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This study investigated determinants of microfinance individual loan repayment performance in Tanzania. A review of Tanzania’s loan performance for over the past three decades have been empirically concluded to be poor due to poor loan repayment culture and lack of effective lending skills .Respondents (N=150) participated. Case study design was employed and data collection methods used was interviews, observations and documentary analysis. Instruments used were interview questions, questionnaires, observation schedule and documentary review schedule. Analysis of data was based on research objectives. It was reveled from the study that socio- economic characteristics variables, age, gender, marital status, education level, business type, business experience, household size and loan duration have effect on loan repayment rate. In addition, it was also revealed that loan size and incentives offered by MFIs to individual borrowers have an effect on loan repayment rate, and that the individual lending model solves the asymmetric information problems in microfinance credit market.
The study statistical results indicate that the researched socio economic variables have no effect on loan repayment behavior with exception of marital status. Secondly, the loan size has an effect on the loan repayment rate depending on the capacity and willingness of MSE borrower. Thirdly, the incentives offered to MSEs individual borrowers have effect on loan repayment rate. Lastly, the statistical results have revealed that the Individual Lending Model solves the asymmetric information problems in microfinance credit market. Recommendations put forward include: A comparative study of two or more financial institutions that offer MSE loans adopting the Individual Lending Model could be ideal in generalizing determinants of loan repayment performance., a study on what Cultural values and religious values play role in loan repayment culture among MSE borrowers should be undertaken and a research on the determinants of loan repayments among urban MSEs similar to rural MSEs and agricultural credit beneficiaries to be done |
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