Credit Risk Management For Salaried Loans To Government Employees: A Case Of Tanzania Postal Bank

ABSTRACT 

This study focused on credit risk management for salaries loans to government employees using a case of Tanzania Postal Bank (TPB). It aimed at examining how the Bank grants loans to employees in public owned institutions, identifying the trend of non-performing loans (NPLs) at TPB, finding out the reasons behind the rising problem of non-repayment of loans and examining measures that could solve the problem of non-performing loans. Interviews, questionnaires and observation were used to obtain the primary data and various documents were reviewed to gather secondary data. The data gathered were analyzed by using computer programs. The study findings showed that TPB had policy and procedures on credit risk management on salaried staff loans but the policies were not fully implemented. The level of NPLs had been increasing year after year which means there was poor management of staff loans. And that death of borrowers and labor turnover had been the major causes of increasing non performing loans. Other reasons included poor cooperation between the bank and employers, lack of legal action against non-complying borrowers, lack of alternative collateral, borrowers possessing multiple loans and inadequate training to credit officers on risk management. In order to control NPLs, the study recommends that the bank should implement landing policies and procedures, perform proper credit customer analysis, train credit officers on key risk indicators and how to manage the same, cooperate with employers, adopt use of supplementary collaterals and  take legal action against non-complying borrowers.