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The purpose of this paper is to examine the relationship between non-performing loans and the performance of Tanzanian commercial banks. The study employed a longitudinal explanatory research design, using panel data of 41 commercial banks in Tanzania and macroeconomic data (2006 to 2019). Data were analyzed using fixed and random effect regression models and PLSSEM. From the results, the study indicated NPLR had a negative and non-significant relationship with both Return on Equity (ROE) and Return on Asset (ROA). The annual GDP rate was observed to show a negative and significant effect on both ROA and ROE. Also, regarding its impact on ROA and ROE, inflation was found to have a positive but insignificant effect. The exchange rate impacted ROE and ROA positively and significantly. However, the interest rate was found to have an insignificant and negative relationship with ROA and ROE.The paper amongst others recommends that banks’ management should improve their credit risk management practices together with establishing an early warning system to alert the banks in case of NPL accumulation so that they can take appropriate means to curb the problem. Commercial banks must apply the information asymmetry theory to choose less risky portfolios but also borrowers to reduce risks associated with the bank’s operations. Keyword:Non-Performing Loans, ROA, ROE, Bank Performance

NON-PERFORMING LOANS AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN TANZANIA