Failure Of Small-Scale Entrepreneurs On Credit Returns To Institutions Lending Credits: The Case Of Mpwapwa District

ABSTRACT

Credit is one of the important sources of capital to small-scale entrepreneurs to develop their businesses. In Tanzania, there is an increase on funding credit programmes aimed to facilitate the small-scale entrepreneurs. There is an emphasis on increasing the availability of credit to small and micro enterprises (SMEs), but access to credit by such entrepreneurs remains one of the major constraints they face because few of them receive such credits. In developing countries for example, most of the small entrepreneurs mentioned lack capital as their principal problem. Failure to return credits by small-scale entrepreneurs is a big problem to some borrowers due to the fact that, many of them take credit but fail to repay. This situation led to the increase in terms and conditions to small-scale entrepreneurs to get credits and some institutions to stop lending credits. This study assessed the failure of small-scale entrepreneurs on credit returns to institutions lending credit in Tanzania. The study also assessed the factors that cause the small-scale entrepreneurs failure to repay credits. The researcher used different respondents like the small-scale entrepreneurs who failed to repay credits, the small-scale entrepreneurs who had loan and are repaying well, people who do not want to borrow credits because they afraid returns disturbance and the member of staff of FINCA institution. The number of respondents expected was 100 but only 98 responded. The researcher used different methodologies which included interviews and documentation. The researcher used interview to find the experience, perceptions and feelings of the loan borrowers about their success and problems they meet during and vi after credit. The researcher used mixed group interview to get different ideas and to reach consensus through dialogue as well as focused group interview by selecting people with similar age, sex, religious and level of education so as to get clear information. The findings shows that the client fail to repay the credits because of multiple-loans. Many small-scale entrepreneurs tend to have more than one loan from different institution, this situation led to many of them to fail to afford to repay on time. The finding also implies that some small entrepreneurs fail to repay credits due to the problem of taking large amount of credits than the amount of capital needed for that kind of business. This is a problem to some client who borrow high amount than the real need. This situation gives an opportunity to some client to misuse money or others to use little money for the business and they use others for other purpose as a result they don’t return the credits on time because the business they did, did not yield enough money to repay the loan. The small-scale entrepreneurs are advised to take loan according to their needs and the capacity of the business they do Another cause the small-scale entrepreneurs to fail to repay credits were those who use loan buying facilities instead of business. The loan which they got was used for other activities, for example; buying food, clothes, building facilities, furniture, transport facilities and school fee. These uses cause many small-scale entrepreneurs to fail to repay credits because the money was used for unintended purpose. As a result, the loan fail to eradicate poverty instead the poverty is increasing day after day through taking the client assets which was used as collateral. The society needs to have knowledge about entrepreneurship and credit repaying behavior; this will help the credit receivers to have discipline on credits and repaying in general.