Performance of group based semi-formal credit on sustainable livelihoods of micro entrepreneurs: a case study of pride Tanzania
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Date
2008
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Sokoine University of Agriculture
Abstract
The purpose of this study was to evaluate the performance of group based credit services
and its implications on the micro-entrepreneur’s livelihood. Specifically the study aimed at
(i) identifying socio-economic factors that determine the loan acquisition from group-
based credit services by the micro-entrepreneurs; (ii) investigating the loan repayment
performance within the group and to credit provider and (iii) assessing the impact of credit
on the livelihoods of micro-entrepreneurs. Data were collected from a sample of 120
micro-entrepreneurs in Iringa District who were beneficiaries of PRIDE Tanzania.
Random sampling technique was used to select the respondents. Data analysis employed
both descriptive and quantitative methods. The study revealed that majority of micro
entrepreneurs were females. The main source of initial capital was own savings. Empirical
results show that the initial capital, net income, experience in business and number of
times the entrepreneurs received credit had positive significant influence on the amount of
credit received by micro-entrepreneur. Furthermore the study found that credit had
significant impact on fixed assets ownership where borrowers had more assets than non
borrowers. The findings showed that there was high repayment performance (more than
99%) to credit institution but there was high default within the group. The study revealed
that credit which is granted for business activities is, in many cases diverted to finance
family needs like educating children and medical expenses. Micro-entrepreneurs
complained of the high interest rate charged, small loan size, short repayment period and
weekly meeting limit the growth of their business. The study suggests that PRIDE
Tanzania should set policies that would enable young micro-entrepreneurs who wish to
start business but lack capital to access credit. The interest rate should be lowered. It
should consider the possibility of increasing the grace period. Training should also provide
micro-entrepreneurs business skills. It has to be flexible by providing loans size based on
business status and not on the frequency of borrowing-.
Description
Masters Dissertation
Keywords
Credit, Sustainable, Pride Tanzania, Livelihoods, Micro-enterprenuar, Semi-formal