The Impact of Bank Ownership Structure on Bank Growth: A Case of Tanzanian Commercial Banks

Abstract

We investigate the impact of bank ownership structure on growth of Tanzanian commercial banks following the financial sector reforms that led to existence of mixed bank ownership structure. We address the following research question: To what extent does bank ownership structure affect the growth of the Tanzanian commercial banks? To answer this question we administer structured questionnaires to bank officials of 32 commercial banks. We also use six years panel data of 32 sampled banks between year 2006 to 2011. We use T-Test to understand the relationship between bank ownership structure and bank growth indicators as measured by qualitative variables and regression analysis of quantitative data. We found no significant relationship between bank ownership structure and bank's ability to extend services to remote areas, increased amount of staff increase in market share and increased number of customers. We also find a positive significant relationship between bank ownership structure and bank growth of banks in terms of increased customer deposits, total assets, customer loans and advances. We also found other factors that influence bank growth other than bank ownership structure that are not explained by the linear regression models. We found  customer deposits is influenced by increased customers' knowledge on the importance of using bank services, increased bank brands that attract more customers, business growth and increased the number of investors in the country. Bank total assets are influenced by the size of the banks and government decision to transfer its deposits to commercial banks as well as banks strategic shift to grow their balance sheets. Number of staff is explained by the growth of banks networks and branches as well as increased competitions among many competing banks in the country.

Keywords: Tanzania Banking Sector, Bank ownership structure, Bank Growth