Commercial Banks Vs Rural SACCOS Credits Risk Management Practices in Tanzania

Abstract

This study applied secondary data from 20 commercial banks and primary data from 37 rural Savings and Credits Cooperative Societies (SACCOS) operating in Tanzania to compare the credits risk management practices applied by commercial banks versus the rural SACCOS. The study revealed that banks have effective credits risk management practices than the rural SACCOS. The study also revealed that because of the effective credits risk management practices all banks (100%) were making profits while only 30% of the rural SACCOS were profitable. Furthermore, the study noted that the mean value of NPL for banks and rural SACCOS was 4.4% and 23.26% respectively. This study recommends that rural SACCOS should imitate some of the best banks’ credits risk management practices in order to reduce the amount of NPL and hence improve their profitability while the government should establish the credits risk regulatory framework for SACCOS as it did for commercial banks.

Keywords: Commercial banks, Rural SACCOS, Credits risk management practices, Tanzania