Loan Appraisal Protocol for Effective Microfinance Portfolio in Tanzania

Authors : Danstun NGONYANİ, Halil SERBES

Pages : 193-210

Doi:10.30927/ijpf.733207

View : 20 | Download : 11

Publication Date : 2020-12-29

Article Type : Research Paper

Abstract :The aim of this article is to provide a comprehensive analysis on loan application appraisal protocol for effective microfinance portfolio in Tanzania. This study utilizes random sampling method and ordinary least square regression model on 219 microfinance institutions collected from Dar es Salaam, Morogoro and Dodoma regions. The results show that borrower business income, capital of borrower, membership duration of borrower and social collateral of borrowers have negative and significant impact on portfolio at risk of microfinance institutions. The findings therefore indicate that portfolio at risk of microfinance institutions can be reduced by insert ignore into journalissuearticles values(i); microfinance institutions to consider sound cash flow of the main business of microfinance client to enhance repayments; insert ignore into journalissuearticles values(ii); microfinance institutions must provide credit facilities to borrowers with relatively high capital in their business; insert ignore into journalissuearticles values(iii); microfinance institutions should extend credits to borrowers who are frequently willing to access credit facilities to enhance regular repayments; insert ignore into journalissuearticles values(iv); microfinance institutions should encourage borrowers to use group lending when accessing credits for effective repayments and diminish the risk of microfinance loan portfolio.
Keywords : Portfolio at risk, Loan appraisal protocol, Non member based microfinance institutions