Microcredit fungibility and effect on business performance among women entrepreneurs in Tanzania

This study aimed to assess the extent to which microcredit women clients practice microcredit fungibility, the factors contributing to microcredit fungibility, and whether credit fungibility affects the performance of the supported microenterprise. Data were collected using a structured questionnaire and analysed using logistic regression analysis and the Hayes Process Macro Linear-Based regression analysis. Results have shown that approximately 70% of sampled borrowers acknowledged engaging in microcredit fungibility, and the borrowers were likely to practice fungibility if they were married, had dependent children, and owned multiple businesses. The number of household members with income sources and the education level of the borrower were negatively related to fungibility. The findings also established that although microcredit plays an essential role in the entrepreneurial pursuits of women microcredit clients, its effectiveness hinges on how the funds are utilised. Results suggest that microcredit fungibility attenuates the impact of microcredit on enterprise performance. Conversely, the number of household members with income sources, the borrowers’ level of education, and the duration of membership in the microfinance programme influenced enterprise performance significantly, while marriage exhibited a negative relationship with enterprise performance. Decision-making by the business owner, the number of dependent children, and ownership of different sources of income by the borrower do not affect business performance significantly. The study recommends microfinance programmes to understand borrower characteristics and household economic portfolios before disbursing the funds. Moreover, providing financial and business skills training to help borrowers grow and manage their businesses and finances effectively is crucial.