Impact of credit on the performance of Banks and other Financial institutions, A case study of Kilimanjaro Co operative Bank limited
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Date
2008
Authors
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Journal ISSN
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Publisher
Sokoine University of Agriculture
Abstract
This study investigated the impact of credit on the performance of financial institutions
focusing on the Kilimanjaro Cooperative Bank Limited (KCBL) in Moshi Municipality,
Kilimanjaro Region. Tanzania.
The researcher interviewed the Bank Manager, credit
officer, and the Management board. He also obtained valuable information through
reviewing relevant documents (reports and credit documents). The information was
analyzed using a simple impact assessment approach. The study revealed that KCBL is
poorly performing on account of unsatisfactory asset quality attributed to poor loan
administration, unsatisfactory earnings and credit management as loans. On the other hand
the study also revealed that the bank was performing well in terms of extending loans and
overdrafts to many borrowers to cater for inputs acquisition and other expenses. The total
gross loans amounted to TZS 3,351.06 million and were extended to various sectors
including Agriculture (28.37%), Education (12.62), Transport & Communication
(12.13%), Trade (10.75%). and manufacturing (8.22%) Hotels & Tourism (6.45%).
Personal loans (6.36%). Real Estate and Construction (5.63%), Health (4.87), Fishing
(3.05%) and the remaining (1.49%) were on insurance and finance. The Bank faced
various risks ranging from financial and non-financial risks. KCBL has several systems in
place which include various management and board committees to address credit risk. The
study also found out that the KCBL did not have an approved credit policy manual for its
day to day lending activities making it difficult to abide by the best practices of credit
management. It is therefore suggested that the bank should prepare a credit policy to act as
a blue print in credit management. The study also recommends s that there should be both
English and Swahili versions of the contract documents so that indigenous borrowers can
comprehend these documents easily
Description
Dissertation
Keywords
Financial institutions, Kilimanjaro Co operative Bank