An empirical analysis of performance of banks in Tanzania

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The university of Dar es Salaam
This study analyzed the performance of various categories of banks in Tanzania. The objective of the study was to assess the influence of size, internationalization, ownership and branch network on the performance of banks in Tanzania and make policy recommendations that could be used by shareholders, regulators and policy makers in their policy decisions in the future. The study used financial ratios computed from audited financial statements of all banks and financial institutions operating in Tanzania from year 2003 to year 2012. The CAMEL Model was applied in analyzing computed ratios whereby performance was evaluated on the basis five components of Capital Adequacy, Assets quality, Management capability, Earnings and Liquidity. The findings of the study give evidence that there was no significant relationship between size, internationalization, ownership, branch network and performance of banks in Tanzania. However, there were some differences in performance between some of the categories of banks. It was observed that, although in total small banks performed slightly better than large banks, large banks recorded much better liquidity ratios and return on assets compared to small banks on account of wide branch network and ability to hire good management. Domestic banks performed better than foreign banks in liquidity and earnings due to factors such as wide branch networks, loyalty of Tanzanians, ability to screen out good and bad borrowers, as well as the overall experience with the market as a whole. Foreign banks appeared to incur high costs on hiring expatriates reducing profitability and ultimately equity. Private banks performed better than state-owned banks in terms of level of non-performing loans and return on assets due to weaknesses inherent in the management of state-owned banks. In view of that, among the measures suggested to improve performance of banks in Tanzania include, improving liquidity levels by increasing outlets, minimizing expatriate costs by limiting the number of expatriates and fixing a reasonably medium and acceptable remuneration to expatriates. It is further recommended that banks should employ more technologies to automate service delivery. Furthermore, banks, especially state-owned, should adhere to prudential guidelines in the administration of credit and establish an appropriate credit risk environment and improve management efficiency.
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Banks and banking, Tanzania
Aminiel, F.S.(2013). An empirical analysis of performance of banks in Tanzania. Master dissertation, university of Dar es Salaam. Available at (