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This study aims at assessing the causes of non-performing loans in Tanzania Commercial banks. The study specifically aimed at assessing causes of nonperforming loans that related to bank operations and causes of nonperforming loans that related to customers operations. The research questions guided this study aim at probing causes of nonperforming loans that directly were related to bank operations and customer operations respectively.
The study was guided by a survey research methodology whereby findings from the studied sample were generalized to the entire population. The study sample was 50 respondents comprises of 40 loan customers and 10 bank officials. Customers were selected by using simple random sampling where by every tenth customer was included in the sample. Bank officials were selected using convenience sampling techniques. Data were collected through interview guide and questionnaire.
The study found that causes of nonperforming loans related to customer operations were related to moral hazards, inadequate business, financial, marketing, entrepreneurship and management skills, fund diversion and multiple loans. On other hand, causes of nonperforming loans related to banking operations were related to adverse customer selection problem, poor loan policy, inadequate loan monitoring and recovery, long queue in banking hall, poor customer services and corruptions of bank officers.
The study recommends that financial institutions should incorporate training of business, entrepreneurship, financial management and accounting skills. Financial institution should also design appropriate loan policy that will reduce credit risks, improve loan monitoring and collection. |
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