Factors That Cause Non- Performing Loans in Commercial Banks in Tanzania and Strategies to Resolve Them

Abstract

This paper reports reasons for non performing loans (NPLs) in commercial banks(CBs) in Tanzania and strategies employed in dealing with NPLs. A semi-structured questionnaire was administered face to face to 48 bank officers from 14 CBs that provide corporate loans and had been in operations for at least five years. Bank officers participated were those involved in lending activities for at least five years. Findings suggest that use of funds for purposes different from agreed ones as a major factor that cause NPLs. Creating an environment to make banks seen as problem solvers and trusted advisor to borrowers was cited as the main strategy towards solving NPLs problems.Findings imply that close monitoring of borrowers is critical to lending business.

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