Comparative analysis of small and large commercial banks’ financial performance in Tanzania pre and post-regulatory reviews

Abstract

The Regulatory Requirements Reviews (RRR) carried out by the Bank of Tanzania (BoT) in 2008 and 2014 have brought both positive and negative consequences for commercial banks, some of which led to the collapse and merger of banks. This study, therefore, analysed the effect of adjustments in the regulatory framework on Tanzania’s commercial banks' performance. Specifically, it analysed the performance level of both small and large banks across time. In addition, the study compared the performance of 24 sampled commercial banks before and after RRR. Data were analysed using descriptive statistics and Student paired t-test. The results, generally, show that Return on Equity (ROE) and Saving Mobilisation Ratio (SMR) positively increased after RRR and their difference was statistically significant (p-value =0.01. The findings further show that Return on Assets (ROA) increased and Non-Performing Loan (NPL) decreased after RRR. However, their differences were not statistically significant. Considering banks' category and time dimensions, the study concludes that most banks performed well in terms of ROE and SMR after the implementation of RRR. However, large banks performed better than small banks. Therefore, the study recommends that, for banks to perform better especially the small banks, they should continue to properly utilize the resources for compliance with the new regulatory requirements. For NPL, both banks need to take serious measure to mitigate NPL exposures including compliance with credit risk management guideline (2010) and regulations (2014)