Abstract:
The study aimed at analyzing the factors contributing to non-performing loans in
Tanzania's local banks, specifically focusing on NMB Bank PLC. Specifically, the study
sought to assess the effects of macroeconomic conditions on non-performing loans at
NMB Bank's Dar es Salaam zone, examine the influence of bank lending policies on non
performing loans within the same region, and evaluate the effects of economic stability
on non-performing loans at NMB Bank in Dar es Salaam. The study employed a
pragmatism research philosophy, combining quantitative and qualitative methods to
analyze factors affecting non-performing loans at NMB Bank PLC. A mixed-methods
approach provided a comprehensive view, utilizing a convergent parallel design for
simultaneous data collection and analysis. The focus was on the Dar es Salaam zone,
chosen for its economic significance and high banking activity. The target population
comprised 250 bank employees, with a sample size of 154 determined using the Yamane
formula. Both simple random and purposive sampling techniques were used to ensure
diverse insights. Data collection involved questionnaires for quantitative data and semi
structured interviews for qualitative insights, with statistical analysis performed using
SPSS to assess the impact of macroeconomic conditions and bank policies on loan
performance. From the findings, it was revealed that macroeconomic conditions,
including inflation, interest rates, and GDP growth, significantly impact non-performing
loans (NPLs) at NMB Bank in the Dar es Salaam zone, explaining 53% of the variance in
NPL levels. Stable economic conditions reduce NPLs, while volatility increases risks,
with a statistically significant p-value of 0.000. Additionally, effective lending policies
correlate with a 0.726-unit decrease in NPLs for each one-unit improvement, supported
by a strong negative correlation of -0.801. Therefore, it is recommended that NMB Bank
incorporate macroeconomic monitoring into its risk management strategies and enhance
lending policies through sound credit assessments to mitigate risks and improve financial
stability. These measures are essential for strengthening risk management frameworks in
Tanzania’s banking sector.
