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This study was conducted at Barclays Bank Tanzania Limited (BBT) with the main
objective of assessing the challenges of risk management in credit portfolio in
commercial banks. Lending is the backbone of commercial banking, so lending is
what banks should do best. Yet these portfolios proved to be the source of recurring
problems and the cause of failure for many commercial banks. Credit portfolio
management grew out of the need to improve the financial performance of the large
corporate loan portfolios in commercial banks. It is paradoxical that these portfolios
created the biggest problems for originators and investors in the marketplace. After
all, large corporate loan portfolios typically are composed of loans, commitments,
and other lending exposures to banks' most creditworthy customers.
The Tanzanian commercial banks have gained a significant share of banking and
financial markets in the country and provide important benefits to the economy, they
facilitate the achievement of the objectives of financial liberalization by boosting
competition in banking markets, stimulate improvements in services to customers
and expand access to credit, especially to domestic small- and medium-scale
businesses. But the attainment of these benefits has been jeopardized because the
Tanzanian commercial bankshave been vulnerable to financial distress due to the
presence of various risks in operation. Substantial number of banks has failed,
mainly because of the challenges of risk management of credit portfolio. It is
important to the bankers to understand all risks embedded in loaning business and
their potential impact on the institution. The following are the categories relate to a
bank’s lending function, that is credit risk, foreign exchange risk, political risk,
interest rate risk and liquidity risk.
A researcher uses four different methods in collecting data which are documentation,
personal interviews, questionnaire and observation and get all the necessary
information from BBTs’ annual reports, extraordinary meetings reports, journals,
audited financial statements and intranet. Therefore, there are need of improving the
credit risk control measures faster and implementing them for its sustainability and
portfolio growth. |
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