An assessment of over-indebtedness among microfinance institutions’ borrowers: the Tanzanian perspective
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Date
2021-01-01
Journal Title
Journal ISSN
Volume Title
Publisher
Informa UK Limited
Abstract
The introduction of microfinance institutions is viewed as the best alter native source of financial services for low-income earners as a means to raise their income and reduce poverty. However, empirical research has indicated that the majority of microfinance institutions’ borrowers are over-indebted. Over indebtedness has negative consequences for debtors, creditors, and for the economy as a whole. Since over-indebtedness is a context-specific phenomenon, it lacks universally accepted indicators. This study aims to validate indicators of over indebtedness and examine the situation of over-indebtedness among micro borrowers in the context of Tanzania. A survey of 535 micro-borrowers was con ducted using a semi-structured questionnaire. Descriptive, thematic, and logistic regression techniques were employed for data analysis. Findings show that debt-to income ratio, multiple borrowing, and delinquency have a positive and significant effect on over-indebtedness. Further, findings indicate that over-indebted micro borrowers in Tanzania spend 75% or more of monthly income on servicing debts; are in the state of delinquency; are unable to meet basic needs due to loan repayment expenditure, have three or more credit commitments, and are in delin quency. To reduce over-indebtedness and hence poverty among micro-borrowers,
Description
Full text Article, Also available at https://doi.org/10.1080/23311975.2021.1930499
Keywords
Micro-borrowers, Microfinance institutions, Over-indebtedness, Indebtedness, Financial services
Citation
Kasoga, P. S., & Tegambwage, A. G. (2021). An assessment of over-indebtedness among microfinance institutions’ borrowers: The Tanzanian perspective. Cogent Business & Management, 8(1), 1930499.