Assessment of Group Lending Performance in Financial Institutions in Tanzania. A Case of Commercial Banks.

Abstract

The study intended to assess group lending performance in financial institutions in Tanzania. To achieve this study three objectives were required; To examine the challenges posed by group lending, determine the performance indicators of the lending, and improve procedures for enhancing the performance of group lending in Tanzania. This study aimed at obtaining data on the forms of social collateral, borrower benefits, challenges, performance, and prospects of the group lending approach in microfinance services delivery. Stratified sampling was used to select 169 household heads who are commercial bank customers in five selected commercial banks in Dar es Salaam and 20 bankers. Data were collected through interviews, questionnaires, and focus group discussions. Data were analyzed by using both content and descriptive analysis and then triangulation was employed to cover a data vacuum. The study revealed that lack of trust, multiple loans, group bias, improper business skills, business failure, and diversification of funds were the main challenges facing group lending performance. Moreover, the study found that group loan performance is enhanced by bonded trust, chattel cover, loan insurance, group recovery, and permanent residence. The study made a contribution to the practical side of group lending, which can help loan policymakers increase the efficiency of lending.