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Assessing the Relationship Between Credit Risk Indicators and Financial Performance of Tanzanian Commercial Banks Commercial banks; Credit risk; financial performance
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Abstract
The study examines the effects of credit risks on the financial performance of commercial
banks in Tanzania. Secondary data, which were obtained from the audited financial
statements of twenty-eight commercial banks in Tanzania from 2010 to 2022, were
employed in this study. The data were collected from the websites of the Bank of Tanzania
and the commercial banks. Return on assets (ROA) or return on equity (ROE) were used as
financial performance measures, while the Non-Performing Loans (NPLs) to Gross Loan
Loss Reserve (LLR) to Gross Loans (GL) and Loss Reserve (LLR) to Gross Loans (GL)
were used to measure credit risk. Since there were no audited financial statements
available for some banks, we had to leave out 12 banks from this study .This study used
balanced panel data regression to explore how credit risks affect the financial
performance of commercial banks in Tanzania. A balanced panel helped to make sure that
each bank is observed within the same time frame, which improves the consistency and
comparability of estimates. This method works well since it controls for differences between
banks and changes over time.
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References
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