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Financial Management Practices Among Micro Enterprises and their Implications for Loan Repayment: A Case of Solidarity Group Lending of DCB Commercial Bank in Dar es Salaam

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  • Daudi Kitomo
  • Robson Likwachala
  • Cornelio Swai

Abstract

The aim of this study was to determine the implications of financial management practices among micro enterprises for loan repayment. The study was confined to Solidarity Group Lending (SGL) customers of DCB Commercial Bank Plc (DCB). Specific objectives included- to identify common practices of managing finances among SGL customers; to determine the extent to which the commonly identified financial management practices influence loan repayment; and to find out challenges facing SGL customers during loan repayment in DCB. A case study research design and cluster sampling were used while data were collected using questionnaires from 80 respondents. Data were analyzed using multiple regressions, and simple descriptive statistics of frequencies, percentages, mean, and range. Results indicate that the common practices of managing finances among the respondents were cash holding 73.8% (n= 59) and short term investments 38.8% (n=31). Regression results revealed that about 70% of variations in ease of loan repayment is influenced by cash holding and short term investment techniques at p=0.000 level of significance (i.e. R = 0.841, R2 = 0.707 and p < 0.05). Key challenges of loan repayment among the respondents were- losses from business (82.6%), payment delays from debtors (67.5%), and difficulty in managing group members to attend their respective loan centers (72.6%). The study recommends that SGL customers need to be educated and sensitized on various financial management techniques and their implications so that they select appropriate techniques in managing profitability and liquidity in their businesses to enhance smooth loan repayment.

Suggested Citation

  • Daudi Kitomo & Robson Likwachala & Cornelio Swai, 2021. "Financial Management Practices Among Micro Enterprises and their Implications for Loan Repayment: A Case of Solidarity Group Lending of DCB Commercial Bank in Dar es Salaam," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(12), pages 122-122, December.
    • Handle: RePEc:ibn:ijefaa:v:12:y:2021:i:12:p:122
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    References listed on IDEAS

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    1. Butt, Babar Zaheer & Hunjra, Ahmed Imran & Rehman, Kashif-Ur-, 2010. "Financial management practices and their impact on organizational performance," MPRA Paper 32685, University Library of Munich, Germany.
    2. Godquin, Marie, 2004. "Microfinance Repayment Performance in Bangladesh: How to Improve the Allocation of Loans by MFIs," World Development, Elsevier, vol. 32(11), pages 1909-1926, November.
    3. William Derban & Jane Binner & Andy Mullineux, 2005. "Loan Repayment Performance in Community Development Finance Institutions in the UK," Small Business Economics, Springer, vol. 25(4), pages 319-332, November.
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    1. Msomi Thabiso Sthembiso & Olarewaju Odunayo Magret & Ngcobo Xolani, 2021. "Sustaining South African Small and Medium-sized Enterprises Through Monetary Access and Literacy in the COVID-19 ERA," Folia Oeconomica Stetinensia, Sciendo, vol. 21(2), pages 57-75, December.

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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