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CHAPTER THREE RESEARCH METHODOLOGY

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 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction
Research Methodology defines the actual ways and activities performed by a researcher in the
course of implementing the conceptual framework of the research problem Kothari (2004). This
section therefore discussed the research design, purpose of the research, research study area, and
study population, sampling design, sample selection methods, data collection methods and data
analysis methods.

3.2 Sampling techniques and sample size

3.2.1 Sampling techniques

Sampling techniques were selected according to their cost effectiveness in terms of financial and
time limit. This study used only non-probability sampling techniques, whereby non probability
samplings are quota, snowball, judgmental sampling techniques and convenience sampling
technique.
However Purposive sampling was employed due to the fact that it provided opportunity to some
key respondents to be included into a sample by virtue of their positions and status so as to
respond on specific (selected) matters (Saunders et al, 2003). These included some senior
members from credit risks department and risks management unit in the head office. Credit
manager and Loan recovery manager who are responsible for credit processing and loan
recovery respectively were included as well.

3.2.2 Sample size

A sample is a smaller group of subjects drawn from the population in which the researcher is
interested in gaining information’s and drawing conclusion about the universe if randomly
selected (Kothari, 1990).
Literature shows that there is no clear cut answer to the questions to what constitutes an
adequate or sufficient size for a sample (Fraenken and Wallen, 2000).A sample of 20 employees
that approximate 80% of the total employees in the Arusha main branch.

3.3 Population of the study

The population of the research is the large group of units that has one or more characteristics in
common on which the research study is focused (Molusa, 1992) it is the units from which the
sample is selected. Likewise; Best and kahn, (1986) the target population is a group of units with
one or more characteristics in common that are of interest to the researcher.
The population of this study included the following, Branch manager, Branch controller, all
Credit managers, Micro finance Bank officer, Relationship managers and officers, Business
Banking manager and officers, Credit management unit, SME’s and Other Bank officer who are
working in Exim Bank Ltd.

3.4 Research area

Area of study is the area where data collected; the place of conducting research was Exim Bank
at Arusha main branch. Given the large number of commercial Banks in Tanzania, a non-
probability purposive sampling basing on informed judgment used to select Exim Bank to be the
area of study. Exim Bank is chosen with the reasons that in qualitative research a work can be
done fruitfully with very small bodies of data that have not been randomly assembled
(Silverman, 2000). The case is considered a good representative of all commercial Banks.

3.5 Research design

Kothari (2002) defines research design as a conceptual structure within which research is
conducted. Also Kothari (2004) explains a case study design as arrangement of the conditional of
collection and analysis of data in a manner that aim to combine relevance to research purpose
with economy in procedure. It constitutes the blueprint for the collection, measurement and
analysis of data.

Researcher adopted case study research design while carrying out the study. The population for
this study comprised the branch directors, controller, managers, Bank officer and customers of
Exim Bank Ltd Arusha main branch. Our Potential respondents were selected from the
population using statistical method (stratified sampling technique).
In this study, both quantitative and qualitative research approaches adopted to investigate the
problem at hand. Quantitative approach assisted to gather factual data and to study relationships
between facts and theories. On the other hand, qualitative approach was adopted so as to
understand people’s perceptions on credit risks management to management and customers.
Both primary and secondary sources of data collection was be used. Questionnaire used to
obtained information for primary source while text books, journals and internet were used for
secondary source. The questionnaire were closed- ended with strongly agree, agree, disagree and
strongly disagree responses. The questionnaire was being administered on face to face to the
employees of Exim Bank Ltd Arusha branch.
Due to the nature of study, a case study design was used. The case study designs allowed in-
depth analysis of the unity that was being studied and it may be easy to infer conclusion upon a
group of subject. Also it gave the opportunity for the researcher to make intensive observations.
In this case the interests of the researcher were to find out the assessment of financial risks
management on commercial banks in Tanzania.

3.6 Data collection methods

During the study both primary and secondary methods of data collection were employed in order
to obtain relevant data. This involved unstructured and structured questionnaires, interviews,
participatory observation and documentary sources.
In determining the data collection method employed in the research, the following factors were
taken into consideration: The general level of literacy, the financial, time available and the
reliability of the method itself.

3.6.1 Questionnaires
According to Leedy (1989), a questionnaire consists of printed questions used to elicit
information from respondents on the attitudes, feelings or reactions about a problem or issue
under study. A series of questionnaires were prepared and distributed to different employees as
per sample in accordance with their department/units. I was prompted to employ questionnaires
for the hope of maximizing the number of respondents and especially with the benefits of
anonymity and confidentiality in mind. The questionnaires were analyzed by listing down views
from the respondents and came up with common themes.

3.6.2 Interview
Personal (face to face) interview were employed to collect information’s regarding this study.
Both structured and unstructured interviews were conducted in order to measure the validity of
the answers of respondents.

This was conducted for the selected number of employees and customer (borrower) who could
give reliable information relating to the topic to meet purpose of the study. Interview helped to
understand the perceptions and meanings individuals given to credit risk management, and be
simultaneously educative to both interviewer and interviewee. The interview was conducted after
the return of the questionnaires so as to check the validity of the information given in both to
solicit the findings.

3.6.3 Observation
An observation method is the most commonly used method especially in studies relating to
behavioural sciences (Kothari 2003). This method enabled the researcher to investigate direct
observation without asking from the respondents. This type of data collection helped the study to
eliminate bias in order to collect accuracy data, information’s that were being obtained to this
method were related to what is currently happening. It was not complicated by either the past
behaviour or future intentions or attitudes of respondents.

Observation were done to see how the bank comply with the lending procedures in managing
credit-risk through observing the approval process, credit committee meeting, loan disbursement
process, loan supervision, monitoring and follow-up. Observation helped to assess the way the
loan officer screen and asses before advance loan to customers and how monitor it repayments.

3.6.4 Documentary Review

The work was planned such that, various Banks’ procedural manuals containing policies and
procedures relating to granting of loans and credit risk management was reviewed. This was for
the purpose of understanding the policies and procedures the Commercial Bank has established
about credit facilities, and the flow of transactions before the borrowing takes place. This
 documentary review enabled to obtain information necessary to provide sufficient evidence as to
whether; the prescribed procedures about lending activities are being carried out on sound
commercial basis and in conformity with the credit procedure.

3.7 Data analysis methods

Microsoft excel was used to analyse Quantitative data that was captured from the field and
Qualitative data were content analysed. Findings presented in a quantitative and qualitative
format using descriptions, tables, diagrams while relevant pie charts, graphs, and frequency
tables featured appropriately.

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