The Board of Directors’ Effectiveness on the Performance of Loans in Tanzania

Abstract

The study assessed the board of director’s effectiveness on the performance of loans in Tanzania. Four specific objectives guided the study as indicated by independent variables named board member’s independency, skills diversity, gender diversity and board meetings while loan performances measured by Non-Performing Loan (NPL) specified as dependent variable. Explanatory research design guided the study whereby the study selected sample of six (6) listed banks by using purposively sampling. The study found and concluded effectiveness of the board of directors is positive affecting performance of loans for listed banks through board member’s independency, gender diversity and skills diversity. The effectiveness of the board of directors on loan performance is negatively affected by board meetings. The study findings provide insights from a practical point of view on the board of directors’ effectiveness on the performance of loans in developing countries like Tanzania, thus filling the gap in the literature reviews. The study findings serve as guidance to regulators and policymakers on what set of factors to review and incorporate into policy, this will help the banks to achieve the current regulator’s requirement of NPL ratio of 5% or below. Apart from the study findings' having wider implications, the study has a few shortcomings for this reason, it would be noteworthy to extend this study to other latitudes incorporating even non-listed banks. This is because compliance of Banking and Financial Institutions (Corporate Governance) Regulations 2021 under BOT is mandatory to all financial institutions in Tanzania both listed and non-listed.