Default dynamics by micro loan beneficiaries of youth developemnt fund in Tanzania: a case of Bukoba municipality

This study investigates the factors which have led to an increasing number of defaults by micro loan beneficiaries of the youth development fund in Tanzania, Bukoba Municipality being the case study. The study was exploratory in nature, using both quantitative and qualitative techniques. Also, observation and personal interviews were used to gather data from 34 borrowing groups of YDF making a total of 131 respondents. The major findings from the study indicated that default was caused by several factors, among which were: lack of markets, the small size of the loan, lack of training, seasonal nature of the business, political interference and multiple sources of credit. Other factors were the lack of a credit culture, the perception of the loan as a grant, doing the same business and theft of assets. The study recommends that YDF financial providers should focus their attention on pre-loan training and post-loan training, which adds incentives to borrowers as a Self-starter for repayment. More important is that close follow-up by loan administrators to ensure timely loan repayment is absolutely paramount. Furthermore, YDF loans should be provided to groups which are registered by the municipality and are recognised by the ward or village councils. More importantly, the public need to be educated to change the attitude of the community that funds borrowed are not grants but a liability that needs to be repaid. Efforts should be made by the government to employ a qualified person to deal with issues pertaining to youth and micro loans in the municipality.