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Bank charges arise from six broad categories of services namely: saving accounts, current accounts, foreign exchange account charges, automatic teller machine transactions, mobile banking, internet banking and money remittances. The nature and trend of bank charges differs from one bank to another. However, the nature and trend of bank charges as well as its impact on performance of commercial bank mainly on the bank profitability has remained an unstudied. This study analysed five commercial banks in Tanzania that have adopted different service charges between 2011 and 2013. By using bank specific charges, the researcher investigated the nature, trends and impact of bank charges on the Return on Assets (ROA) and Return on Equity (ROE). The results reveal that the overall nature of bank charges is not homogenous among the commercial banks studied. Additionally majority of banks have positive trends on the average charges and number of charges imposed by the bank over the year, while few constant or negative trends. The results also indicated that, some charges were significant to banks’performance as measured by Return on Assets (ROA) and Return of Equity(ROE) and others were not. The study contributes to the understanding of the nature, trend of the bank charges and their relation to performance of commercial bank in Tanzania. It calls for the closer examination of the commercial bank diversification of fee generating services and the nature of the bank charges in relation to the performance of financial institutions. |
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