Assessment of impact of bank service charges on performance of commercial banks in Tanzania: A case of five selected banks in Dar-es-salaam
Date
2016-07-28
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Publisher
St John's University of Tanzania
Abstract
The general objective of the study was to assess the impacts of bank charges on performance of commercial banks in Tanzania. Specifically, the study aimed to understand the nature of noninterest bank charges, that is, how noninterest bank charges influence performance and financial risks associated with noninterest bank charges among commercial banks of Tanzania with references from five commercial banks in Dar-es-Salaam. The study used the case study cross – sectional research design and a sample size of 100 bank employees from five commercial banks obtained through simple random and purposive sampling methods. Also, data was collected through questionnaires and interview methods and thereafter presented, analyzed and discussed so as to address the research objectives. The study found that most commercial banks of Tanzania have both traditional and non-traditional noninterest bank charges. These include foreign exchange account charges, mobile banking charges, service charge on customer accounts, automatic teller machines transactions charges, internet banking charges, account maintenance fee, credit cards fee and cash management fees. The Pearson correlation analysis further indicated that some of the non – interest bank charges like foreign exchange account charges, mobile banking charges, service charge on customer accounts, automatic teller machines transactions charges and internet banking charges had a significant relationship with the increase in Return on Asset (ROA) and Return on Equity (ROE) of the selected commercial banks. Also, the study found noninterest bank charges have positive influence on the financial performance of Commercial banks in Tanzania. On the other hand, most risks identified were unsystematic risk (diversifiable), foreign-exchange risk, systematic risk (undiversifiable), credit or default risks and market risk (volatility). The study provides recommendations to Commercial banks to increase their noninterest bank charges services particularly those with low risks but used regularly by customers. For example, ATM and foreign exchange services. The study also recommends that, in order to increase volume of sales and performance, it is important that commercial banks maintain certain minimum bank charges so as to attract more customers to utilize their services. For instance, reducing costs related to opening and maintenance of customers’ accounts or reducing fees incurred by customers when checking accounts balance.