Repayment rate analysis for microcredit loans extended to women: a case of Temeke District.

Microcredit programmes have been initiated as efforts to alleviate poverty and empower disadvantaged people. Some financial institutions, non-governmental organizations and the Tanzanian Government are involved in such programmes. The Government's popular initiatives include Youth and Women Development Funds (YWDF). Local authorities, through the central government's directive, finance women and youths by giving soft loans of at least ten percent of their revenues. The government has been providing loans with plans that are aimed to make funds revolving. However, repayment has been poor to the extent that frustrates revolving schedules. For example, Temeke district was unable to provide credit in 2001. Thus, it was necessary to carry out the study so as to identify causes for such a poor repayment rate. The study was based in Temeke district. It was limited to funds provided by Temeke Municipal Council. Sampling was based on geographic clusters of which the ward was the cluster unit. 38 groups were interviewed in the district. Hypothesis one sought to find whether or not repayment is a function of knowledge in business management and lending policy, business experience, as well as coordination and follow up schedules. Hypothesis two sought to find out whether or not funds applied by the client significantly differ from that provided by the lender. It has been established that the credit culture in Tanzania is underdeveloped because some people regard loans as grants. The solution to overcome the grant attitude is to abolish it. The study has identified that pre-loan training has the strongest relationship with repayment rate. Pre-loan training can enhance culture change. Also the amount of funds applied by clients was proved to be significantly different from the amount provided for by the lender. Most borrowers were unable to invest. Instead, they diverted funds for other uses, for example, consumption. It is suggested that sufficient training should be provided. The vocational and managerial training to equip entrepreneurs with technical and managerial skills for running their enterprises lead to behavioral change, good self-selection and enhanced survival of new enterprises.