Liquidity management of commercial banks in Tanzania: the case Study of Selected Commercial Banks in Dar es Salaam (CRDB, NMB, Barclays and NBC)

This study examined the liquidity management practices of Commercial Banks in Dar es Salaam region Ilala District. This study is important because the art of commercial banking lies in the resolution of the conflict between profitability and liquidity because holding asset in liquid form for liquidity purposes will often involve some loss of earnings capacity relative to other investment opportunities. The study was descriptive. This was done in order to get a detailed account of the problem being studied. The sampling used was purposive and included bank staffs who worked on risk management for at least more than a year. 40 questionnaires were distributed to various respondents. Only 26 questionnaires were filled and returned to me by the respondents. The findings indicated that the surveyed commercial banks are practicing liquidity management using various methods. Though the study shows that they practice liquidity management, the findings indicated that commercial banks in Tanzania have inadequate liquidity management guidelines, they lack qualified personnel and they experience the problem of credit concentrations. Similarly the findings indicated that the surveyed commercial banks have no specific department that is charged with the responsibility of managing liquidity. Following the above findings, liquidity management in Commercial Banks still leaves a lot to be desired. The researcher recommends that, Commercial banks should adopt adequate liquidity management guidelines and models, establish independent department that will be dealing with liquidity risk management. Intensive staff training is also highly recommended so as to make management of liquidity as efficient as possible hence maximize profits.