Factors Determining Loan Repayment in Tanzania: A Case of CRDB Bank, Meru Branch, Arusha

Kyando, Lugano (2019) Factors Determining Loan Repayment in Tanzania: A Case of CRDB Bank, Meru Branch, Arusha. Masters thesis, The Open University of Tanzania.

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Abstract

Many banks have faced with Non-performing loan that lead to the greatest risk to the banking industry not only in Tanzania but also globally as well. The objective of this study was to determine the factors that determine the repayment of loans in Tanzania, a case of the CRDB bank. The specific objectives of this study were to determine the effect of credit institutions' factors in paying loans in Tanzania, to determine to what extent the factors of borrowers affect the payment of loans in Tanzania and to determine the effect of loan factors in the payment of loans in Tanzania. The study adopted a descriptive research strategy. The study involved staff of CRDB bank at the Meru branch and its borrowers. The sample size of the study included 50 respondents. The data were analyzed in a descriptive way. This result of the study indicated that factors of lenders, factors of the borrower, and factors of the loans determines loan repayment of commercial banks in Tanzania. The study recommends banks to use an efficient and effective credit risk management that ensures that loans are combined with repayment capacity, minimum or Non-national loans, that loan defaults are identified and appropriate measures are taken to minimize the impact of defaulting. This study also recommends commercial banks to join and establish credit information that can be consulted before the loan is disbursed. Furthermore, the study recommends that commercial banks should have mandatory borrowers to monitor the use and repayment of loans. This supervision will allow commercial banks to closely observe the performance of borrowers. In addition, the training of borrowers prior and after receiving loans should be concentrated on areas such as management of their businesses, accounting and savings. These measures will reduce the rate of defaulters. Finally, the study recommends commercial banks to also apply strict credit policies so that loans are granted to those who are able to repay and mitigate moral risks, such as internal loans and information asymmetry.

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