An Assessment of Group Lending Challenges Facing Microfinance Institutions in Mwanza, Tanzania

Abstract

The purpose of this study is to thoroughly evaluate the difficulties Tanzanian microfinance institutions (MFIs) encountered when putting group lending concepts into practice. It specifically aims to pinpoint the main obstacles associated with trust concerns, group dynamics, operational complexity, and legal limitations. The study uses a mixed-methods research methodology to collect data from borrowers and MFI staff through qualitative interviews and quantitative surveys. While semi-structured interviews were held with MFIs, surveys were given to clients taking part in group lending programs. For context and historical patterns, secondary data were also gathered from previously published studies, scholarly works, and regulatory papers. According to the study, trust and group dynamics are crucial to the success of group lending initiatives. There are issues with resolving conflicts, free rider issues, uneven participation, and eroding confidence. MFIs emphasized operational problems, such as the difficulty of complying with regulations, technological constraints, and the complexity of handling repayments. Capacity building, technological advancements, regulatory authority collaboration, risk management, and a client-centered approach are among the recommendations. The study admits its shortcomings, including the fact that it only focused on two MFIs in Mwanza and that survey results may have been biased. The results, however, lay the groundwork for future studies on the changing opportunities and difficulties in group lending and give useful insights for practitioners and policymakers in Tanzania’s microfinance industry. This study fills a clear vacuum in the literature by offering a comprehensive analysis of the difficulties MFIs in Tanzania encountered when implementing group lending models. The study’s uniqueness and practical worth are enhanced by the inclusion of theoretical frameworks, a mixed-methods approach, and practical recommendations. As such, it is a great resource for those involved in the microfinance and financial inclusion scene.