The Relationship Between Intellectual Capital and Financial Performance of Banks in Tanzania

This study examines intellectual capital (IC) performance of banks operating in Tanzania, and investigates the relationship of IC on financial performance. It identifies the IC components that may be the drivers of the traditional indicators of bank success. The study uses the Value Added of Intellectual Coefficient VAIC (TM) methodology, to measure the Intellectual Capital efficiency of the Banks using a four years period data set from 2010 to 2013. The results of a survey, show that intellectual capital performance of Tanzania is low and it is positively associated with bank financial performance indicators. However, when VAIC is split into its components, the relationships between these components and bank financial performance indicators vary. Three value efficiency indicators, Human Capital Efficiency (HCE), Capital Employed Efficiency (CEE) and Structural Capital Efficiency (SCE) which are the components of VAIC (TM) ratio, were used in the analysis.