A Thesis Submitted to Mzumbe University in Partial Fulfillment of Masters of Business Administration in Corporate Management of Mzumbe University.
2013
Loans form very greater party of banks total assets. These assets generate huge interest income for banks which to a large extent determines the financial performance of banks. However, some of these loans usually fall into non-performing status and adversely affect the performance of banks. In view of the critical role banks play in an economy, it is essential to identify problems that affect the performance of these institutions. This is because non-performing loans can affect the ability of banks to play their role in the development of the economy.
The overall objective of this study was to assess comparison of the causes of nonperforming loan to the three banks originating from different continent that Bank of Baroda Tanzania Limited originating in India, CRDB Bank PLC originating in Tanzania, and Standard Chartered Bank originating in Europe and coming up with the measures/recommendations for ensuring that there is a very minimal level of nonperforming loan in the banks.
The study drew a sample of respondents by using purposeful sampling. The respondents were working in the credit departments of the three banks. The data were gathered by using questionnaire, personal interview and documentary methods. The data collected were analyzed using statistical methods to derive information for comparison of the causes of nonperforming loan in the three banks.
The study found that the causes of nonperforming loan relate to the three banks included diversification of fund, lack of integrity on borrower’s side, death of key personnel in the business, lack of effective ways of credit recovery, lack of business skills, poor loan analysis, pressure from top management, and ineffective loan conversant.
From the findings of the current study it was recommended that banks should strengthen the internal control, provide training to staffs and motivate staff to reduce the rate of NPL.