RUAHA UNIVERSITY COLLEGE (RUCO)
(A constituent college of the St. Augustine University of Tanzania)
FACULTY OF BUSINESS AND MANAGEMENT SCIENCE
MASTER OF BUSSINESS ADMINISTRATION (MBA)
COURSE: BUSINESS RESEARCH METHODOLOGY COURCE CODE: RMB 604
NATURE OF ASSIGNMENT: INDIVIDUAL ASSIGNMENT
COURSE INSTRUCTOR: DR. CHALU.
NAME OF STUDENT MOLLEL ALLEN REG ; 036/MBA/T/2012 SUBMISSION DATE 10 OCTOBER 2013
TOPIC; THE ASSESMENT OF CREDIT RISK MANAGEMENT EFFECTIVENESS IN COMMERCIAL BANK IN TANZANIA –A CASE OF CRDB –BANK IRINGA MUNICIPALITY CHAPTER ONE INTRODUCTION
1.1 Background of the problem:
According to Lopez ,(1999) he defined credit risks as the degree of value fluctuations in debt instruments and the derivatives due to changes in the underlying credit quality of borrowers and counterparts also the credit risk model are used to determine risk–adjusted and regulatory capital requirements. However the development of the corresponding regulatory standards for credit risk models is much more challenging than for the markets risks model. Also according to Bhattacharya, (1996) Commercial banks are the ones which facing credit risk, other are lender to business, and even individual themselves. Financial institutions particular commercial banks are the one which come across credit risk. The only solution necessary for setting banking status is credit risk management and control. Global financial crisis which has its roots on mortgage are reason for banks collapse, this force automatically banks to gain enough confidence and reset their policy and strategies over credit management. Not only that but also the overall world financial system in general and not only rely on the financial aid by the government and central banks (rescue package) which most of the time left until the situation is critical. Lending activities is the major source of revenue and is the foundation of banking activities, especially in developing countries like Tanzania where capital market is less developed. The main problem of this study is to assess how effective is the credit risk management is operated by the Tanzania commercial banks with reference to the CRDB-Bank. It has been found that regardless of different strategic techniques that has been employed by the commercial banks around the world including policies, organizational structure, regulation and perhaps Acts but there are still credit defaulting persist and credit risk rate is increasing. Therefore this study will be broken down into the following components; i) How the Tanzania commercial does protects the interest of the bank and the interest of the stakeholder i.e. Banks, Owners, Customers and Government concerning the credit risks? ii) What are the strategies, methods and techniques that are implemented in managing the credit risks among the commercial banks? iii) To evaluate the concept of the loan portfolio diversification of the commercial banks and the attitudes towards its and their perception what the diversification is? Therefore this study is aimed at reviewing the role of the credit risk management in the commercial banks and explores the strategic techniques that are employed to mitigate the credit risk and application of the diversification techniques that are employed to mitigate the credit risks in the loan portfolios1.4 .0 Objectives of the study 1.4.1 General objectives
The general aim of the study is to assess the effectiveness of credit risk management practices in Tanzania commercial banks. 1.4.2 Specific objectives i. To examine the credits qualities in the loan portfolio of the CRDB bank. ii. .To investigates the...
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