Influence of Non-Performance Loans on the Financia Performance of Listed Commercial Banks at DSE.

Abstract

Credit risk management plays a great role in the financial performance of commercial banks not only in developing countries but also in developed countries. The proxies that measure credit risk is non-performing loans (NPLS), The study examined the relationship between NPLs and the financial performance of commercial banks in Tanzania. The study adopted a causal research design, where purposively sampling was used to select NMB, CRDB MKOMBOZI, MAENDELEO and DCB as a sample for the study. The study utilized secondary data from 2013to2020 secured from DSE. Using template collection. The study adopted descriptive statistics, correlation matrix for a relationship, bound cointegration for a long-run relationship, granger causal test for causal relationship and error correction model. The study findings revealed that found a strong there is a negative correlation between financial performance and non-performance loans. The study concluded that there is an existence of long-run movement between the selected variables and financial performance. In addition to that, unidirectional between the non-performing loans and financial performance of NMB, CRDB, MKOMBOZI, MAENDELEO and DCB were found. The researcher recommended that commercial banks listed at DSE should have a minimum non-performance loans. While the topic was helpful, there is a need to conduct an inclusive study for all banks in Tanzania.