The liquidity stability of commercial banks is critical to Tanzania’s financial system, especially amid recent shifts in fiscal and regulatory frameworks. This study investigates how specific components of the business environmental namely regulatory tightening, political unpredictability, and market disruptions from digital financial services affect liquidity challenges in Tanzanian commercial banks. The study is guided by Modern Money Theory, which explains how centralized government fiscal operations influence bank liquidity, and Social Intermediation Theory, which emphasizes the role of institutional and socio-political dynamics in financial intermediation. A pragmatic paradigm underpins this research, employing a mixed-methods approach. Quantitative data were collected via structured questionnaires from 94 participants using stratified sampling across three banks (NMB, CRDB, and Equity Bank), while qualitative data came from semi-structured interviews. Descriptive statistics, Chi-square tests, and multiple linear regression were used for analysis. Findings revealed that overdependence on government securities, political unpredictability, and competition from mobile money operators were statistically significant predictors of liquidity challenges (p < 0.05), jointly explaining 47% of the variance (Adjusted R² = 0.47). Chi-square tests also confirmed strong associations between restrictive policies and liquidity constraints. The study concludes that business environmental dynamics significantly influence liquidity risk in Tanzanian banks. It recommends diversification of investment portfolios, enhanced digital competitiveness, and a more balanced regulatory framework. Theoretically, the study affirms the relevance of MMT and Social Intermediation in explaining liquidity fragility under centralized public finance reforms. To enhance liquidity resilience, the study strongly recommends institutionalizing regular dialogue between banks, regulators, and policymakers to foster a more predictable and supportive financial ecosystem. With centralized public finance reforms.
Grace Isidor Temba (2025) studied this question.