A Dissertation submitted to the School of Business in partial fulfillment of the requirements for the award of MSc. Accounting and Finance of the Mzumbe University
This study intended to make an analysis on Foreign Exchange Risk Management in
Commercial Banks of Tanzania. The research was carried out at CRDB, NMB, NBC
and DCB the study was conducted with the following objectives: To examine the
volume of foreign exchange transaction in commercial banks, To examine foreign
exchange exposure that commercial banks face, To explore different foreign exchange
risk management strategies for commercial banks in Tanzania.
Data were collected through Questionnaires, Interviews and Documentary Review.
Questionnaires were open- ended questions, which allowed individuals to express their
views concerning Foreign Exchange Risk Management in commercial banks. Interviews
were conducted on the basis of predetermined interview guide. Thus both qualitative and
quantitative were collectively employed in the process of collecting data and information
required in this research.
After Analysis of data, tests of questionnaires were carried and presented in tables for
easy interpretation. The study of the findings revealed that there had been significant
percentage in the volume of foreign exchange transaction in commercial banks, even if
volatility continues to characterize foreign exchange rates; in conjunction with increase
in volumes of transaction results in a complex aspect that necessitates the protection of
local value or earnings as foreign exchange rate exposure expands.
Also the study revealed that the majority the selected firms face all of three exposures;
transaction, economic and translation exposure. Even the companies which do not have
any foreign subsidiary are also facing translation exposure because of their foreign
currency assets and liabilities.
Also the study real that most of the banks under the present study are managing their
transaction exposure. Few of them are managing both transaction as well as economic
exposure. There is no significant difference between attitude of companies towards
review of their exposure and hedging policy regularly using different strategies both
internal and external hedging strategies.