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Effectiveness of Credit Risk Management Programs in Commercial Banks in Tanzania

Author

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  • Edward Mashaka Makono

    (Accounting and Finance Department, St. Augustine University of Tanzania)

  • Crispin John Mbogo

    (Accounting and Finance Department, St. Augustine University of Tanzania)

Abstract

This study examines effectiveness of Credit Risk Management Programs in Commercial Banks in Tanzania and NMB Plc in Dodoma City was used as a case study. Specifically, the study aimed to assess the compliance with lending procedures in managing and controlling credit risk at NMB Dodoma, to investigate the efficiency of internal controls in managing and controlling credit risk at NMB Dodoma, to assess the effects of credit risk management on the financial performance of commercial Banks especially NMB in Dodoma. Descriptive research study was carried out, the research used a sample size of 87 respondents chosen from the study’s four NMB branches in Dodoma City in order to generalize the findings to all commercial banks in Tanzania. A research questionnaire was used to collect data, and quantitative research methodologies were used to analyze the results. In order to establish descriptive information about the acquired data, frequencies and percentages were computed. The Statistical Package for Social Science (SPSS) was used to analyze the data acquired using multiple regression statistical analysis. The results showed that the majority of respondents indicated that credit risk management was not well implemented in Tanzanian financial institutions. It was discovered that Commercial banks have policies, procedures, and instruments for managing credit risk, but these measures aren’t consistently followed. The strategies utilized to manage credit risks were poorly executed. There was a low level of awareness of credit risk management principles among bankers. The study concluded that there were a lot of weaknesses in management of credit risks including lack of strong risk management departments, weak rules and principles, unimplemented policies and biasness in the implementation of compensation. The study recommended that there is a need for training on credit risks to take place at work rather than offering generic training on general issues and devaluing credit risk management in workplace organizations. Lastly suggesting areas for further studies to investigate the results of Tanzanian banks’ deployment of automated technology. This will look at the potential risks brought on by these new technologies in more detail.

Suggested Citation

  • Edward Mashaka Makono & Crispin John Mbogo, 2023. "Effectiveness of Credit Risk Management Programs in Commercial Banks in Tanzania," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(3), pages 495-504, March.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:3:p:495-504
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    References listed on IDEAS

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    1. Philippe Jorion, 2009. "Risk Management Lessons from the Credit Crisis," European Financial Management, European Financial Management Association, vol. 15(5), pages 923-933, November.
    2. Evelyn Richard & Marcellina Chijoriga & Erasmus Kaijage & Christer Peterson & Hakan Bohman, 2008. "Credit risk management system of a commercial bank in Tanzania," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 3(3), pages 323-332, July.
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