EFFECTS OF CLIENTS ' LITERACY ON DEFAULT AND DELINQUENCY OF SAVINGS AND CREDIT CO-OPERATIVE SOCIETIES IN TANZANIA

Authors

  • Neema Mori UDBS
  • Thadei Nyantori CRDB Bank
  • Donath Olomi IMED

Abstract

This study examines the influence of economic and financial literacy on the delinquency and default rate of clients of rural Savings and Credit Co-operative Societies (SACCOSs) in Tanzania. The data were collected from a random sample of 200 individual loan beneficiaries drawn from eight SACCOSs, and analysed using regression models. The findings established that the level of economic and financial literacy of rural borrowers is very low. The study also found a negative relationship between economic literacy and financial literacy, on the one hand, and default and delinquency, on the other. This suggests that borrowers ' inability to make prudent borrowing and investment decisions, rather than poor intentions, is the main explanation behind the failure to meet debt obligations. Therefore, conventional microfinance may be penalising those with the least human capital, who happen to be the poorest people. The findings underline the need to invest in enhancing the poor ' s human capital to ensure sustainable financial deepening and a positive impact on poverty.

Author Biographies

Neema Mori, UDBS

Senior lecturer

Donath Olomi, IMED

Directo

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Published

2017-03-22

Issue

Vol. 19 No. 2 (2016)

Section

Articles

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Copyright

Copyright © by University Of Dar-es-Salaam Business School, University of Dar es Salaam

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 Business Management Review [ISSN 0856 2253 (Print) & ISSN   (Online)] is published bi-annually, June and December by University Of Dar-Es-Salaam Business School, University of Dar es Salaam, and P.O. Box 35046 €“ Dar es Salaam €“ Tanzania.