The Effects of Foreign Banks Entry on Domestic Banks Performance in Tanzania

Abstract

By use of commercial bank balance sheets data for the period 2000-2006 the article examines the extent of foreign ownership in the domestic banking market.  The net interest margins, overhead, taxes paid and profitability of foreign and domestic banks with the former achieving higher profitability.  Estimation results further support the contention that an increase in the share of foreign banks leads to a higher profitability of domestic banks.  Foreign bank entry improves the functioning of the banking sector through increased market competition and improved efficiency of domestic banks.