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Challenges Facing Accessibility of Agriculture Financing in Tanzania: A Case Study of TIB Development Bank Limited and CRDB Bank PLC

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  • Andrew A. MWAMPAGHALE

    (Accounting and Finance, St. Augustine University of Tanzania)

  • Crispin Mbogo, PhD

    (Accounting and Finance, St. Augustine University of Tanzania)

Abstract

This research was conducted to study the main challenges that farmers in forms of SMEs, Cooperates, Microfinance Institutions, and individuals face in accessing Agricultural finance in Tanzania with the case studies of TIB Development Bank Limited and CRDB Bank PLC clients. emphasis was put to examine the effect of collateral requirement; to investigate the effects of interest rates as offered by lenders to clients and to assess the effect of a condition of initial capital investment/equity in agricultural project financing to clients and stakeholders dealing with agricultural activities for both TIB Development Bank Limited and CRDB Bank PLC. The research adopted the use of case study design research in generating the required primary data and secondary data. The primary data were collected using two methods: questionnaires and interviews; considering the total prospective clients of 365 from TIB and 175 clients who approached CRDB bank for agricultural finances, the researcher sampled 10% of these prospective clients and that being the case, 50 questionnaires were distributed among the selected prospective clients for both CRDB and TIB and only 35 questionnaires were returned; a response rate of 70% was considered reasonable. Interview method was also used to 30 sampled respondents from the population of staff dealing with agricultural loans, TIB had a total of 50 working staff dealing directly with agricultural financing and CRDB had 45 staff and a 10% of these working population was sampled for interview on challenges that most prospective clients/borrowers face in accessing agricultural loans; whereas the interview was conducted either through face-to-face interview or phone call interviews. The research found that the issue of collateral requirement is the main challenge limiting accessibility of agricultural financing for many borrowers in Tanzania when they need agricultural loans to finance agricultural projects. It was also found out that high interest rate is a limiting factor in the accessibility of agricultural loans compared to low interest rates, and that clients are attracted to banks which offers low interest rates than those offering high interest rates. Further it was found out that the requirement for equity contribution is a limiting factor for accessibility of agricultural loans especially for start-up agricultural projects. The study therefore concludes that collateral requirement, high interest rates and equity contribution among others are the factors limiting accessibility of agricultural loans in Tanzania. It is recommended that more agricultural subsidies and credit guarantee schemes be established by the government to reduce the challenges of collateral requirement and high interest rates.

Suggested Citation

  • Andrew A. MWAMPAGHALE & Crispin Mbogo, PhD, 2023. "Challenges Facing Accessibility of Agriculture Financing in Tanzania: A Case Study of TIB Development Bank Limited and CRDB Bank PLC," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(3), pages 1222-1242, March.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:3:p:1222-1242
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    References listed on IDEAS

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