Factors Influencing Bank Lending Behaviour in Tanzania A Case of Listed Banks in Tanzania

Abstract

The study looked at bank and industry-specific factors that influence listed commercial banks’ lending behaviour in Tanzania for the five-year period  from 2016 to 2020. Asset quality, capital adequacy, liquidity, and bank size were employed as bank-specific factors, whereas Gross Domestic Product  and inflation rate were used as industry-specific factors. To establish the cause and effect relationship between the response and  explanatory variables, the study used an explanatory research design. Secondary data were extracted from seven listed commercial banks’ audited  financial statements for a five year period, totalling 35 data points. After performing pre-regression analysis (multicollinearity test), correlation and  linear analysis were conducted. From 2016 to 2020, the study discovered that capital adequacy and bank size have the biggest impact on Tanzanian  listed commercial banks’ lending behaviour. At 5 per cent level, other explanatory variables such as asset quality, liquidity, GDP growth rate, and  inflation rate were insignificant. Thus, the study concludes that capital adequacy and bank size influence the lending behaviour of the listed  commercial banks in Tanzania from 2016 to 2020. The research was limited to seven Tanzanian listed commercial banks from 2016 to 2020.  Regardless of their capital adequacy or size, the banks should lend cautiously. This is because, in today’s intensely competitive business, if larger  banks with massive capital lend irresponsibly, they are likely to collapse. Finally, the study results demonstrated that the bank size and capital  adequacy influence the lending behaviour of the listed commercial banks’ in Tanzania