Relationship between Asset Quality and Financial Performance of Commercial Banks Before and After Shifting Capital City Located to Dodoma Region, Tanzania

Abstract

Commercial banks have a strategic and essential contribution to the growth of the national economy. The study examined the relationship between asset quality and financial performance of commercial banks before and after shifting capital city located to Dodoma region, Tanzania. Through a quantitative research approach coupled with panel data were generated through document reviews. The research location was carried out at National Microfinance Bank Plc (NMB), Co-operative Rural Development Bank (CRDB) and Tanzania Postal Bank (TPB) located in Dodoma Region. The population of this study comprised quarterly financial data from 2010-2020. A sample size of 120 observations calculated by taking the (quarterly) financial data of 10 years from three commercial banks so, Three (3) commercial banks was involved namely; NMB, CRDB and TPB. This study was employed purposive sampling procedure. The data was extracted from reliable source such as Bank of Tanzania (BOT) and Dar es Salaam Stock Exchange (DSE. The findings show that there is a relationship between asset quality and financial performance before and after shifting the capital city from Dar es Salaam to Dodoma Region (P-Value of 0.006),(0.003 ) and (0.005) CRDB, NMB and TPB respectively. It is, therefore, concluded that there is a statistically significant association between the shift of the capital city from Dar Es Salaam to Dodoma Region and financial performance of commercial banks in Tanzania before shifting capital city and after shifting the capital city. The study recommends that the Bank of Tanzania, international financial organizations and policymakers to supervise the operations of commercial banks to increase asset quality. This may be done by monitoring and mentoring to show good directions to the commercial banks.