Formal, informal and reciprocal credit transactions in rural Tanzania
Abstract
The formal credit market, informal commercial credit market, and the system of reciprocal credit transactions were evaluated to determine the system of credit supply and demand in Mbeya region, Tanzania. The analysis of the formal and informal commercial credit market functioning was based, primarily, on a combination of national and regional-level data from government institutions and research reports. A household level survey (n = 499) was conducted to evaluate the system of reciprocal credit transactions which occur in rural areas. The components of the credit transactions which structured this investigation were credit supplied, credit utilized and preference for loan use. Two methods of measuring the credit utilized or provided were applied in the analysis of credit transactions. In each case, the relationships between those measures and household wealth, sex and household status of the respondents were tested. The relationships between loan use preferences and household wealth, sex and household status of respondents were evaluated. Various univariate and multivariate statistical procedures were utilized to test the hypotheses. Results indicate that the use of credit was not related to household wealth, sex or household status. The number of credit sources provided was related to household wealth for the total sample as well as the male head of house and the female head of house subsamples. A positive relationship between the cash value of reciprocal-cash loans provided and household wealth was observed. Also found was a statistically significant difference between males and females when the value of the reciprocal-cash loans was related to household wealth. The respondents' use preference ratings for the loans were not related to household wealth. Male heads of house, female non-heads of house and female heads of house differed in their preferences for the use of small loans. There was no interaction between household wealth, gender and use preference for either large or small loans. In Tanzania the majority of the population is rationed out of the formal market for credit and the informal commercial credit market does not appear to function in rural areas. Reciprocal credit transactions are more widespread and provide individuals with the opportunity to improve their well-being.
Degree
Ph.D.
Advisors
Widdows, Purdue University.
Subject Area
Economics
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