IDEAS home Printed from https://ideas.repec.org/a/ags/afjecr/347740.html
   My bibliography  Save this article

Do small businesses benefit from microfinance loans in the era of free market capitalism? A critical analysis of PRIDE, Tanzania

Author

Listed:
  • Magufuli, Musa
  • Rwezaula, Anicet
  • Byaro, Mwoya

Abstract

This study examines the perceptions of small business operators on microfinance loans received from PRIDE (Promotion of Rural Initiative and Development Enterprises)-Tanzania in Kinondoni Municipality in relation to poverty reduction. The study involved 96 small business owners who worked in hair-dressing and cutting salons, food vendors, and tailor shops in Kinondoni Municipality. We used a cross-sectional design for data collection, which included structured questionnaires, interviews, and focus group discussions. Additionally, we analyzed quantitative data using descriptive statistics. The findings show that about 74% of small businesses had initial capital of less than 500,000 Tanzanian shillings or US$190 to start a business, while PRIDE prefers group loans. Small business borrowers expressed dissatisfaction with the loans offered by PRIDE. The focus group discussions suggest that the provision of loans has not contributed to an improved standard of living but rather trapped people in poverty as they sell their assets to repay the loans. Factors that lead small businesses to fail to repay the loans include high PRIDE operating costs, higher risk associated with lending to poor businesses, and lack of collateral or credit repayment histories among borrowers. These findings imply that PRIDE-Tanzania aligns with the neoliberal agenda, relying on market mechanisms to provide financial services to small businesses in Kinondoni that cannot translate into an improved standard of living, but rather into poverty. The policy implication is for policymakers to develop revised policies that regulate the operations of other microcredit institutions to protect the interests of small business owners.

Suggested Citation

  • Magufuli, Musa & Rwezaula, Anicet & Byaro, Mwoya, 2024. "Do small businesses benefit from microfinance loans in the era of free market capitalism? A critical analysis of PRIDE, Tanzania," African Journal of Economic Review, African Journal of Economic Review, vol. 12(3), September.
    • Handle: RePEc:ags:afjecr:347740
    DOI: 10.22004/ag.econ.347740
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/347740/files/Do%20small%20businesses.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.347740?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Tanima, Farzana Aman & Brown, Judy & Wright, Jan & Mackie, Vera, 2023. "Taking critical dialogic accountability into the field: Engaging contestation around microfinance and women’s empowerment," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 90(C).
    2. Chung Thanh Phan & Thang Tat Vo & Diem Thi Hong Vo, 2023. "Can microcredit reduce vulnerability to poverty? Evidence from rural Vietnam," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 608-629, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bo Yang & Xiangnan Wang & Tong Wu & Weihua Deng, 2023. "Reducing farmers' poverty vulnerability in China: The role of digital financial inclusion," Review of Development Economics, Wiley Blackwell, vol. 27(3), pages 1445-1480, August.
    2. Hoque, Md Mahfuzul & Kummer, Tyge-F. & Yigitbasioglu, Ogan, 2024. "How can blockchain-based lending platforms support microcredit activities in developing countries? An empirical validation of its opportunities and challenges," Technological Forecasting and Social Change, Elsevier, vol. 203(C).
    3. Cazenave, Bruno & Morales, Jeremy, 2024. "Against new humanitarian management: Prefigurative accounting in the humanitarian field," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 99(C).
    4. Kingston, Kylie L. & Luke, Belinda & Furneaux, Craig & Alderman, Lyn, 2023. "Examining the re-territorialisation of beneficiary accountability: Digitising nonprofit services in response to COVID-19," The British Accounting Review, Elsevier, vol. 55(5).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:afjecr:347740. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://www.ajol.info/index.php/ajer/index .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.