Abstract:
Non-Performing loans (NPLs) has been a historical problem affecting Financial
Institutions (FIs) in Tanzania, Maendeleo Bank PLC is one of them. The study analyzed
the causes of NPLs in FIs in Tanzania, Maendeleo Bank PLC being the case study. The
study’s specific objectives were: (i) to determine the contribution of National economic
downturn on NPLs at Maendeleo Bank PLC, (ii) to determine the contribution of Bank
lending interest rates on NPLs at Maendeleo Bank PLC, (iii) to determine the contribution
of staff collusion on NPLs at Maendeleo Bank PLC, (iv) to determine the contribution of
inappropriate use of loans on NPLs at Maendeleo Bank PLC and (v) to determine the
contribution of inflation on NPLs at Maendeleo Bank PLC. Methodologically, the
researcher used purposive and simple random sampling through to collect primary data
from a sample of 60 respondents in Maendeleo Bank PLC. Secondary data were collected
from the same bank, BOT and NBS covering year 2014 – 2018. SPSS was applied on data
processing and inferential statistics on data analysis.
A correlation analysis performed on the data revealed that, most variables were correlated
and met a Pearson correlation significance “r” at moderate and strong correlation of
variables, as discussed in chapter four of this study. Strong correlation were between INT
and NED whereby results showed that p 0.05. (r = 0.710; p = 0.046). Variables with
moderate correlation were INT and STC that is significant p 0.01 (r = 0.560, p = 0.000),
INT and IUL correlated at p 0.01. (r = 0.545; p = 0.000) and STC and IUL that was
significant at p 0.01. (r = 0.545; p = 0.000). Also, a regression analysis performed on the
data showed that all independent variables (NED, STC, IUL, INF and INT) were positively
related to NPLs with unstandardized coefficient beta “B” of 0.075, 0.005, 0.027, 0.432 and
0.032, that means 1 % change in independent variable cause a change in NPLs by
percentage magnitude of the respective coefficient. Therefore the correlation and
regression analysis results mean that NED, STC, IUL, INF and INT are the causes of NPLs.
Therefore, it is recommended that FIs, particularly Maendeleo Bank PLC should improve
its credit policies and invest in staff training so as to enhance an effective management of
NPLs. Also, further studies should be carried on the causes of NPLs in FIs with focus on
broad spectrum of regional banks in Dar Es Salaam and in other areas as recommended.
