Banks In Tanzania Research Articles

Human Resources Management Practices and Their Influence on Voluntary Employee Turnover in Commercial Banks in Tanzania: Shreds of Evidence from CRDB Bank in the Northern Zone of Tanzania

This study examined the influence of Human Resources Management Practices (HRMP) on voluntary employee turnover in commercial banks in Tanzania, focusing on CRDB Bank in the Northern Zone of Tanzania with a specific focus in Arusha, Kilimanjaro, and Manyara. It was observed that the bank operates in a highly competitive environment and face unique regional dynamics in so doing the zone has experienced high turnover rates than other branches despite HRM practices are consistent over all branches according to HR report in 2021. We therefore examines key HRM practices, including recruitment, training and development, compensation, rewarding performance and performance appraisals as critical parameters that influence turnover dynamics. The research design was a sequential explanatory design whereby quantitative data were first collected and analyzed followed by qualitative. Mixed approaches were applied. It targeted employees working in 40 Branches including Brach managers, employees from various departments, and exit employees who were contacted. The total population was 354 people with a sample size of 188 participants. Data collection involved a questionnaire for 183 staff working in the northern zone. Other five (5) participants; Human resources officer from, two Brach managers and exit employees were interviewed to grasp other unique factors for turnover in the respective zone. Since the population was heterogeneous Stratified sampling was used to get these percipients. Descriptive statistics was employed with the help of a statistical package for social science SPSS 26 Version. The findings reveal that well-executed recruitment and selection processes, training and development programs, and compensation practices play a pivotal role in reducing turnover. However, it is noteworthy that performance appraisal alone does not significantly influence voluntary turnover, while job design modifications exert a clear and meaningful negative effect on turnover within the organization. The study recommends that CRDB Bank can proactively manage and reduce voluntary employee turnover in the Northern Zone by focusing on various aspects of HRM practices and the work environment.

Impact of Capital Structure on Profitability of Commercial Banks in Tanzania

This paper aims to examine the impact of capital structure on the profitability of commercial banks in Tanzania using panel data from 2017to 2021. Specifically, the study wants to investigate the impact debt and equity in capital structure on profitability of commercial banks in Tanzania. The study employed panel data research design and used secondary data which were extracted from audited financial statements of commercial banks. Return on assets was used as the dependent variables while independent variables were debt and equity capital as well as the debt-equity ratio. Result from the analysis indicates that initially the variables were not normally distributed which necessitate normalization of variables. Correlation analysis was performed and there was no multicollinearity problem between the variables. Based on Hausman test fixed effect model was selected as the appropriate model. The results from the analysis showed that 1% increase in debt capital increases profitability of commercial bank by 16.79%. The positive debt-profitability coefficient implies opportunities for enhancing profitability of commercial bank through debt financing. Result further revealed that 1 % increase in debt-equity ratio is associated with 18.07% decline in profitability. Which implies negative relationship between debt-equity ratio and profitability. On the other hand, increase in equity finance is associated with decline in profitability holding other factors constant. However, the study recommends a comprehensive assessment and consideration of situational factors while carrying out capital structure decision inverse relationship between debt-equity ratio also implies that excessive debt may pose financial risk and make the company less attractive to potential investors.

Dividend Policy and Share Price Valuation of Listed Commercial Banks in Tanzania

Dividend Policy and Share Price Valuation of Listed Commercial Banks in Tanzania

Towards Corporate Financial Performance: What is the Role of Board Gender Diversity?

This study seeks to analyse the influence of board gender diversity in influencing the firm financial performance using the agency theory, resource dependency theory and human capital theory in the study. The study population is the forty-nine (49) banks licensed by Bank of Tanzania (BOT) as at December 2022. The study used purposive method of sampling technique and only listed banks were selected as study sample. The study used panel data from listed banks in the Dar es salaam Stock Exchange (DSE) market for the period of ten (10) years from 2013 to 2022. Our study has used secondary data through bank’s annual audited reports extracted from their specific websites and DSE website. Our study used both descriptive and inferential analysis where data collected were analysed by using the STATA 15. The study used return to asset (ROA) as dependent variable and female director education, female director tenure and female director leadership as independent variables. Our results show that female directors on the boardroom with consideration of demographic features of education, tenure and leadership does not significantly influence financial performance of firms. Furthermore, our study recommends further researchers to measure the non-financial influence that female directors may have on firms.

EFFECTS OF CREDIT REFERENCE BUREAU PROCEDURES ON PERFORMANCE OF LOAN PORTFOLIO: A CASE OF SELECTED COMMERCIAL BANKS IN TANZANIA

This study investigates the impact of credit reference bureau (CRB) procedures on the performance of loan portfolios at selected commercial banks in Tanzania. A cross-sectional research design was adopted, with data collected through questionnaires and interviews involving 95 respondents from selected commercial banks. The findings show that the procedure to accessing loans had a positive and significant relationship with loan portfolio performance at these banks (β = 0.835, p = 0.000), as did loan approval procedures (β = 0.789, p = 0.001) and quality control procedures (β = 0.768; p = 0.002). All were significant at 5% level. The study concludes that using credit reference bureau services allows banks and other credit providers to assess potential clients, track their financial performance, and manage any accumulated debts. The study recommends that the government of Tanzania work closely with listed commercial banks and other financial institutions to ensure compliance with legal requirements specifically policies and procedures that assist in screening and monitoring clients from the initial stage of lending by using credit reference bureau procedures to improve decisions on loan provision.

Comparative Advantage of Trade in Food Products among the Selected East African Community Partner States: Implication for Policy Formulation

Despite the potential benefits of regional trade, economic disparities among East African Community (EAC) member states persist. This study investigated the relationship between trade openness, comparative advantage in food trade, and economic performance within the EAC, focusing on Tanzania, Kenya, and Uganda. The study adopted export data from the United Nations Commodity Trade Statistics Database, the World Bank, and the International Trade Centre, as well as GDP data from the Bank of Tanzania and the National Bureau of Statistics. Data were analysed through descriptive statistics, causality analysis, Revealed Comparative Advantage (RCA), and vector autoregressive model. Findings reveal a positive impact of trade openness on Tanzania’s economy but negative impacts on Kenya and Uganda, suggesting Tanzania benefits from EAC integration while Kenya and Uganda face trade challenges. The causality analysis shows that Tanzania’s economic performance drives food exports, trade openness impacts Kenya’s economic performance significantly, and Uganda sees a reciprocal link between economic growth and food exports; however, trade openness does not significantly affect Ugandan economic growth. The analysis of the Balassa index indicates Kenya’s food export advantage, a decline in Uganda’s export advantage since 1996, and Tanzania’s lack of export advantage with potential for improvement. The study recommends cautiously implementing trade openness policies within the EAC to prevent trade distortions and currency devaluation.

The effect of credit risk management on the financial performance of commercial banks: evidence from Tanzania

The vital role played by commercial banks in economic development calls for the stable and sustainable financial performance of banks for smooth financial intermediation. However, unhealthy credit has caused the collapse of many financial institutions all over the world. Therefore, this study examines how credit risk management practices affect the financial performance of commercial banks in Tanzania. While employing multiple linear regression techniques, the study analysed balanced panel data from 225 observations gathered from audited published annual reports of 15 commercial banks in Tanzania from 2006 to 2020. Credit risk approval and credit risk monitoring were used as proxies for credit risk management. The findings reveal that credit risk approval has a positive effect on banks’ capital adequacy, efficient utilisation of equity, asset quality, and liquidity. However, credit monitoring negatively affects the financial performance of banks through their earning ability, asset quality, and liquidity. The study recommends that incorporating credit risk management practices as a core aspect of bank operations is crucial, as it has a beneficial impact on financial performance. Nevertheless, it is advised to exercise caution and achieve a harmonious balance in the integration and concentration of all examined variables since credit approval could not exhibit a positive effect on banks’ earning ability. This has also been established on credit monitoring towards capital adequacy and efficient use of equity.

Big data analytics usage in the banking industry in Tanzania: does perceived risk play a moderating role on the technological factors

PurposeThe main purpose of this paper is to examine the adoption of big data analytics (BDA) in the Tanzania banking industry by investigating the influence of technological, environmental and organizational (TOE) factors while exploring the moderating role of perceived risk (PR).Design/methodology/approachThe study employed a qualitative research design, and the research instrument was developed using per-defined measurement items adopted from prior studies; the items were slightly adjusted to fit the current context. The questionnaires were distributed to top and middle managers in selected banks in Tanzania using the snowball sampling technique. Out of 360 received responses, 302 were considered complete and valid for data analysis. The study employed partial least squares structural equation modeling (PLS-SEM) to examine the developed conceptual framework.FindingsTop management support and financial resources emerged as influential organizational factors, as did competition intensity for the environmental factors. Notably, bank size and perceived trends showed no significant impacts on BDA adoption. The study's novelty lies in revealing PR as a moderating factor, weakening the link between technological readiness, perceived usefulness and the intent to adopt BDA.Originality/valueThis study extends literature by extending the TOE model, through examining the moderating roles of PR on technological factors. Furthermore, the study provides useful managerial support for the adoption of BDA in banking in emerging economies.

Re-Estimating Inflation Threshold Level for Tanzania

The study seeks to estimate the relationship between inflation and economic growth, as well as the headline inflation threshold level beyond or below which Tanzania’s economic growth is constrained. This was achieved through the Ordinary Least Squares (OLS) regressions employing quarterly data spanning the period 2001:1 to 2021:4. The findings suggest that the coefficient of inflation variable that captures the effect of low inflation on growth is statistically significant and positive, implying that low inflation is pro-growth. One percent increase in inflation leads to an economic growth of 0.352 percent. Furthermore, the coefficient of the high inflation proxy variable has a negative sign with the inflation threshold level being seven percent. At this level, the total effect of inflation on growth is estimated at 0.3494 percent. Moreover, optimal inflation levels of one to three percent have no impact on growth, as mirrored by invariable adjusted R2.The recommendations from the results of this study are three-fold. First, the Bank of Tanzania may consider inflation targets below seven percent but above three percent in the monetary policy planning to continue supporting economic growth. Second, since the Bank has largely depended on inflation behaviour in informing inflation targets to choose, which ended into picking targets far from the optimal inflation, it is essential that the Bank also benefits from empirically estimated threshold rates. Third, in order to utilize any new information emanating from structural changes and developments in the economy, inflation threshold level should be re-estimated regularly.

Effects of Exchange Rate Variability on Coffee Export Growth in Tanzania

Exchange rate movement is perceived as a very important factor in influencing the performance of the agriculture sector. When the currency of the exporting country depreciates against the trading partners’ currencies tends to stimulate demand and improve export earnings. An increase in value of the currency against the other trading partners’ currencies (e.g. USD) tend to affect the costs of production that may affect aggregate agricultural supply. However, the linkage of the exchange rate and agricultural export growth in particular traditional exports such as coffee has never been properly and intensively documented for appropriate decision-making in Tanzania. Therefore, this study was set to assess how exchange rate variability has affected coffee export growth in Tanzania. The study made use of time series data from 1991 to 2022 using the vector error collection model (VECM). Given the influences other than the real effective exchange rate on the export of coffee growth, we discriminately incorporated inflation rate, discount rate, and money supply, as the independent variables. Yearly data (1991-2022) obtained from the Bank of Tanzania and the International Coffee Organization were used for the analysis. The results from this study reveal that the real effective exchange rate has an enormous positive impact on coffee export growth in the long run. This implies that, the depreciation of the domestic currency against USD has advantage on coffee export growth when considering the demand side as it tends to stimulate coffee demand in the rest of the world, thus leading to an increase in export volume and revenue which helps to foster coffee export growth. However, in the supply side, this depreciation should be carefully monitored as excess depreciation may end up by rising inputs prices especially those inputs imported such as fertilizers, agrochemical, aggrotech and agro machineries that may intern affect the production level. The study ends by concluding, that it is imperative for the Central Bank to carefully observer exchange rate fluctuations and implement appropriate monetary policy strategies in favour of the agriculture sector in particular exportable crops such as coffee. This will help to manage the risks and opportunities that may arise in coffee export growth associated with currency movement.

Banking Sector Development and Bank Risk-Taking Behaviour: Evidence from Commercial and Non-commercial Banks in Tanzania

This study investigates the effect of banking sector development measured by domestic credit provided by banks to private sector as percentage of GDP on risk-taking behaviour of the banks in Tanzania, measured in terms of bank capitalization ratio. The relationship was observed using annual country-level and bank-level data from commercial and non-commercial banks operating in Tanzania from 2012 to 2021. A system GMM estimation technique was employed in the investigation. Our results found that the effects of banking sector development on bank risk measured in terms of bank capitalization ratio is homogeneous across commercial and non-commercial banks. This means the development in banking sector measured as credit to the private sector by banks percentage of GDP in Tanzania has significant positive effect on bank capitalization ratio. Hence, reduce bank risk of default. Nonetheless, the findings reveal further that the profitability of bank and bank size factors are significant positive and negative respectively in relation to bank capitalization ratio. The results are further robust to bank ownership status dummy variable (DOSF) and for country of originality of the banks (DCOF) used to investigate whether there will be significant change in the result or not. The results of the robustness test indicate that banking sector development has insignificant effects on capitalization ratio when banks categorized as domestic and foreign banks as well as when banks categorized as private and state-owned banks.

The Effect of Bank Size, Net Interest Margin, and Capital Adequacy Ratio on Commercial Banks’ Return on Assets: Empirical Evidence from Tanzania

While the current body of literature offers valuable insights into the factors influencing bank financial performance, there is a significant paucity of empirical research focusing on least developed nations. This paper presents new evidence of the effect of bank size, capital adequacy ratio (CAR), and net interest margin (NIM) on banks’ return on assets (financial performance) from the perspective of Tanzania – a least-developed country. We employed the Random Effect, and the Generalized Least Squares (GLS) regression models utilizing a panel dataset spanning the period 2000 to 2022 of ten (10) Tanzanian commercial banks to examine the specific effect of the foregoing variables on commercial banks’ financial performance. The estimation results show that capital adequacy ratio (CAR) and bank size have positive significant effects on the financial performance of commercial banks in Tanzania. Whereas we found inconsistent results for the effect of NIM; while the random effect model shows a marginally significant positive effect on ROA, the GLS regression shows a significant negative effect, indicating that the effect of NIM could be either positive or negative depending on the context. Therefore, policymakers should prioritize measures aimed at promoting healthy levels of capital adequacy and encouraging the growth of larger banks while ensuring adequate oversight to mitigate potential risks associated with market dominance. Additionally, regulatory frameworks should be designed to foster competition and efficiency in the banking sector, facilitating a conducive environment for banks of all sizes to thrive and thus contribute to economic growth.

Database Privacy: Design of User Privacy Preserving Central Bank Digital Currency: A Case of Tanzania

Objectives: This work aims to contribute towards Tanzanian Central Bank Digital Currency (CBDC) users’ privacy preservation. It proposes the design of a privacy preserving CBDC which might be issued by Tanzania's Central Bank (CB), the Bank of Tanzania (BoT), which is currently in CBDC research phase. The work also aims to contribute to literature, the CBDC research being done by BoT, other CBs and CBDC stakeholders around the world. Methods: By using the Design Science Research (DSR) methodology, a privacy preserving CBDC design suitable for Tanzania was proposed, demonstrated and evaluated. This is the result of existing literature showing that different countries have different CBDC designs due to their differences in contexts and purposes for CBDC issuance. This consequently emphasized the fact that a CBDC design should not be treated as a one-size fits all solution. Findings: As opposed to the existing general and other country specific CBDC designs, we proposed a privacy preserving CBDC design suitable for Tanzania by consulting literature and taking into consideration the Tanzanian context. The design appears to be promising Tanzanian CBDC users’ privacy preservation though further work needs to be done. The work should not only be on practical evaluation of the proposed design but also on other factors impacting the success of CBDC projects. This will consequently further increase the success probability of CBDC projects, hence the potential for practical realization of CBDC project benefits. Novelty: Existing literature has shown that, considering the countries’ differences in context and CBDC issuance purposes, CBDC design should not be treated as a generic solution thereby obliging the need for country-specific CBDC designs. Consequently, the privacy preserving CBDC design suitable specifically for Tanzania consists of and provides an outline of privacy preserving interactions among the identified key Tanzanian CBDC participants or actors. The actors are the BoT, the intermediaries (i.e., other banks and payment service providers), Tanzania’s National Identification Authority (NIDA), financial transactions violation detection engine, and the expected CBDC users. Keywords: Digital currency, database privacy, central bank digital currency, privacy

In-Depth Assessment of Key Factors Affecting Coffee Production in Tanzania

Coffee has been among the traditional cash crops and one of the main contributors to foreign earnings in Tanzania. Consequently, earnings from its exports have remained low due to various production challenges which in turn affects export growth. These challenges have never been properly and intensively recognized for better decision-making. Therefore, this study was set to provide an in-depth assessment and understanding of key factors affecting coffee production in Tanzania.The study used simple random sampling to collect information from 364 respondents in four highly coffee-growing districts in Ruvuma, Mbeya, and Songwe regions. Qualitative and quantitative data were collected through structured questionnaires from small-scale farmers. Data were then analyzed by using a statistical Package for Social Sciences (SPSS) and Excel. From the findings, poor agronomic practices such as inadequate application of fertilizer, poor pesticides and disease control, and aged low-yield coffee trees were found to be the main factors that strongly explain the relationship with low coffee production output due to their significant results. Furthermore, using regression the other variables found to significantly affect coffee production output level were limited access to finance and inadequate extension services. Based on the findings, sustainability of the coffee sector development, intensive government intervention is needed by putting more priority on training farmers best agronomic practices in the right way. This way, small farmers can be aware of the importance of the application of required agronomic practices as a key factor in the scale-up of productivity and production output. The Bank of Tanzania can also efficiently address the challenge of small-scale farmers in obtaining soft loans at a reasonable cost from financial institutions by creating an enabling environment. This should include the provision of a special loan facility to commercial banks connected with conditions to beneficial banks to lend to farmers at an indicative rate that can be affordable to small-scale coffee growers. These findings will inform policymakers and coffee stakeholders in the coffee value chain on the best actions and decision-making to enhance the sector's performance.

Contribution of Evangelical Lutheran Church-Northen Diocese on the performance of community banks in Tanzania: A case of Uchumi Commercial Banks

Contribution of Evangelical Lutheran Church-Northen Diocese on the performance of community banks in Tanzania: A case of Uchumi Commercial Banks

How Do Commercial and Non-commercial Banks Adjust Capitalization Ratio: Evidence from Tanzania

This study examines the dynamic balanced panel data to explore the level of capitalization adjustment process for commercial and non-commercial banks in Tanzania for a period of 10 years from 2012 to 2021 in a two-step system GMM estimator. The findings of the research reveal that the cost of adjustment towards the required bank capitalization ratio is lower for commercial and non-commercial banks operating in Tanzania. The results are significant to the instantaneous adjustment process of a capitalization ratio measured in terms of the ratio of bank total equity to total assets. This finding is consistent with the dynamic trade-off theory of capitalization ratio using the coefficient value of the lagged response variable. The result reveals further that return on assets reduces the cost of the target bank capitalization ratio which means it eliminates the financial distress because return on assets is easier to be valued by investors. Therefore, it can be used as an indicator of the good performance of banks that can increase the easy availability of external capital from prospective and existing investors. The negative and significant sign of the bank size coefficient (-0.710) implies that the sample of banks in this study in terms of equity to assets ratio causes the capitalization ratio to deviate from the target level. This is consistent with the too-big to fail hypothesis. Abdulhamid et al. (2019) hold that an inverse association between bank size and capitalization ratio would happen because large banks have comparative advantages in non-traditional banking activities (interest) since they can operate with a fixed cost. The findings of this study have significant policy implications for economic and financial sector growth.

Team Communication and Employee Performance in Commercial Banks in Tanzania

This study established the influence of team communication on employee performance in commercial banks in Tanzania. The study was anchored on the Katzenback and Smith model. The study adopted a descriptive survey research design and targeted all 39 operational commercial bank headquarters. The unit of observation comprised senior managers, managers, supervisors, and lower-level employees in each of the commercial banks under review thus making a total of 1480 of the targeted respondents. A simple random sampling technique was used to select the respondents; however, the expected sample size was 445 respondents with each senior manager, manager, supervisor, and lower-level employee contributing 30 percent of the total sample size. Both descriptive and inferential statistics were used to analyze the data with the assistance of statistical package for social sciences version 26. The study established that team communication influences employee performance in commercial banks. The study recommended that banks and many other organizations need to put in place mechanisms on how to evaluate -employee-based team performance rather than the rule thumb individual-based performance evaluation. The study has also pointed out strategic areas of importance into which managers in banks can look into the respective banks such as team communication that if well accommodated influence employee performance. In addition to other recommendations, it was proposed that, in light of these findings, work organizations evaluate their high-performance work system policy and activities by the degree to which they contribute directly to the accomplishment of the team’s strategic goals and objectives through the improvement of the employee performance.

The Nexus between Degree of Commercialization, Trade Openness and Tax Revenue Performance in Tanzania

The study was mainly focused on evaluating the nexus between degree of monetization and tax revenue performance in Tanzania. Specifically, the study intends to examine the share of broad money (M2) to GDP and how it influences tax revenue performance in Tanzania. Time series research design was employed, and purposive sampling was used here and has opted for a quantitative research approach while time series data research design was employed. The study used secondary data obtained from the Bank of Tanzania (BoT), International Monetary Fund (IMF) and World Bank (WB). The data ranges were from 1970-2020. Findings from the study revealed that agriculture shares were positively related to the tax revenue performance, foreign aids were positively related to the tax revenue performance, political stability were positively related to the tax revenue performance Finally trade openness influenced tax revenue performance. The study concluded that degree of commercialization was positively related to the tax revenue performance. Therefore, this study recommends that policy makers may enact good policy, laws and regulations that will enhance the government to improve the overall tax revenue performance in Tanzania. Also, the study recommends that the government to encourage the exportation to increase tax revenue performance in Tanzania.

Evaluating the impact of self-service cash deposit machines on the performance of commercial banks in Tanzania

This study aims to evaluate the impact of utilization of self-service cash deposit machines (SSCDMs) on the financial performance of Tanzanian commercial banks, focusing on key parameters like capital adequacy, asset quality, management quality, earning ability, and liquidity. The research, conducted over six years (2017–2022), utilizes a CAMEL analysis and combines secondary data review with primary data collected through interviews. Four commercial banks' audited financial statements serve as the primary data source. The findings indicate a mixed impact of SSCDM utilization on bank performance, with some banks experiencing positive effects on capital adequacy and liquidity ratios, while others show performance fluctuations. Overall, SSCDMs are found to enhance operational efficiency and convenience, attracting more customers and increasing deposit volumes. However, potential liquidity management challenges are noted. This study contributes valuable insights to the evolving Tanzanian banking sector, aiding policymakers and bank management in informed decision-making regarding self-service banking technologies.Graphical abstract

GEOGRAPHIC DIVERSIFICATION AND EFFICIENCY IN THE BANKING INDUSTRY. DOES BOARD COMPOSITION IN TERMS OF INDEPENDENT DIRECTORS’ MATTER?

This study aimed to investigate the moderating role of board composition in terms of independent directors on the relationship between geographic diversification and efficiency of commercial banks in Tanzania. The research employed balanced panel data from 15 commercial banks in Tanzania from 2012 to 2020. The formulated hypotheses were tested by Tobit Regression Analysis and DEA using STATA version 17. The findings indicated that geographic diversification had a significant and negative relationship with allocative and economic efficiency. The study also revealed that the positive and considerable board composition in terms of independent directors moderated the relationship between geographic diversification and the allocative and economic efficiency of commercial banks. We discovered empirically that moderating the role of independent directors on the relationship between geographic diversification and efficiency contributes to efficiency. Therefore, this study recommend policy makers, management and others regulatory authority to consider independent directors when planning for efficiency of a commercial banks in Tanzania.