bank m project rep[ort

1. i

2. ii
ACKNOWLEGMENT
I would like to thank those who have assisted me in accomplishing my project report writing, I
would like to thank the management of bank M for giving me information and some documents
that has supported me to perform my project report writing. Also I thank my family Mr. And Mrs.
KAPORO who made me healthy and gave me courage and financial support. Also I would like to
express lots of thanks to my friends who in one way or another have contributed to accomplish my
report writing

3. iii
LIST OF ABREVIATION.
IFM Institute of Finance Management
NFI Non-financial institution
ATM Automated Teller Machine
MFIs Microfinance institutions
P&Ls Profits and Loss
HR Human Resource
IFM Institute of Finance of Management
ALCO Asset Liabilities Committee
IFRS International Financial Reporting Standard
MIS Management Information System
PUC Paid-Up Capital

4. iv
EXACUTIVESUMMARY
The project is involve to define the factor that affecting lending in Bank M, The primary aim of
the task was to define the component of the bank industry including Non –financial institution
and financial institution to cover with that we know more about Bank M sources of its finance
and its benefit to the people. The history about Bank M in general in viewing that we discover
the vision and mission of Bank M , ownership and organization structure, . as well as the
objective of the privatization policy in commercial bank, the other things that we have learned
based on the how bank balance sheet it differ from the non bank balance sheet ,Also on the issue
of ALCO this is like the heart of the bank because when this committee fail will result on the
bank fail of collapse so this for is very important also there is another part which is how the
exchange rate affect the bank and how the volatility rate affecting the bank, change of the
interest will bring positive changes or negatives changes it depend o the situation of the economy
whether there is inflation or deflation, the method used when we collect data are through internet
by viewing the annuals report of the Bank M, The other method that we have used is vesting
method, this done through in branch and getting the information we visiting part of its branch in
DAR ES SALAAM allocated in Posta at Samora load beside roundabout and TTCL Tower.

5. v
Table of Contents
DEDICATION.................................................................................... Error! Bookmark not defined.
ACKNOWLEGMENT.........................................................................................................................i
LIST OF ABREVIATION ..................................................................................................................ii
EXACUTIVESUMMARY.................................................................................................................iv
CHAPTER ONE................................................................................................................................1
1.1 TOPIC OF THE PROJECT IS THE FACTOR THAT AFFECTING LENDING IN
BANKING………………………………………..……………………………………….
Error! Bookmark not defined.
1.2 SUPPORT AND DEFEND OF PROJECT TOPIC......................................................................1
1.3 DISCUSSION ON THE FOLLOWINGPART ...........................................................................2
CHAPTER TWO................................................................................................................................3
2.O INTRUCTION.........................................................................................................................3
2.1 Components of the Banking industry ..........................................................................................3
2.1.1 A Non-financial institution (NFI) .........................................................................................3
2.1.2 Financial institution.............................................................................................................3
2.2 The sources of finance for banking .............................................................................................3
3.1coverage of the financial sector and benefit to the people ..............................................................6
CHAPTER THREE: LITERATURE REVIEW ....................................................................................8
3.1 Basic Component of banking sector...........................................................................................8
3.2 Sources of fund in banking industry ........................................................................................9
CHAPTER FOUR............................................................................................................................10
4.0 PRESENTATION OF ANALYSIS AND FINDINGS...............................................................10
4.1 objective of the study...............................................................................................................10
4.2 objectives as listed in your project question...............................................................................10
4.2.1brief history about bank M..................................................................................................10
4.2.2 Misssion and vision of Bank M..........................................................................................11
4.2.3 Ownership and organization structure of Bank M................................................................11
4.2.4Objectives of privatization in commercial bank and how this objective achieved....................11
4.2.5 The financial statements and basic three types of financial statements and its objectives .......12
4.2.6 The difference between bank and non bank balance sheet.................................................12
4.2.7 The principle describes the trends in the categories of bank assets and liabilities.................13
4.2.8 The importance of financial statement in banking sector. ....................................................13

6. vi
4.2.9 The concept of ALCO.......................................................................................................13
4.2.10 Types of risks facing Bank M and how that risk managed..................................................14
4.2.11 How treasury and risk management functions relate.........................................................15
4.2.12 How volatility of interest rates in the market influence the Bank M performance................15
4.3Recommendation to IFM in order to improve its performance.................................................16
CHAPTER FIVE..............................................................................................................................16
5.1 The information result found in the topic or problem of the project ...........................................17
5.2 The fund in fund is performing is performed through.................................................................17
5.2.1 Making loans ....................................................................................................................17
5.2.2 Creating money.................................................................................................................18
5.2.3 Transmitting monetary policy ............................................................................................18
CHAPTER SIX................................................................................................................................19
6.1 CONCLUSION ..........................................................................................................................19
REFERENCE...................................................................................... Error! Bookmark not defined.

7. 1
CHAPTER ONE
1.0. TITLE OF THE STUDY: FACTOR THAT AFFECTING LENDING IN
BANKING
1.1 Background of the Study
The banking sector is an indispensable financial service sector supporting development plans
through channelizing funds for fruitful purpose, mobilizing and controlling flow of funds from
surplus to deficit units and supporting financial and economic policies of government. The
success of banking is assessed based on profit and quality of assets it possesses. Even though
bank serves social objective through its priority sector lending, mass branch networks and
employment of many people, maintaining quality asset book and continuous profit making is
important for banks continuous growth. Bank loans are one of the most important long-term
financing sources in many countries (Freixas & Rochet, 2008). In some developed countries like
Japan, long term bank loans represent more than 70% of its total long-term debt. Lending
institutions such as bank plays major role in economic growth and development through
provision of credit to execute economic activities. However, the major concern of any lender
while advancing credit is how they will get their money back (Fleisig, 1995), and this implies
that the engagement between lenders and borrower is accompanied by certain level of risk. The
major types of risks faced by lending institutions globally include market risk, operational risk,
and performance and credit risks
1.2 SUPPORT AND DEFEND OF PROJECTTOPIC
Lending institutions play a major role in economic growth and development through provision of
credit to execute economic activities. However, the major concern of any lender while advancing
credit is how they will get their money back .Lending needs to be effectively carried out by the
commercial banks since it is the basis for the establishment of sound economic development.
The lending operations of commercial banking in any economy constitute a critical sector in the
growth and development of any economy. The need for lending arises in view of the apparent
financial disequilibrium in the economic system which is the gap arising between the deficit unit

8. 2
and the surplus unit. Thus, lending must be designed in such a way that it could be a total benefit
to all different interest group of the bank, which includes the shareholders, depositors and the
borrowers. According to Roy and Lewis (1991), giving credit to worthy borrowers is one of the
most significant functions of commercial banks that are directly related to the development of the
economy. If those loans or credit are not grown, the expansion of the production facilities and
operations would almost be impossible and take a longer time. In the view of Nwankwo (2000),
credit constitutes the largest single income-earning asset in the portfolio of most banks. This
explains why banks spend enormous resources to estimate, monitor and manage credit quality.
This is understandably, a practice that effect greatly on the lending behavior of banks as large
resources are involved.
1.3 DISCUSSION ON THE FOLLOWING PART
After look on the introduction of this report the other remain part will be discussed as follow in
the second part of this project will relay on the overview of industry sector which is financial
institution which comprises two component which are Non bank Financial institution and Bank
financial institution also will cover on the sources of fund means that how financial sector being
financed among sources of finance are accepting deposit from the public, retained earning equity
finance and other sources of fund and the benefit of this financial institution to the peoples and o
the third part of this project based on the literature reviews of the part as discussed on the chapter
two. But on the fourth part of this project based on the objectives as par question instruction
given, also critically explained based on the presentation and finding as the question guide and
also shows what IFM so suppose do to improve it is performance . And on the firth part of this
project relay on the finding the objective obtained as according to what question guide, also
show how the fund obtained are used bank and the last part of this project based on the
conclusion and recommendation as guided

9. 3
CHAPTER TWO
2. O INTRUCTION
According to the chapter two show basic component of banking industry sectors, also discussed
about the sources of finance banking sector as well as the benefit of banking to the community
based on the area covered
2.1 Components of the Banking industry
2.1.1 Financial institution
Is an institution that provides financial services for its clients or Members. One of the most
important financial services provided by a financial institution is acting as a financial
intermediary. Most financial institutions are regulated by the government Financial institutions
provide services as intermediaries of financial markets. Broadly speaking, there are three major
types of financial institutions, Depository institutions – deposit-taking institutions that accept and
manage deposits and make loans, including banks, building societies, credit unions, trust
companies, and mortgage loan companies, Contractual institutions – insurance companies and
pension funds and Investment institutions this include the investment banks, underwriters, firm.
2.1.1 A Non-financial institution (NFI)
Is a financial institution that does not have a full banking license or is not supervised by a
national or international banking regulatory agency. NFIs facilitate bank-related financial
services, such as investment, risk pooling, contractual savings, and market brokering. Examples
of these include insurance firms, pawn shops, cashier's check issuers, check cashing locations,
payday lending, currency exchanges, and microloan organizations.
2.2 The sources of finance for banking
Accepting of deposit
The largest source by far of funds for banks is deposits; money that accounts holders entrust to
the bank for safekeeping and use in future transactions, as well as modest amounts of interest.
Generally referred to as "core deposits," these are typically the checking and savings accounts

10. 4
that so many people currently have. Many banks financed through the deposit that is accepted
from the public, by accepting the deposit from the public bank will act as the borrower and
customer will act as the lender so for the fund obtained bank will use it for lending to the client
and receive the interest from the client which will act as sources of fund to the bank and facilitate
running of different activities on the bank
Equity finance
This is the type of financing is essentially an exchange of money for apiece of ownership in a
new business. This type of financing can be provided by venture capitalists and angel investors.
An advantage of using equity financing as away to raise capital is that the new business owner
can pay back the loaned amount through affixed duration of time. In addition the new business
owner can focus on making their products profitable rather than worrying about paying back the
investors immediately.
Bank’s retained earnings
The bank could seek to reduce the share of its profit it pays out in dividends. Alternatively, it
may try to boost profits themselves. The most direct way to do so would be by increasing the
spread between the interest rates it charges for loans and those it pays on its funding. While
competitive pressures may limit how much an individual bank can widen these spreads, lending
spreads could rise across the system if all banks followed a similar strategy and alternative
funding channels (such as capital markets) did not offer more attractive rates. Other ways to
increase net income include increasing profit margins on other business lines, such as custody or
advisory services, and reducing overall operating expenses
Charging for its services
Banks raise capital by charging for its services, these services include fee for providing cheques,
ATM access, over draft charges and checking. Most of the services provided by banks are paid
services. Whether you use an ATM or need a cheques book, you need to pay for it. Some banks
provide credit cards. Credits help banks to raise capital as the banks take considerable amount of
risk while providing credit cards to customers. Credit cards use money from banks for
transactions and customer pay the bank back after the monthly cut off dates for payment. As the

11. 5
bank is providing the money for customer to spend, there is risk involved, such as; if the
customer does not pay the bank. Therefore, banks charge a huge amount of interest on credit
limits used. Apart for loans and deposits, banks raise capital through investments and securities.
Banks raise capital through investment.
Banks raise capital by underwriting that is; acting on behalf of clients as agents to issue
securities. This opportunity given by banks to individuals, corporations and governments is
called investment banking. Investment banks raise a considerable amount of capital. In
investment banking the bank helps the individuals, corporations or government for mergers; it
also helps in trading and providing ancillary services. Investment banks are different from other
retail banks as they do not take deposits from the customer. Their main work for raising capital is
trading securities either in cash or they involve themselves in securities for market making.
Investment Banks raise capital by assisting in foreign exchange, equity securities and also
commodities. Banks raise capital by providing traveler’s cheques to people going on holiday.
Each bank has a foreign exchange policy. Investment Banks raise capital by dealing in mutual
funds, pension’s investments and medical securities for customers. Banks raise capital by
charging a fee from the customers for maintaining accounts for trading. Investment banks deal in
investment made by customers by investing the capital in stocks and equities.
Sell the products to earn profit
All banks whether retail, commercial or for investment have various ways to raise capital. As
other businesses sell their products to earn profit, banks also sell services and finance deals to
raise capital. The difference in capital earned by the banks in form of loans and the interest paid
by the bank to depositors is the capital raised by the bank. Banks raise capital by a lot of new and
innovative ideas to attract customers. Banks have various loans plans and schemes at different
interest rates to attract maximum number of customers. Banks raise capital by taking varied risk
in the market. Banks raise capital by giving increased tenure to the customers to pay off loans.
As tenure increase risk increases, hence interest earned by the bank increase. As awareness levels
of customers have increased and a number of people wish to invest in mutual funds and
securities, the need for agents to help customers have increased. Investment banking plays a

12. 6
major role as agents between customers and the stock market. Investment banks deals with
mergers.
3.1coverageofthe financial sectorand benefit to the people
3.1.1 Area coved by bank sector in Tanzania
The level of formal financial access in the rural areas is 8.5 percent compared to 23 percent in
the urban areas and totally excluded rural population is 60 percent compared to 45 percent in
urban areas. Moreover, according to the geospatial census of financial access points conducted in
2012, and based on latest population census, only 30% of the Tanzanian population live and
transact within a 5km distance of a financial access points. Financial access points are defined as
points where cash in cash out services can be conducted. These include bank branches, ATMs,
microfinance institutions (MFIs), post offices and
3.1.2 Benefit of financial sectorto the people
Provide the safe place of keeping money (security for money)
One of the basic reasons bank accounts exist is to provide a place to put one's money to keep it
safe. While images like stuffing client mattress with money may seem humorous to most of us,
there have been times when people have done just that with the money they earned. In other
situations, people might carry cash on their persons. The danger with either situation is that if
money is stolen or lost, it cannot be replaced
Facilitate payment services (time saving)
Equally important is the fact that most people who are employed receive paychecks that can be
redeemed for cash at banks. Of course, banks have a common policy that requires them to charge
a fee for the cashing of someone's paycheck. This may not seem very important since the fees are
generally very small. Yet, even a small fee can amount to something over time. The advantage to
having a bank account with a local bank.
at those fees will be waived if you keep an account with them also through the ATM peoples will
withdraw their easily due to that reason it make time saving

13. 7
Provision of loan to the individual
In fact that an account can improve the of customer to get chances of being approved for a loan.
It may be especially true if customer is attempting to get a personal loan from the bank you have
an account with and do business with on a regular basis. Established relationship with regular
customers can go a long way to help you obtain that personal loan or business loan customer
need. Similarly, the fact that customer have an existing account with a banking institution might
be considered when are trying to get financing for a loan elsewhere. For example, the lender may
want to know if client have an active saving or checking account with a positive balance, so there
is no doubt that you will have the ability to pay back the balance of the loan you receive. So the
clients by getting the loan will enable to conducting different investment for development
purpose and solve the problem of unemployment

14. 8
CHAPTER THREE: LITERATURE REVIEW
3.1 Basic Componentof banking sector
Component of banking sectors divided into two main categories which are financial institution
and Non financial Institution
Non Financial Institution is explained by different author, Non bank financial Institutions
means that is a financial institution that does not have a full banking license or is not supervised
by a national or international banking regulatory agency. NFIs facilitate bank-related financial
services, such as investment, risk pooling, contractual savings, and market brokering. Examples
of these include insurance firms, pawn shops, cashier's check issuers, check cashing locations,
payday lending, currency exchanges this explained by Carmichael, Jeffrey, and and .also NFIs A
non-bank financial company, on the other hand, is a financial institution that provides related
banking services but does not meet the legal definition of a bank. In other words, it is an
institution that does not hold a banking license and is not regulated by a banking regulatory
agency. Pawnshops and currency exchanges, for example, are some non-bank financial
institutions explained by Michael Pomerlean Carmichael, Jeffrey The function of non bank
deposit function are Financial Intermediation and Economic Basis of Financial
Intermediation explained by Alan Greenspan
Bank financial institution
A bank is a financial institution that accepts deposits from the public and creates credit; Lending
activities can be performed either directly or indirectly through capital markets. Due to their
importance in the financial stability of a country, banks are highly regulated most in countries.
Most nations have institutionalized a system known as fractional reserve banking under which
banks hold liquid assets equal to only a portion of their current liabilities Siklos, Pierre and
Robert E. Wright and Vincenzo Quadrin

15. 9
3.2 Sources offund in banking industry
Public deposits, though fell sharply in 1998-99, is positively skewed with the restrictions on bank
exposure to NFCs. Debentures, which are normally the attractive avenue to raise funds, has
proven to be lackluster pasture for the NFCs. The current liabilities, provisions for asset
degradation and other liabilities form major sources that are utilized to maximize the operating
profits. The rise in funding cost can be attributed to the high inflation, economic growth,
dramatic rise in consumption finance, and credit risk associated with (Rakesh Mohan 2004).
However, the profit arising out of core operations such as leasing, hire purchase financing and
investing activities is falling in the recent years. This is compensated by the diversification into
non-fund based activities such as money transfer, forex operations, portfolio management,
venture capital consultancy etc.With the recent norms on restricting banks exposure to funding
non-banking finance companies, the bank borrowings by them has significantly fallen down.
Moreover, high cost of funds from banks and conditions imposed by the banks are forcing these
companies to look for cheaper source of funds. With the fall in inflation coupled with southward
movement of real rate of interest, the companies are exploring to mobilize funds in the capital,
public deposits, and increased appropriation to the sector.

16. 10
CHAPTER FOUR
4.0 PRESENTATIONOF ANALYSIS AND FINDINGS
4.1 objective of the study
Objectives of the study as par this project report based on the following issues, The history
about Bank M, Mission/vision, Ownership structure Organization structure of the Bank M, the
objectives of the privatization of commercial banks in Tanzania, How far have these objectives
been achieved , the meaning of financial statements and basic three types of financial statements
and objectives for each, different basic components of bank’ balance sheet and how a bank
balance sheet differs from that of a non-bank, Basing on the same period above, principle trends
in the categories of bank assets and liabilities, The important of financial statement in banking,
the concept of ALCO, types of risks facing Bank M, the ways used by the Bank M to hedge
financial risks, Relate treasury functions and risk management functions as undertaken by Bank
M, volatility of interest rates in the market influence Bank M performance, How the exchange
rate movement influence economic stability and Bank M performance
4.2.1briefhistory about Bank M
Bank M Tanzania plc (Bank M) is a fully fledged commercial bank regulated by the Bank of
Tanzania. The Bank was issued a license to undertake banking business in the United Republic
of Tanzania by the Bank of Tanzania in February 2007 and opened its doors for business in July,
2007.
The Bank has been incorporated vide Certificate of Incorporation No. 59365 with an authorized
share capital of TZS 1 Trillion and currently has a Paid-Up Capital (PUC) of TZS 73.06 Billion.
The PUC of the bank is 387% higher than the minimum mandated PUC stipulated by the Bank
of Tanzania.
The shareholders of the bank comprise of a career banker with significant experience in Asia,
Europe and Africa, a registered private pension in United Kingdom, three leading corporate
groups with wide ranging trading, manufacturing and real estate business interests in the Eastern
African region, one of the leading microfinance companies in Tanzania and leading businessmen
of Tanzania.

17. 11
4.2.2 Missionand vision of Bank M
The Mission of the bank is “to build profitable, lifelong customer relationships through the
provision of a wide range of innovative financial products and services; to the benefit of all our
stakeholders”.
The vision of the bank is “to be the preferred banking partner in Africa by offering world class
financial solutions”.
4.2.3 Ownershipand organizationstructure of Bank M
The shareholder/investor profile of Bank M is as follows;
P. Sajeev Kumar 10.69%, K.Bhaskaran Nair 6.40%, Vimal Mehta 15.25%, Noble Azania
Investments Ltd 8.90%, Equity& Allied Ltd 7.05%, Africarriers Ltd 12.56%, Sean Patrick
Breslin 11.34%, PRIDE Ltd 3.12%, Caitrin Breslin 0.87%, Simon & Roisin Gregory 4.52%,
Ramesh Patel 3.39%, Shiva Kumar 1.58% and Others.
The Organization structure of bank M start from Managing Director, General Manager
Wholesale Banking, Head of Treasury, Head of Retail and SME banking, Head of Operations,
Head of Risk as shown below.
Managing Director
General Manager
Wholesale Banking
Head of RiskHead of
Operations
Head of Treasury Head of Retail and
SME banking

18. 12
4.2.4 Objectives ofprivatization in commercialbank and how this objective
achieved.
The following are the primary objectives and second objectives of privatization in Tanzania
Primary objectives were covered by the following objectives
 Improve the operational efficiency of enterprises that are currently in the Parastatals
sector, and their contribution to the national economy
 To reduce the burden of Parastatals enterprises on the Government budget,
 To expand the role of the private sector in the economy,
 To permitting the Government to concentrate public resources on its role as provider of
basic public services, including health, education and social infrastructure and
Encourage wider participation by the people in the ownership and management of
business.
The Secondary objectives of privatization in Tanzania, comprised the following
 To create a more market-oriented economy
 To secure enhanced access to foreign markets to capital and to technology
 To promote the development of the capital market
 To preserve the goal of self-reliance.
4.2.5 The financial statements and basic three types of financial statements
and its objectives.
Financial statements are a collection of reports about an organization's financial results, financial
condition, and cash flows. They are useful for the following reasons to determine the ability of a
business to generate cash, and the sources and uses of that cash. Types of Financial statement
which are Income Statement (shows income and expenditure) to shows profit .Balance sheet
(Financial position) and Statement of Cash Flows (shows in and out of cash in business)
4.2.6 The difference betweenbank and non bank balance sheet
Bank balance sheet: liabilities of bank balance sheet is greater than asset, in bank balance sheet
take deposit are the main source of income to the bank while non bank has no such things(no

19. 13
deposit amount on non bank balance sheet).also the other difference between the two is on loan,
on bank loan take as the asset to the bank while in non bank take it as liabilities(obligation to
pay) but for bank its asset(source of fund to the bank, also the other difference is on the
inventory, in bank balance sheet there is no inventories(stock) but on non bank there is
inventories and it take it as asset of the company(current asset
4.2.7 The principle describes the trends in the categoriesofbank assets and
liabilities.
International Financial Reporting Standards (IFRS)
Many countries around the world have adopted by IFRS so the definition IFRS is designed to
provide a global framework for how public companies prepare and disclose their financial
statements. Adopting a single set of world-wide standards simplifies accounting procedures for
international countries and provides investors and auditors with a cohesive view of finances.
4.2.8 The importance of financial statementin banking sector.
The financial statement of a bank observes the health of the banking business, think of the
Balance Sheet as a tool to start with the first category, Assets. It will always begin with the most
liquid assets. Most often cash, which is typically what you have in the bank and petty cash, is
listed first on a Balance Sheet. Knowing how much cash there is on hand is always very
important for cash flow purposes and other importance is To meet their financial reporting
obligations and to assist in strategic decision-making, firms prepare financial statements.
However, “the information provided in the financial statements is not an end in itself as no
meaningful conclusions can be drawn from these statements alone
4.2.9 The conceptof ALCO
ALCO is the short term of asset-liabilities committee which is established in the bank as a
response to safeguard the assets and liabilities of the banks against interest rate risk.
ALCO is formed because firm’s profitability may be affected through changes in interest rate by
either increasing in cost of fund and by lowering its returns from earnings assets and reducing the
value of owner’s investment.
ALCO meets regularly or more frequent to manage the firms interest rate risk

20. 14
The net worthy of the bank is the difference between Bank assets and Bank liabilities
4.2.10 Types ofrisks facing Bank M and how that risk managed
bank management must take utmost care in identifying the type as well as the degree of its risk
exposure and tackle those effectively. Moreover, bankers must see risk management as an
ongoing and valued activity with the board setting the example. As risk is directly proportionate
to return, the more risk a bank takes, it can expect to make more money. However, greater risk
also increases the danger that the bank may incur huge losses and be forced out of business. In
fact, today, a bank must run its operations with two goals in mind – to generate profit and to stay
in business (Marrison, 2005). Banks, therefore, try to ensure that their risk taking is informed
and prudent. Thus, maintaining a trade-off between risk and return is the business of risk
management. Moreover, risk management in the banking sector is a key issue linked to
financial system stability. Unsound risk management practices governing bank lending often
plays a central role in 80
Type of Risks
Risk may be defined as ‘possibility of loss’, which may be financial loss or loss to the image or
reputation. Banks like any other commercial organisation also intend to take risk, which is
inherent in any business. Higher the risk taken, higher the gain would be. But higher risks may
also result into higher losses. However, banks are prudent enough to identify, measure and price
risk, and maintain appropriate capital to take care of any eventuality. The major risks in banking
business or ‘banking risks’, as commonly referred, are listed below –
The following are the types of risk facing bank , Firstly Market risks is the risk that changes in
market prices, such as interest rate, equity prices, foreign exchange rates and credit spreads (not

21. 15
relating to changes in the obligor’s issuer’s credit standing) will affect the group’s income or
the value of its holdings of financial instruments. Market risk can be hedge through trading
portfolio The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimizing the return on risk, secondly Credit risk
is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the group’s loans and
advances to customers and other banks and investment securities .The objectives of this risk
there is must be careful in loan access also this risk can be managed This risk hedge through risk
grading and reporting, documentary and legal procedures, and compliance with regulatory and
statutory requirements. Risk management provides solution for controlling risk. Equivocality
arises due to conflicting interpretations and the resultant lack of judgment. This happens despite
adequate knowledge of the situation. That is why, banking as well as other institutions develop
control systems to reduce errors, information systems to reduce uncertainty, incentive system to
manage agency problems in risk-reward framework and cultural systems to deal with
equivocality.
4.2.11 How treasuryand risk managementfunctions relate
The general mission of the treasury department is to manage the liquidity of a business. This
means that all current projected cash in and out flows must be monitored to ensure that there is
sufficient cash to fund company operations, as well as to ensure that excess cash is properly
invested. The functions of treasury management and risk management relate on the appraisal of
investments to ensure that resources are allocated to the most promising opportunities, Also their
function relate on bank cash flows to ensure that its cash needs are met at minimum cost by
constantly reviewing the impact of a Bank corporate policies on working capital. Both
departments are responsible for optimizing a Bank's capital structure by diversifying sources of
capital and creating new partnerships, also both departments are responsible for a bank's
pensions to minimize future risks and create certainty
1. Cash forecasting
Compile cash information from

22. 16
2. Working capital monitoring
3. Cash concentration
4. Investments
5. Risk management
4.2.12 How volatility of interest rates in the market influence the bank M
performance
In case of the interest of the bank rise this will lead the amount of money in the circulation to
decrease because will discourage the borrowers to borrow from the bank by the amount of
interest rise through that process that the inflation will be controlled also in case the amount of
the interest rate decrease this will enable customer easily to get the loan from the bank with
lower interest rate which become easily for bank t control the amount of deflation in the
economy. The other point to note is that when interest rate decreases on the bank for loan issue
will be come as sources of income for the bank
4.3Recommendationto IFM in order to improve its performance
The institute should to make sure that all students should engage in practical training rather than
doing project, because by doing project is like doing things theoretically, so students lack a
chance of practicing what they have taught in classes and there are big Gap between theoretical
and practice .IFM must cooperate with other organizations so as to allow Students to participate
in field practical and not projects because what is needed in life is practice and knowledge and
not theoretically.

23. 17
CHAPTER FIVE
5.1 The information result found in the topic or problem of the project
The Bank’s Risk Management Committee plays a significant role in prescribing the risk
management policy, reviewing the sufficiency of the risk management policy and systems,
defining the strategy for risk management, and monitoring the Bank’s risk to an appropriate
level, in compliance with the Bank’s risk management policy which has been approved by the
Board of Directors based on the Risk Management Committee’s recommendation. The
objectives are to manage the relevant risks within designated parameters, including the
maintenance of capital in accordance with the revised capital adequacy requirements under the
Basel II rules which have been in effect from the end of 2008, and the management of business
to achieve an appropriate rate of return. The important processes in the risk management system
comprise the identification of significant risks which may potentially impact the Bank’s business
operations, the assessment of each type of risk, the monitoring of risks to an appropriate level
under the Bank's policy, and the reporting of the status of each type of risk to relevant parties so
as to enable them to manage and/or handle the risks in a timely manner appropriate rate of return.
5.2 The fund in fund is performing is performed through
5.2.1 Making loans
While at any given moment some depositors need their money, most do not. That enables banks
to use shorter-term deposits to make longer-term loans. The process involves maturity
transformation converting short-term liabilities (deposits) to long-term assets (loans). Banks pay
depositors less than they receive from borrowers, and that difference accounts for the bulk of
banks’ income in most countries. Banks can complement traditional deposits as a source of
funding by directly borrowing in the money and capital markets. They can issue securities such
as commercial paper or bonds; or they can temporarily lend securities they already own to other
institutions for cash a transaction often called a repurchase agreement (repo). Banks can also
package the loans they have on their books into a security and sell this to the market (a process
called liquidity transformation and securitization) to obtain funds they can relend. A bank’s most

24. 18
important role may be matching up creditors and borrowers, but banks are also essential to the
domestic and international payments system
5.2.2 Creating money
Banks uses it funds also create money. They do this because they must hold on reserve, and not
lend out, some portion of their deposits either in cash or in securities that can be quickly
converted to cash. The amount of those reserves depends both on the bank’s assessment of its
depositors’ need for cash and on the requirements of bank regulators, typically the central bank a
government institution that is at the center of a country’s monetary and banking system. Banks
keep those required reserves on deposit with central banks money when they lend the rest of the
money depositors give them. This money can be used to purchase goods and services and can
find its way back into the banking system as a deposit in another bank, which then can lend a
fraction of it. The process of relending can repeat itself a number of times in a phenomenon
called the multiplier effect. The size of the multiplier the amount of money created from an
initial deposit—depends on the amount of money banks must keep on reserve.
5.2.3 Transmitting monetary policy
Banks use it is fund also play a central role in the transmission of monetary policy, one of the
government’s most important tools for achieving economic growth without inflation. The central
bank controls the money supply at the national level, while banks facilitate the flow of money in
the markets within which they operate. At the national level, central banks can shrink or expand
the money supply by raising or lowering banks’ reserve requirements and by buying and selling
securities on the open market with banks as key counterparties in the transactions. Banks can
shrink the money supply by putting away more deposits as reserves at the central bank or by
increasing their holdings of other forms of liquid assets—those that can be easily converted to
cash with little impact on their price

25. 19
CHAPTER SIX
6.1 CONCLUSION.
According to this project the objectives is summarized as follows, The issue of the objectives of
the privatization of commercial banks in Tanzania as discussed in this project am come to
realized that there is advantages and disadvantages of privatization in Tanzania, the meaning of
financial statements and basic three types of financial statements and objectives for each,
different basic components of bank’ balance sheet the issue of financial statement in bank is very
important document for the user like investors ,debtors ,creditors and board of director the
decision making and shows how a bank balance sheet differs from that of a non-bank the main
different is based on the loan, for bank loans is Asset but for Bank Loan is Liabilies. Principle
trends in the categories of bank assets and liabilities where by bank M use IFRS, The other
objectives based on the important of financial statement in banking, the concept of ALCO
which this key or heart of bank is this fail the bank will collapse ,volatility of interest rates in the
market influence bank M performance on this part I have learned on how changes on the interest
rate may affecting bank is negatively of positively, How the exchange rate movement influence
economic stability and bank M performance
The Bank’s Risk Management Committee plays a significant role in prescribing the risk
management policy, reviewing the sufficiency of the risk management policy and systems,
defining the strategy for risk management, and monitoring the Bank’s risk to an appropriate
level, in compliance with the Bank’s risk management policy which has been approved by the
Board of Directors based on the Risk Management Committee’s recommendation. The
objectives are to manage the relevant risks within designated parameters, including the
maintenance of capital in accordance with the revised capital adequacy requirements under the
Basel II rules which have been in effect from the end of 2008, and the management of business
to achieve an appropriate rate of return. The important processes in the risk management system
comprise the identification of significant risks which may potentially impact the Bank’s business
operations, the assessment of each type of risk, the monitoring of risks to an appropriate level
under the Bank's policy, and the reporting of the status of each type of risk to relevant parties so
as to enable them to manage and/or handle the risks in a timely manner appropriate rate of return.

26. 20
REFERENCE:
 Daily Times Reporter (10 January 2013). "Bank M Operating Profit Up 41 Per Cent".
Tanzania Daily News (Dar es Salaam). Retrieved 8 November 2014.
 The Citizen Reporter (13 April 2016). "Tanzania: Bank M's Profit Up 20 Percent on
Improved Interest Income". The Citizen (Tanzania) (TCT) via AllAfrica.com. Dar es
Salaam. Retrieved 18 April 2016.
 "Directory of Commercial Banks Operating In Tanzania". Bank of Tanzania (BOT). 8
November 2014. Retrieved 8 November 2014.
 Mwamunyange, Joseph (3 August 2013). "Bank M Joins Tanzania's Top 10 Banks". The
EastAfrican (Nairobi). Retrieved 8 November 2014.
 Daily News Reporter (29 July 2013). "Bank M Assets Expand, Hit Half Trillion".
Tanzania Daily News (Dar es Salaam). Retrieved 8 November 2014.
 Bluhm, Christian, Ludger, Overbeck, and Christopher Wagner (2002). An Introduction to
Credit Risk Modelling. Chapman. Hall.
 Carmichael, Jeffrey, and Michael Pomerleano. The Development and Regulation of Non-
bank Financial Institutions. Washington, D.C.: World Bank, 2002. Print
 Kenny, C. J. and T. J. Moss (1998), “Stock Market in Africa: Emerging Lions or White
Elephant?” World Development, Vol. 26, No. 5, pp. 829-43
 Carmichael, Jeffrey, and Michael Pomerleano. The Development and Regulation of Non-
bank Financial Institutions. Washington, D.C.: World Bank, 2002. Print
 Principal for the management of Credit Risk from the bank for International Settlements
 Damiano Brigo and Massimo Masset (2006) Risk Neutral Pricing of Counterparty Risk
in; Pychln, M. (Editor), counterparty credit risk Modeling; Risk , Management, Pricing
and Regulation. Risk Books.