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Issue and incidences of credit risk and its consequences have been increasing and recently declared to be the first big challenging issue in commercial banks. This study has assessed challenges facing commercial banks in controlling credit risks in Tanzania using four selected CBs based in Dar es Salaam as a case study. The objectives of the study were to identify the influence of risk management tools on creating challenges in credit risk control in the case study commercial banks, to investigate contributions of procedures in credit provision on creating challenges in credit risk control in the case study commercial banks; and to assess the role of assessment of collaterals on creating challenges in credit risk control in commercial banks in Tanzania. 80 individuals were used intact as samples. Data were collected mainly through structured questionnaires Non-managerial employees and customer interviews with the bank. The information acquired were evaluated and displayed in a cross-tabulated and descriptive form, and to create statistical connections between variables, a straightforward agreement implies proportion was used.The results indicate that collateral and Mortgage value valuation, Client credit history, business performance evaluation and credit selective ad version and credit rationing are the most commonly used tool across most CBs in Tanzania. The findings indicate that 35% of the challenges and credit default scenarios are caused by credit control tools. Common challenges in credit control due to CRM tools include use of outdated risk management tools in credit risk control, inappropriate CRM tools, and low perceived value of CRM tools to influence accounting performance. Based on the study analysis at least every bank is using CBs, 5Cs or CAMEL procedures or any other procedure in the credit evaluation process. However, the results show that about 38% of credit default scenarios are caused by credit provision process The challenges created by credit provision procedures in credit risk control include low influence on accounting returns, economic instability, lack of knowledge among borrowers, and high business risks. Common collateral procedures were cross verification with regulatory bodies, loan officer visiting the collateral for verifications. Generally, about 27% of challenges in credit risk control were caused by these collateral assessment procedures. In conclusion, the challenges in credit risk control are mainly exuberated by credit risk control tools, credit provision procedures, and collateral assessment. |
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