ASSESSMENT OF DEBT COLLECTION STRATEGIES USED BY COMMERCIAL BANKS IN TANZANIA DURING COVID-19

Abstract

ABSTRACT Commercial banks in Tanzania have used various debt collection techniques designed especially for these exceptional circumstances. Traditional debt collection techniques like letters and phone calls are still widely used; however, they may not always produce the desired results due to poor customer response or borrower financial hardships. Ensuring that all debt collection strategies adhere to legal requirements established by organizations like Tanzania's Central Bank (BOT) is crucial. The study's main goals were to evaluate the effectiveness of the debt collection strategy utilized by commercial banks during COVID-19, the compliance level of the debt collection strategy, and the compatibility of the debt collection strategy. With the use of purposive sampling, participants were chosen. The total population of 1,000 people, including loan officers and bank loan applicants, was represented by a sample size of 91. In addition, the study used both primary and secondary data sources, with the former consisting of questionnaires and interviews as methods of data collection and the latter of official publication documents from the Bank of Tanzania during the COVID-19 pandemic. Tables and figures were used to present the results of the qualitative and quantitative analysis of the acquired data. The results revealed a low level of compliance with the debt collection strategies employed by the commercial bank during Covid 19, as indicated by a p-value of compliance being above 0.1 at a significant level of the study. Additionally, the study found that most people generally agreed that debt collection strategies were compatible, and it also revealed that debt collection strategies were ineffective. As a result, it is advised that financial institutions develop an information technology system and be ready for crises that could impair the bank's functioning.