Factors affecting loan repayments by Tanzania in business firms

The study investigated, Factors Affecting Loan Repayments by Tanzanian business firms. Three objectives guided this study namely: To examine the adequacy of CRDB Bank Ltd loan approval and disbursement procedure; To examine the relationship between loans issued by CRDB Bank and the loan default as well as to identify the factors contributing to loan default. The study was conducted in DSM region using a survey approach. Questionnaire responses on twelve potential default factors were analyzed to gauge their relevance to default rate. The said factors included: Bureaucratic delay by CRDB to issue loans; Lack of physical follow-up of loans and projects by CRDB staff; Misallocation/misuse of funds by borrowers; Loans being issued based on poor /unrealistic business plans; Lack of credit rating bureau; Culture of unwillingness to repay the loans; Power rationing; Inadequate share capital; Inappropriate loan policies; Interest rate; Tax rate and Other economic factors. Findings from the study revealed that all the twelve factors affected loan repayment rate to varying degrees. The analysis of personal qualities revealed other default factors such as age, education, business experience and legal status of business firms. Sector analysis showed that agriculture had poorer personal and institutional qualities that are likely to have bearing to default rate. The study concluded that loan default is related to internal qualities of borrowers, banking industry and economy in general. The study recommended measures to be undertaken to check the quality of borrowers before granting loans, introduction of credit rating bureaus and improvement of loan policies.