Faculty of Insurance and Banking

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Access to Credit and Households’ Borrowing Behavior in East Africa
(Journal of Economics and Business, 2019) Lotto, Josephat
The primary objective of this paper is to examine how the borrowing behavior of households in the East African region are influenced by their demographic characteristics- gender, age, income and education using Tobit regression. The paper employs survey data adapted from the World Bank's 2017 Global Findex. The results show that male-headed households borrow more often than female-headed households, and that older head of households are more likely to participate in borrowing activities than their younger counterparts. Generally, the results reveal that the household whose age is relatively small should be more indebted and will have a lower level of income, and consequently fewer physical assets. This is due to the life-cycle theory which suggests that younger households have expectations of their income to rise in the future as opposed to the older households, who are heading to retirement. So, they are more willing to borrow and acquire durables and other assets due to their hopes and expectation of getting more income in the future. On the other hand, the findings reveal that the education of the head of the household is the enabling factor for the household to borrow due to the financial literacy awareness one can derive from education. The income level of the household is also considered as the determining factor of the household's borrowing likely-hood. Since borrowing requires the guarantee in terms of borrower's income, the higher the income levels of the borrower the more likely the individual will receive the loan from the lenders. Despite household's education, age and income the results also show that the gender of the households influences the borrowing behavior of the households and that women may not have the borrowing power and ability as compared to their men counterparts. This may be due to their inability to have collateral and guarantees used as loan back-up, their poor financial education awareness, and lower business experience. Therefore, understanding households' borrowing behavior in East Africa is very important, and the results of the study may be of policy interest towards the strengthening of the East African Community financial inclusion agenda. Also, the study commends governments of the East African region to promote households' borrowing and increase opportunities for household investment in achieving intended economic growth.
Accounting Changes and Budgeting Practices in the Tanzanian Central Government: A Theory of Struggling for Conformance
(University of Southampton, 2011-07) Mkasiwa, Tausi Ally
This research investigates the phenomenon of budgeting practices in the Tanzanian Central Government. It seeks to understand how budgeting systems under the New Public Management (NPM), World Bank- and IMF-exhorted systems were adopted and implemented. There were several motives for this research: the significance of budgeting in financial management, the sparsity of empirical studies on NPM in developing countries, and a call for an understanding of the local contexts of the country and an evaluation of the reforms themselves. Additionally, the complexity of NPM reforms and the mixed results of previous empirical studies, indicated the need for a more appropriate methodology. The study adopts interpretive research and executes a grounded theory strategy. It develops a substantive grounded theory on budgeting practices and a formal grounded theory on accounting changes in organizations (Glaser and Strauss, 1967; Strauss, 1987). Fieldwork was undertaken in three Tanzanian Ministries. Struggling for conformance is the central phenomenon of the substantive and the formal grounded theory. The substantive grounded theory explained a process through which the Tanzanian Central Government actors were determined to implement budgetary reforms, despite difficulties. Struggling for conformance was illustrated by the establishment of rhetorically applied (rhetorical) rules and regulations, followed by budgeting attempts and games in their implementation, due to the uncertain environment, complex budgeting systems, the donors‟ influence, and cultural and administrative practices. The process of struggling for conformance had positive and negative impacts on budgeting operations and budgeting allocations. The formal grounded theory proposes that organizations adopt and implement accounting changes in order to achieve legitimacy, efficiency and self-interests. Rhetorical rules on accounting changes are established and implemented through accounting attempts and games, which may reveal the coexistence of instrumental and ceremonial aspects of accounting (Covaleski and Dirsmith, 1991), and even fulfill individual, rather than organizational, interests (strategic deterioration). Struggling for conformance is caused by conflicting and enabling power, complex rules, and a fragmented environment. Its consequences reflect the extent of the acquisition of efficiency and legitimacy. This research contributes to the limited amount of empirical accounting research on NPM in developing countries, to grounded theory and interpretive accounting research, and to the expansion of New Institutional Sociology. It further provides a framework of struggling for conformance, which produces possible explanations for the complexities of budgetary and NPM reforms, the adoption and implementation of accounting changes in organizations, and loose coupling
Assessing the Determinants of Bank Liquidity: Experience from Tanzanian Banks
(The African Journal of Finance and Management, 2015) Lotto, Josephat; Mwemezi, Justus
This paper identifies the determinants of banks’ liquidity in Tanzania. The panel regression was employed for secondary data extracted from published bank financial statements of 49 banks in the sample, covering the period from 2006 to 2013. The results revealed that capital adequacy, bank size and interest rate margin had a negative and statistically significant effect on banks’ liquidity, while non-performing loans and inflation were found to have positive impact on bank’s liquidity. On the other hand, the profitability and GDP growth rate had statistically insignificant impact on banks’ liquidity, although they both had expected positive relationships. According to the study results smaller banks are more liquid because they mainly focus on short-term loans that mature shortly, and are therefore are believed to be more liquid as compared to bigger banks that tie up most of their capital on long-terms loans that mature after some years.
Complex corporate ownership and control in UK listed companies
(University of Strathclyde, 2012) Lotto, Josephat
This thesis sets out the empirical evidence on complex ownership and control using data for UK listed firms adapted from Faccio and Lang (2002) for the period 1996-1999. Using OLS estimation method, the thesis links corporate financial policies and performance with ownership and control. It reports a negative relationship between control concentration of the largest shareholder and dividend pay- out ratios in companies which separate ownership from control, and a positive relationship between ownership concentration of the largest shareholder and dividend payout ratios, in companies which do not. I show that higher control-rights grant larger shareholders incentives (lower cash-flow rights) and ability (higher control-rights) to extract private benefits, for companies which separate ownership from control. Supportive evidence emerges of a positive relationship between the largest shareholder’s ownership concentration and debt ratio; when ownership concentration of the largest block holder increases, so does the possibility of collusion with management. It is further reported that, family companies employ more debt in their capital structures to prevent dilution of control and have significantly higher debt ratios and lower pay-out ratios than companies controlled by financial institutions. It may be argued that, the absence of strong external monitors makes it easy for family companies to pass control between generations. Finally, I test the relationship between voting rights of the largest shareholder and firm performance and report a negative relationship, suggesting reduction of corporate values. I demonstrate that firms whose control is shared among two family block holders accumulate more debt and perform worse than firms where the largest family block holder shares control with the second largest financial institution. This suggests that the incentives to collude with the largest shareholder or to monitor the largest shareholder are significantly affected by the type of block holder. It is also shown that firms with control coalition having more than two block holders perform better than those with only two block holders, especially those of the same type.
Credit availability for Tanzania’s small businesses: a gender perspective
(Business Management Review, 2016) Lotto, Josephat
The purpose of this study was to examine whether firm and owners’ characteristics are driven by gender and whether gender is attributable to credit accessibility in small and locally-owned firms in Tanzania. The study uses data collected from 400 small businesses through questionnaires and interviews and analyses it using univariate and multivariate statistical tools The findings show that female owners are less educated, have less work experiences and their firms are relatively smaller and younger than in the case for males. Moreover, female-owned firms were more likely to be organised as sole proprietorship or partnerships. Also the findings indicate that female-owned firms are more likely to have a need for credit during the three years prior to the survey. Nevertheless, when it comes to applying for credit, male owners were more likely to apply for credit than their counterpart female owners. Surprisingly, the credit applications of female-owned firms were more likely to be approved than those from the male-owned firms. The results suggest that policy-makers and regulators should not use the “one-size-fits all” approach when setting policies for the growth and survival of small firms due to the differences in firm and owners’ characteristics with regard to credit accessibility between male and female-owned firms. Furthermore, the results imply that when formulating policies for credit accessibility the issues of size and gender are pertinent. On the whole, the study contributes to the extensive literature on gender and entrepreneurship for a specific Tanzanian context.
Determinants of Financial Performance of Tanzanian Banks
(The African Journal of Finance and Management, 2016) Lotto, Josephat; Kakozi, Ezra
This paper examines factors that affect bank performances in Tanzania for the period of 2006 to 2013. The empirical results suggest that high net interest margins (NIM) and return on bank assets (ROA) are significantly associated with larger banks that hold a relatively high amount of capital. However, such banks have lower liquidity levels and poor management quality measured by how efficiently they reduce operating expenses. This calls for banks owners to review the performance of banks management in relation to their incentive packages so as to match management remunerations with their contribution towards bank performance. No impact was found of macroeconomic variables measured by GDP growth rate and inflation on bank interest margin and profitability. Also the findings show that micro-financial factors, measured by financial structure and market concentration, are worth less to banks interest margin and profitability in Tanzania. As a matter of policy implications at the bank level, the improvement of the profitability of Tanzanian banks need to be conducted by a reinforcement of the capitalization through national regulation programs, and by reducing the proportion of non-interest bearing assets to the benefit of bank loans.
Directors and firm performance: evidence from British soccer corporations
(Leeds University Business School, The University of Leeds, 2011) Mnzava, Bernard Elieza
The purpose of this research is to analyze the importance of the interrelationship between directors and firm performance in UK soccer corporations. In doing so the analysis enriches the existing literature in corporate governance in several ways. The primary innovation contained in this thesis is that it analyses productivity performance in the field of corporate governance for the first time. My empirical analysis considers two distinctive elements of firm performance. The first element is productivity performance, which is measured by on-field football success that includes winning percentage, percentage of league points and attendance. To my knowledge, this has not been addressed elsewhere in the corporate governance research. The second element is financial performance, which is measured by off-field economic success which includes profitability and the ratio of turnover to total assets. Overall, the findings of this research suggest that productivity performance is the principle criterion used to judge corporate decision making. The first element of the empirical analysis examines determinants of directors’ remuneration under three categories, namely; board remuneration, executive remuneration and CEO remuneration. My main findings can be summarized as follows. Firstly, I find evidence that in all categories of directors’ remuneration productivity performance is the chief determinant; concomitantly, there is little evidence of a link between CEO remuneration and financial performance. Secondly, I document that directors’ remuneration is substantially affected by firm size and managerial ownership. Finally, I find that the proportion of non-executive directors significantly reduces board and executive compensation. The second empirical analysis investigates the determinants of executive turnover, through using multiple theoretical approaches. My analysis compares the relative importance of productivity compared to financial performance on executive turnover decisions. My main finding is that productivity performance is more important than financial performance in driving executive turnover. Furthermore, my analysis demonstrates that executive turnover is considerably influenced by managerial ownership and industry experience. Overall, my results suggest a stronger relationship between performance and turnover in listed corporations than in FA Premier League corporations. This implies that quoted firms adhere to corporate governance directives more than FA Premier League firms. The final empirical analysis investigates the impact of multiple directorships, ownership structure and managerial industry experience on productivity and financial performance. My main findings are as follows. First, the results reveal that directors with multiple directorships improve productivity performance by enhancing the firm’s net spending, this having the effect of worsening financial performance. Second, I find that managerial ownership tends to seriously worsen productivity performance, whilst block holder ownership enhances financial performance. Third, managerial industry experience promotes productivity performance but worsen financial performance. Overall, in the contemporary relationship football firms are characterized by a trade-off effect between financial and productivity performance measures. Finally, I document evidence that productivity performance depends on financial performance and vice-versa.
Diversification, financial performance and the destruction of corporate value? An application of fuzzy set analysis
(University of Strathclyde, 2013) Mabonesho, Ernest Francis
FSA techniques appear to offer valuable complementary theoretical and empirical insights to conventional finance research methods in order to better understand the financial impact of corporate diversification strategies. FSA can provide a conceptual framework to integrate the often confusing and conflicting theoretical explanations and empirical results of past research. This thesis explores the potential usefulness of FSA in addressing finance research problems or paradoxes that are characterized by large numbers of inter-connected variables, complex causality and where different configurations lead to similar outcomes. Specifically fuzzy set analysis is used on cross-sectional data from firms listed in London stock exchange FTSE All-share index (2001-2010) in order to address a gap in the literature as to “how corporate diversification necessarily and sufficiently leads to favorable financial performance”. The results of this research show that there is no simple answer to this question nor is there a simple theoretical explanation. It appears that a diversification strategy per se is neither a necessary nor a sufficient indicator of favorable or unfavorable financial performance. The FSA results showed multiple configurations of corporate diversifications and other firm attributes which are usually or more often than not sufficiently associated with favorable firm value, profitability, and risk-return performance. This indicates presence of complex causality, asymmetric causality, and equifinality in examining determinants of financial performance. The results are partially explained by elements of standalone theories but better explained by the construction of a series of hybrid theoretical frameworks. The usefulness of FSA in helping understand and improve decision making processes that rely on complex financial or numeric information has been demonstrated, and it is hoped that this research acts as a “stepping stone” to legitimate a new set of analytical techniques for accounting and finance researchers to use. This would help corporate managers/CEOs, analysts, and investors in decision making processes.
Does bank capital regulation affect bank value?
(African Journal of Business Management, 2017-05-08) Lotto, Josephat
The aim of this study was to examine the relationship between capital adequacy and the bank profitability measured by returns on equity (ROE) for Tanzanian large commercial banks during the period between 2009 and 2014. The positive relationship between bank capital and performance may also be explained using monitoring-based theory. The monitoring-based theory suggests that higher bank capitals encourage serious scrutiny and monitoring of borrowers to avoid default risk. The monitoring of borrowers indirectly improves the probability of bank’s survival by eventually increasing surplus generated through the healthier relationship between borrowers and banks, hence, bank performance Furthermore, the study found a significantly positive relationship between bank size and bank returns on equity. This is consistent with a familiar explanation that larger banks accumulate large assets which generate relatively more income and eventually increases the bank’s profitability. The study also reveals a negative and significant relationship between non-performing loans and bank profitability. This relationship shows that accumulation of Non-Performing Loans invites vulnerability to default risk which consequently causes banks’ failure to sustain or increase their investment efficiency. Similarly, lower NPLs are associated with drop in deposits rate which eventually impacts on banks’ operations and profitability. Consequently, the study recommends the banks’ capital regulation to be anchored on a sound system of bank monitoring and the Bank of Tanzania should swiftly and strictly enforce the compliance of the bank capital requirements and review the minimum capital requirement of deposit money regularly so as to maintain the optimal capital level in an attempt to improving bank profits level. The study also encourages bank capitalization to improve performance. More specifically, banks are encouraged to have a habit of retaining more earnings instead of distributing such large sums as bonuses in order to increase the banks’ capital base.
Does IFRS improve the usefulness of accounting information in African capital markets?
(Leeds University Business School, The University of Leeds, 2012) Ngole, Shaban Juma
This thesis examines whether IFRS adoption improves the usefulness of accounting information in African capital markets. Consistent with the IASB (2010) conceptual framework which focuses on shareholders, I define usefulness as the increase in value relevance of earnings and book value of equity, asymmetric earnings timeliness and conditional conservatism and the predictive ability of earnings and cash flow. I use a relatively large sample of 347 firms listed in five African capital markets namely; Johannesburg, Nairobi, Cairo and Alexandria, Botswana and Casablanca Stock Exchanges. The thesis derives its motivation from the contemporary debate on fair value versus historical cost accounting, illiquidity of African markets and the adoption of IFRS in Africa. Although IFRS is widely adopted in Africa there are relatively few studies examining its usefulness. In Africa, capital markets are relatively small and illiquid (Smith et al., 2002 and Kenny and Moss, 1998), there are no sound IFRS enforcement mechanisms (Daske et al., 2011, Anandarajan and Hasan, 2010, World Bank, 2010a, and Prather-Kinsey, 2006), culture is secretive and conservative (Dahawy et al., 2002 and Gray, 1988) and many accounting systems are based on government or bank capital models of corporate governance (Chamisa, 2000). Since, IFRS characterized by fair value accounting principles requires liquid and active markets for its appropriate use (Ball, 2008) and focuses on market led principles of measurement and disclosures (Walker, 2010) it is unclear how useful it is to market participants in illiquid markets particularly African capital markets. The research objectives are fourfold; to examine whether IFRS increases (i) the information content of earnings and book value of equity as measured through the earnings response coefficient (ERC), the book value response coefficient (BRC) and adjusted R2 (ii) the asymmetric earnings timeliness and conditional conservatism as a measure of stewardship role of management to capital providers, (iii) the predictive ability of earnings and cash flow and (iv) to examine the conditioning roles of culture and legal origin on the above research sub-themes. The results are summarized as follows; (i) IFRS increases the valuation role of book value of equity and overall value relevance but not earnings. These findings are consistent with the IASB (2010) conceptual framework' focus on the statement of financial position rather than the statement of financial performance in financial reporting. The results are also consistent with prior studies such as Hung and Subramanyam (2007) and Francis and Schipper (1999) which document the declining (increasing) value relevance of earnings (book value of equity), (ii) IFRS is incrementally more value relevant in code law than common law countries and (iii) the secretive culture prevalent in African countries is associated with greater BRC (lower ERC) after IFRS Moreover, consistent with prediction, the results indicate that IFRS leads to reduced gains, loss, incremental loss and overall earnings timeliness. Also, common law earnings are timelier (untimely) in recognizing bad news (good news) than code law earnings. However, this symmetric earnings timeliness decreases after IFRS adoption. Furthermore, the results indicate that a conservative culture is associated with greater (lower) gains (loss and incremental loss) recognition timeliness. In terms of earnings and cash flow predictability, IFRS results in reduced predictive ability of cash flow and earnings. Also, cash flow dominates earnings in predicting future cash flow. Conservative culture is associated with lower (greater) predictive ability of cash flow (earnings). Moreover, results do not support the contention that IFRS increases the predictive ability of earnings and cash flow more in common than code law countries. This is the first comprehensive study examining the decision usefulness (as defined by the IASB conceptual framework, 2010) of IFRS in Africa. The conclusion is that IFRS has not improved financial reporting in Africa.
Domestic Debt and Economic Growth in Tanzania - An Empirical Analysis
(Journal of Economics and Management Sciences, 2018-05-26) Lotto, Josephat
The main objective of this paper was to examine the impact of domestic debt on economic growth in Tanzania for the period 1990 to 2015 using Ordinary Least Square (OLS) regression method to estimate the effects. The study finds that there is an inverse but insignificant relationship between domestic debt and the economic growth of Tanzania as measured by GDP annual growth. The inverse relationship between domestic debt and GDP may be caused by different factors such as; increased trend in domestic borrowing, government lenders’ profile dominated by commercial banks and non-bank financial institutions which promotes the “crowding out” effect; the nature of the instruments used by the government ; the improper use of the domestic borrowed funds which may include funding budgetary deficits, paying up principal and matured obligations on debt, developing financial markets as well as fund other government operations. Other control variables relate with the GDP as predicted. For example, Inflation (INF) has a negative effect on the GDP growth rate, but the relationship is not statistically significant, while gross capital formation (GCF) has a positive statistically significant effect on GDP growth rate. Furthermore, foreign direct investment (FDI) showed a positive effect on the GDP growth rate and export (X) has a positive effect on GDP growth rate, and the relationship is statistically significant explaining that if a country applied an export-led growth economic strategy it enjoys the gains of participating in the world market. This means that an increase in export stimulates demand for goods which leads to increase in output, and as a country’s output increases, the economic performance also takes a similar trend. Finally, government expenditure (GE) had a negative effect on the GDP growth rate which may be explained by the increased government expenditures which are funded by either tax or borrowing. Therefore, what is required for countries like Tanzania is to have better debt management strategies as well as prudential financial management while maintaining to remain within the internationally acceptable debt level of 45% of GDP and maintain a GDP growth rate of not less than 5%. It is important for the country to realize from where to borrow from, the tenure, the risks involved and limitations to borrowing and thus set the right balance of combination of both kinds of debt. Another requirement is to properly utilize the borrowed funds. The central government’s objective should be to use the funds in more development-oriented projects that bring positive returns to the economic development. The government should not only create a right environment and policies for investment to attract investment from domestic and foreign sources but also be cautious about the kind of investments that the foreign investors make.
The Effect of Separating Ownership from Control on Corporate Leverage
(Business Management Review, 2012) Lotto, Josephat
This paper aims to examine how corporate leverage is affected by the separation of ownership from control .Using data from a sample of 643 listed UK firms, the results show supportive evidence of a statistically significant positive relationship between the largest shareholder’s ownership concentration and debt ratio. More importantly, the results of the paper show a statistically significant and positive relationship between control-wedge (deviation between control rights and cash flow rights) and the debt ratio confirming that control attracts controlling shareholders to extract private benefits. This finding offers directly evidence for the debt-increasing effect of the hypothesis formulated in this paper: the non-dilution entrenchment effect and signaling effects of debt finance contribute to a higher corporate debt level when the control-rights and cash-flow rights of the largest controlling shareholder are highly separated.
Efficiency of Capital Adequacy Requirements in Reducing Risk-Taking Behavior of Tanzanian Commercial Banks
(Research Journal of Finance and Accounting, 2016) Lotto, Josephat
This paper intended to examine the relationship between capital and risk of Tanzanian commercial banks during the period 2009-2014 using the Two Stage Least Square (2SLS) method of estimation. The empirical findings reveal a direct relationship between capital ratios and bank risk-taking behavior implying that as the level of banks’ risk increases bank managers tend to increase the bank capital ratios so as to prevent banks from violating the regulatory minimum capital requirements.The study also found a positive relationship between regulatory pressure and capital. This positive impact shows that Tanzanians large commercial banks approaching the minimum capital requirements are inclined to improve their capital base in order to circumvent the penalties resulted from infringing the legal requirements of keeping minimum capital ratio.The study further shows a positive and significant association between profitability and bank capital implying that that as the profitability of banks increases they retain more earnings to raise the level of their capital. Hence, it is concluded that improvement in profitability helps banks to increase their capital ratios and prevent them from penalty associated with failure to meet minimum capital requirements.
The Empirical Analysis of the Impact of Bank Capital Regulations on Operating Efficiency
(International Journal of Financial Studies, 2018-03-22) Lotto, Josephat
This paper principally aims at examining the impact of capital requirements regulation on bank operating efficiency in Tanzania. The study employs bank level data for the period between 2009 and 2015. The findings show a positive and significant relationship between capital ratio and bank operating efficiency. This shows that commercial banks in Tanzania with more stringent capital regulations are more operationally efficient. This relationship proposes that capital adequacy does not only strengthen financial stability by providing a larger capital cushion but also improves bank operating efficiency by preventing a moral hazard problem between shareholders and debt-holders. This result may also imply that the increased regulations on capital requirements influence the bank’s decision to revisit their internal operations strategy in terms of strong corporate governance, risk assessment methods, credit evaluation procedures, employment of more qualified staffs, and enhanced internal control procedures. Another key finding is an inverse relationship between non-performing Loans (credit risk) and bank operating efficiency. The implication of this relationship may simply mean that the bank’s total loan and advances in combination with total deposit either due from customers or from other banks are of little importance in determining the operational efficiency of banks. This probably implies that the amount of money banks loan out is too excessive, which would attract a greater chance of default. The paper lays down some recommendations: first, banks in Tanzania are advised to invest in more advanced technological innovations to reduce the staff costs and other operating expenses to increase their operational efficiency; and, second, bank management is also advised to be more careful in the loan screening process to reduce the incidence of non-performing loans.
Evaluation of factors influencing bank operating efficiency in Tanzanian banking sector
(Cogent Economics & Finance, 2019-09-12) Lotto, Josephat
This paper examines factors affecting operating efficiency of 36 commercial banks in Tanzania for the period between 2000 and 2017. The paper employs robust random-effect regression model to estimate the relationship between bank operating efficiency and its determinants. The results show that bank liquidity and capital adequacy have a positive relationship with bank operating efficiency. This suggests that capital adequacy and liquidity, not only strengthen financial stability by providing a larger capital cushion and bank required liquidity level, but also improve bank operating efficiency by lowering moral hazard between shareholders and debt-holders. Furthermore, the study shows that bank profitability and operating efficiency are directly related—implying that banks should put emphasis on improving their earning generating power to increase their operational efficiency. This paper suggests banks to increase their profitability by investing more on financial innovations and branch networks, and expand their market shares to boost their operational efficiency. Further, the paper argues that banks should optimally use their asset capacity to enhance their earnings profiles. At the same time, banks should avoid reckless lending that would increase the level of unsecured credits in banks’ portfolio. Finally, the results encourage banks in Tanzania to monitor and evaluate these factors for improvement to enable the sustainability of banks and industry for economic growth.
Evaluation of Financial Performance of Foreign and Domestic Banks Operating in Tanzania
(European Journal of Business and Management, 2016) Lotto, Josephat
This study aimed at conducting a comparative analysis of the financial performance of foreign owned banks and domestic banks operating in Tanzanian banking sector for the period between 2009-2016 using DuPont model and the paired-sample t-test analysis. The model depicts that return on equity of banks is affected by three parameters namely; Profit margin (PM), Assets utilization AU and Equity Multiplier (EM). The results of the analysis show that both returns on equity (ROE) and return on assets (ROA) of foreign banks are higher than those of the domestic banks. The higher ratios of ROA and ROE observed in foreign banks may have been caused by reported higher interest margin (PM) and Equity Multiplier (EM) signifying a better cost management and use of large financial leverage by foreign banks than domestic banks.Based on the results portrayed by this study we may conclude that foreign banks in Tanzania not only have higher return on assets ratio (ROA), but also higher return on equity (ROE) ratio due to a larger use of financial leverage rather than the profitable use of assets. This implies that, compared to domestic banks, foreign banks manage their capital more efficiently than their domestic counterparts
Examination of the Status of Financial Inclusion and its Determinants in Tanzania
(MDPI Sustainability, 2018-08-13) Lotto, Josephat
The primary motive of this paper is to examine the determinants of financial inclusion in Tanzania. The paper borrows data from a household survey conducted by TWAWEZA. Employing the probit regression, the findings of this paper reveal that gender, education, age and income are the pertinent factors which affect the financial inclusion in Tanzania. The paper further shows the following: First, if you are a man, financially stable, have a good education and are relatively older, you then stand better chances of being Financially included. The results show that, as the level of education increases, the individual is more likely to be financially included. The possible reason for this observation may be clearly linked with the financial ability of educated individuals to afford holding bank accounts and presenting personal guarantees when required by the banks during loan application because the level of education goes parallel with the income level. In addition, the results confirm a gender gap in formal financial inclusion, and this may be due to the factors such as inability of women to show collateral, their poor financial education awareness and lower business experience. Second, the paper also shows that the factors which affect traditional banking services are the same as those affecting mobile banking services (gender, age, income and education), and that there is a negative trend and a clear departure of customers’ usage from banking retail services to mobile financial services. Although this gap has been narrowed recently, the best option with the banking sector is to create more new delivery channels while using mobile financial services as an infrastructure to deepen financial access reaching more un-banked population. The paper, therefore, recommends banks to create more delivery channels while using mobile telecommunication network as an infrastructure to deepen financial access reaching more unbanked people rather than competing with mobile network operators. The findings of this paper may also be used as a wake-up call for policy makers to put more emphasis on women and young people who are often left behind during Government’s effort toward reaching the entire population as far as financial inclusion is concerned.
Examining the impact of information technology on internal auditing effectiveness in Tanzanian organizations
(Time Journals of Social Sciences, 2014-11-06) Lotto, Josephat
This research assessed the impact of Information technology on internal auditing in Tanzanian organizations. The study was exploratory and descriptive in nature and it was restricted to the Dar es Salaam area, which is the commercial center of Tanzania. As such it represents IT growth of both government and a business organizations in the country. Primary data was collected through questionnaires. The central finding in this research work reveal that the internal audit profession in Tanzania lags behind in effective use of IT to support their duties. From the discussion of the findings it was clearly observed that several factors, which contributed to the hindrance of internal auditors’ use of technology, are interwoven. As such, it was clear that the lack of top management support seemed to be a critical problem because it is from this factor that other factors were brought into existence. For instance, inadequate training programs, internal auditors’ involvement in information systems development, and poor allocation of budget to the internal audit department were the result of lack of top management support.
Exploring human capital: Discrimination factors and group-specific performance in the football industry
(African Journal of Business Management, 2017) Trequattrini, Raffaele; Lardo, Alessandra; Ricci, Federica; Lombardi, Rosa
The aim of the study is to investigate whether discrimination factors exist within professional football clubs, concerning the management of their human capital, by analyzing the correlation between the footballers’ wages and their performance. An analysis was conducted to show that discrimination, based both on nationality and race, can affect the strategies adopted by football club managers and in the professional footballer labour market, where players are considered to be the human capital of football enterprises. The research framework consists of an analysis of the existing literature on discrimination in sports and of a quantitative analysis based on an exploratory approach, where the wage differences among Italian Serie A league footballers are compared to the performance of each group of players (organized by race or nationality). The results of the analysis of data for all Italian Serie A clubs show that discrimination (in pay) exists against Italian and white players. In contrast, when small and big clubs are considered separately, the findings relating to small clubs highlight that foreign and black players face such discrimination. The results suggest that managers of professional football clubs apply a discrimination strategy. In addition, the results provide practical implications on the types of discrimination errors that are committed by the management of big and small football clubs. Big clubs tend to overrate the contributions of foreign and/or black players compared to those of Italian and white players, while small clubs tend to overrate the contributions of Italian and white players compared to those of foreign and black players. To reduce discrimination, clubs have to correlate how much players are paid with their performance. Further research is recommended to identify the impact of wage inequality on the football labour market and on professional team management.
Exploring the value of factoring as a finance option for small enterprises in emerging economies: A Tanzanian case study
(Entrepreneurship and Innovation, 2006) Satta, Tadeo Andrew
Using Tanzania as a case study, this paper explores the value of factoring as a finance option for small enterprises in emerging economies. Based on identified challenges, the paper develops a policy framework that could facilitate the growth of the factoring industry in Tanzania. Within the boundaries of the developed framework, the paper concludes that there is a need for the Tanzanian government to create a favourable legal and regulatory environment, foster economic growth, support the formation of factoring associations, strengthen credit information infrastructure, and create an overall favourable tax structure that is supportive of the factoring industry. Furthermore, the paper argues that the ongoing global growth in factoring provides a unique opportunity for fostering the growth of factoring finance in emerging economies through cross-border factoring.

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