Early Alert Accounts system so as to enhance adequate monitoring and supervision.