Loan Recovery Procedures in Tanzania: A Case of Selected Microfinance Institutions in Dar-Es-Salaam, Tanzania
Downloads
The study aimed to determine the procedures employed by MFIs, specifically in loan recovery in Tanzania. Loan recovery has been a difficult task for many financial institutions but becomes more challenging to microfinance institutions due to the nature and processes they employ. The study examined the loan recovery procedures at NFBS, SMF and AML found in Dar-Es-Salaam, Tanzania. The researcher employed a mixed- case study design, which involved 50 credit officer respondents obtained under the purposive sampling. The study used semi-structured questionnaires to gather primary data and also secondary data from documents available at NFBS, SMF and AML. Data were analysed using simple descriptive statistics with percentages and frequencies for quantitative data, while thematic analysis was used for qualitative data. The study found that NFBS, SMF and AML used loan recovery procedures such as direct contact, friendly reminder, and issuance of final demand notice. Another procedure is to inform the local government on property selling and using a debt collection agency. The study recommends for MFIs to establish and prefer formal procedures that can be used for loan recovery because the use of informal procedures creates room for conflict and leads to ineffectiveness of recovering loans.
Downloads
Ali, H. M. A. (2014). Blaming the poor and legitimising coercive loan recovery strategies: Unveiling the dark side of NGO practices in Bangladesh. Anthropologica, 56(1).
Amirah, A., & Hanani, Y. (2018). The Current Practice of Debt Recovery Methods in Islamic Banks in Malaysia. International Journal of Islamic Studies. (Special Edition-SPIKESS, 13(2).
Angaine, F., & Waari, D. N. (2014). Factors Influencing Loan Repayment in Micro-Finance Institutions in Kenya (Vol. 16, Issue 9). Ver. III. www.iosrjournals.org
BoT. (2019). Bank of Tanzania: Annual Report 2019/2020.
Brown, A., Mackie, P., Smith, A., Msoka, C., Mwasekaga, B., Mongi, O., Japhet, P., Venance, T., Mkinga, N., & Masiaya Laiser, Y. (2015a). Inclusive Growth: Tanzania Country Report Cardiff School of Geography and Planning Financial inclusion and microfinance in Tanzania Research Team Surveillance at the Bank of Tanzania, and of researchers.
Brown, A., Mackie, P., Smith, A., Msoka, C., Mwasekaga, B., Mongi, O., Japhet, P., Venance, T., Mkinga, N., & Masiaya Laiser, Y. (2015b). Inclusive Growth: Tanzania Country Report Cardiff School of Geography and Planning Financial inclusion and microfinance in Tanzania Research Team Surveillance at the Bank of Tanzania, and of researchers.
Chen, X., Wang, G., & Zhang, X. (2019). Modeling recovery rate for leveraged loans. Economic Modelling, 81. https://doi.org/10.1016/j.econmod.2019.04.006
Chisom, A. (2012). Loan Granting and Its Recovery Problems on Commercial Banks (A Case Study of First Bank Plc, Ojo-Alaba Branch).
CRDB. (2020). CRDB Annual Report 2019.
Creswell, J. W., & David Creswell, J. (2018). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches (5th ed.). SAGE Publications.
Debeb, D. (2015). A Study on Loan Recovery Performance of Rural Saving and Credit Cooperatives in Laygaint worda, Amhara Regional State, Ethiopia. In European Journal of Business and Management www.iiste.org ISSN (Vol. 7, Issue 25). Online. www.iiste.org
Fenech, J. P., Yap, Y. K., & Shafik, S. (2016). Modelling the recovery outcomes for defaulted loans: A survival analysis approach. Economics Letters, 145. https://doi.org/10.1016/j.econlet.2016.05.015
Gachuru, G. (2020). The Effect of Employee Competence on Performance of Microfinance Institutions in Nakuru Town. Editon Cons. J. Bus. Manag. Stud.-Blind Peer Reviewed Journal, 2(6), 40–48. www.editoncpublishing.org
Gatimu, E. M., & Kalui, F. M. (2014). Assessing Institutional Factors Contributing to Loan Defaulting in Microfinance Institutions in Kenya. IOSR Journal of Humanities and Social Science (IOSR-JHSS, 19(5), 105–123. www.iosrjournals.org
Gatimu, E. M., Muturi, W., & Oluoch, O. (2018). Effect of Non-Performing Loan Management Practices on Loan Recovery Performance of Deposit Taking Savings and Credit Cooperatives in Kenya. IOSR Journal of Humanities and Social Science (IOSR-JHSS), 23(11).
Gebeyehu, Z., Beshire, H., & Haji, J. (2013). Determinants of Loan Repayment Performance of Smallholder Farmers: The Case of Kalu District, South Wollo Zone, Amhara National Regional State, Ethiopia. International Journal of Economics, Business and Finance, 1(11).
Ghosh, S. (2019). Loan delinquency in banking systems: How effective are credit reporting systems? Research in International Business and Finance, 47. https://doi.org/10.1016/j.ribaf.2018.07.011
Gikurumi, D. M., Ngahu, S. T., & Wanyoike, D. (2015). Effects of Land Act 2012 On Recovery of Delinquent Loans by Commercial Banks in Kenya A Survey of Commercial Banks in Nakuru Town. International Journal of Economics, Commerce and Management United Kingdom, III (5).
Guetterman, T. C., & Fetters, M. D. (2018). Two Methodological Approaches to the Integration of Mixed Methods and Case Study Designs: A Systematic Review. American Behavioral Scientist, 62(7). https://doi.org/10.1177/0002764218772641
Islam, R., Karim, Mohd. A., & Ahmad, R. binti. (2018). Forced Loan-Recovery Technique of The Microfinance Institutes in Bangladesh And Its Impact on The Borrowers: An Empirical Study on Grameen Bank, Brac And Asa. Journal on Innovation and Sustainability. RISUS ISSN 2179-3565, 9(3). https://doi.org/10.24212/2179-3565.2018v9i3p75-93
Kartikasary, M., Marsintauli, F., Serlawati, E., & Laurens, S. (2020). Factors affecting the non-performing loans in Indonesia. Accounting, 6(2). https://doi.org/10.5267/j.ac.2019.12.003
Kaveri, V. S. (2016). Strategic Debt Restructuring and Loan Recovery. Journal of Commerce and Management Thought, 7(2). https://doi.org/10.5958/0976-478x.2016.00015.x
Khalily, M. A. B., & Meyer, R. L. (1993). The political economy of rural loan recovery: evidence from Bangladesh. Savings & Development, 17(1).
Kimasar, F. (2014). The Use of Credit Reference Bureau on Loan Recovery Among Commercial Banks in Nakuru Town. International Journal of Science and Research, 3(10).
Kiplimo, J. C. (2015). Determinants of access to credit by smallholder farmers in eastern and western Kenya. Journal of Development and Agricultural Economics, 7(9). https://doi.org/10.5897/JDAE2014.0591
Kitomo, D., Likwachala, R., & Swai, C. (2020). Financial Management Practices Among Micro Enterprises and their Implications for Loan Repayment: A Case of Solidarity Group Lending of DCB Commercial Bank in Dar es Salaam. International Journal of Economics and Finance, 12(12). https://doi.org/10.5539/ijef.v12n12p122
Kosgey, Y. K. K. (2013). Agricultural Credit Access by Grain Growers in Uasin-Gishu County, Kenya. IOSR Journal of Economics and Finance, 2(3). https://doi.org/10.9790/5933-0233652
Kothari, C. R. (2004). Research methodology: Methods and techniques (2nd ed.). New Age International (P), Ltd.
Krishnan, R., & Kozhikode, R. K. (2015). Status and corporate illegality: Illegal loan recovery practices of commercial banks in India. Academy of Management Journal, 58(5). https://doi.org/10.5465/amj.2012.0508
Laseinde, M. A., & Olokoyo, F. O. (2018). Deposit Money Banks Loan Recovery Strategies and Customer-Bank Relationship. European Journal of Business, Economics and Accountancy, 6(3).
Makorere, R. F. (2014). Factors affecting loan repayment behaviour in Tanzania: Empirical evidence from Dar es Salaam and Morogoro regions. International Journal of Development and Sustainability, 3(3).
Marini, L., Andrew, J., & van der Laan, S. (2017). Tools of accountability: protecting microfinance clients in South Africa? Accounting, Auditing and Accountability Journal, 30(6). https://doi.org/10.1108/AAAJ-04-2016-2548
Mensah, H. K., Azinga, S. A., Akwele, J., & Sodji, M. (2015). Challenges Faced by Small and Medium-Size Enterprises in Accessing Credit Facilities from Financial Institutions: An Empirical Assessment Incorporating the Perceptions of Both Borrowers and Financiers. In International Journal of Economics, Commerce and Management United Kingdom: Vol. III (Issue 11). http://ijecm.co.uk/
Messai, A. S., & Jouini, F. (2013). Micro and macro determinants of non-performing loans. International Journal of Economics and Financial Issues, 3(4).
MFT. (2011). Promoting Transparent Pricing in the Microfinance Industry TANZANIA Country Overview Key Facts: Microfinance in TANZANIA.
Murthy, U., Mohammed Kamil, N., Anthony Mariadas, P., & Devi, D. (2017). Factors Influencing Non-Performing Loans in Commercial Banks: The Case of Banks in Selangor. International Journal of Business and Management, 12(2). https://doi.org/10.5539/ijbm.v12n2p246
Namayengo, F., van Ophem, J. A. C., & Antonides, G. (2016). Women and microcredit in rural agrarian households of Uganda: Match or mismatch between lender and borrower? Applied Studies in Agribusiness and Commerce, 10(2–3). https://doi.org/10.19041/apstract/2016/2-3/9
Neilands, R. (2018). Fictitious employment contracts in loan recovery processes in Latvia. SHS Web of Conferences, 40. https://doi.org/10.1051/shsconf/20184001005
Netzer, O., Lemaire, A., & Herzenstein, M. (2019). When Words Sweat: Identifying Signals for Loan Default in the Text of Loan Applications. Journal of Marketing Research, 56(6). https://doi.org/10.1177/0022243719852959
Nguta Guyo, H., & Huka, S. (2013). Factors Influencing Loan Repayment Default in Micro-Finance Institutions: The Experience of Imenti North District, Kenya. In International Journal of Applied Science and Technology (Vol. 3, Issue 3). www.ijastnet.com
Okwara, M. O., Umebali, E. E., Agu, F. N., & Anyanwu, U. G. (2019). Efficiency of Microfinance Banks' Lending to Agriculture in Imo State, Nigeria. Asian Journal of Agricultural Extension, Economics & Sociology. https://doi.org/10.9734/ajaees/2019/v36i230242
Ongesa, N. t, Nyamweya.B.O, Abdi, M. A., Njeru, F., & Gongera, E. G. (2014). An Assessment of Financial Literacy on Loan Repayment by Small and Medium Entrepreneurs in Ngara, Nairobi County. Research Journal of Finance and Accounting, 5(12).
Osunde, C., & Mayowa, A. G. (2012). Microfinance and Entrepreneurial Development in Nigeria. In Jorind (Vol. 10, Issue 3).
Ozili, P. K. (2019). Non-performing loans and financial development: new evidence. Journal of Risk Finance, 20(1). https://doi.org/10.1108/JRF-07-2017-0112
Pandey, A. (2019). High bids and low recovery: A possible case for non-performing loan auctions in India. IIMB Management Review, 31(3). https://doi.org/10.1016/j.iimb.2019.03.005
Paxton, J., Graham, D., & Thraen, C. (2000). Modeling group loan repayment behavior: New insights from Burkina Faso. Economic Development and Cultural Change, 48(3). https://doi.org/10.1086/452613
Priyankara, D. T., & Sumanasiri, E. A. G. (2019). Determinants of Microfinance Loan Default: An Empirical Investigation in Sri Lanka. South Asian Journal of Social Studies and Economics. https://doi.org/10.9734/sajsse/2019/v4i330127
Rao, D. S., & Sravani, M. (2013). Self-Regulatory Organisations in Indian Microfinance Sector. International Journal of Management & Information Technology, 7(1). https://doi.org/10.24297/ijmit.v7i1.712
Rathnapala, I. (2015). Law and Practice Relating to Money Recovery Actions in Sri Lanka. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2598345
Rehman, R. U., Zhang, J., & Ahmad, M. I. (2016). Political system of a country and its non-performing loans: A case of emerging markets. International Journal of Business Performance Management, 17(3). https://doi.org/10.1504/IJBPM.2016.077243
Risal, N. (2018). Microfinance Position and Indebtedness: Empirical Evidence from Microfinance Institutions in Nepa. Pravaha, 24(1). https://doi.org/10.3126/pravaha.v24i1.20232
Sah, R. (2015). Loan Recovery Monitoring Mechanism. International Journal of Trade, Economics and Finance, 6(1). https://doi.org/10.7763/ijtef.2015.v6.444
Sarma, G. K., & Borbora, S. (2014). Loan Recovery Performance of Credit Officers in Microfinance Institutions: A Case of Assam. In International Journal of Science and Research. www.ijsr.net
THOMAS, R., & Thakur, S. S. (2019). Bank-group wise Comparison of Loan Recovery Performance of Commercial Banks in India. International Journal of Business Excellence, 1(1). https://doi.org/10.1504/ijbex.2019.10023278
Torban, T. K. (2020). Assessment of Credit Risk Management in Micro Finance Institutions: A Case of Adama Town MFIs, Ethiopia. Srusti Management Review, 13(1).
URT. (2000). The Tanzania Development Vision 2025.
Microfinance Act, (2018).
Microfinance Regulations, (2019).
Wang, H., Forbes, C. S., Fenech, J. P., & Vaz, J. (2020). The determinants of bank loan recovery rates in good times and bad – New evidence. Journal of Economic Behavior and Organization, 177. https://doi.org/10.1016/j.jebo.2020.06.001
Waqas, M., Fatima, N., Khan, A., & Arif, M. (2019). Determinants of Non-performing Loans. International Journal of Finance & Banking Studies (2147-4486), 6(1). https://doi.org/10.20525/ijfbs.v6i1.617
WB. (2013). Diagnostic Review of Consumer Protection and Financial Literacy: Key Findings and Recommendations, Financial Inclusion and Infrastructure Practice, Financial Inclusion and Consumer Protection Service Line, Africa Region.
Wilfred, C. (2013). Evaluating the State of Loan Repayment on Management of Microfinance Institutions: A Case of National Microfinance Bank.
Yegon, J. C., Kipkemboi, J., Kemboi, J. K., & Chelimo, K. K. (2013). Determinants of Seasonal Loan Default among Beneficiaries of a State-Owned Agricultural Loan Scheme in Uasin Gishu County, Kenya. Journal of Emerging Trends in Economics and Management Sciences, 5(1).
Zhang, Y., Shi, B., Wei, Y., & Jin, D. (2019). Loans defaulting prematurely and the pricing of loan insurance. Xitong Gongcheng Lilun Yu Shijian/System Engineering Theory and Practice, 39(10). https://doi.org/10.12011/1000-6788-2018-0381-10
Copyright (c) 2021 International Journal of Scientific Research and Management
This work is licensed under a Creative Commons Attribution 4.0 International License.
