Breaking the Credit Constraint: Socioeconomic Determinants of Microfinance Access among Small-Scale Borrowers

Abstract

This study examined the influence of socioeconomic factors on access to microfinance loans among small-scale borrowers in Kilombero District, Tanzania. The study was guided by the Theory of Planned Behavior and employed a positivist philosophy, quantitative approach, and cross-sectional research design. The study population comprised 1,378 small-scale borrowers, from which a sample of 310 respondents was determined using Yamane’s formula at a 5% margin of error, with 299 valid responses obtained for analysis. Data were collected using structured questionnaires and analyzed using descriptive statistics and multiple linear regression. The findings revealed that socioeconomic factors significantly influenced access to microfinance loans, with the regression model explaining 71.66% of the variation in loan access. Financial literacy, savings group membership, land ownership, household income, previous borrowing and repayment experience, radio ownership, and farmers’ group membership were positively associated with access to microfinance loans. In contrast, household dependency, unemployment, and longer travel time to microfinance institutions were associated with reduced access. Significant spatial differences were also observed, with borrowers in Idete, Kibaoni, and Lumemo experiencing lower access compared with those in Ifakara, while differences for Mngeta were not statistically significant. However, sex, age, marital status, education, economic activity, mobile money use, internet access, and electricity access did not have statistically significant independent effects. The study concludes that improving access to microfinance requires greater emphasis on financial literacy, savings and farmers’ groups, productive assets, household income, positive repayment histories, and financial outreach to underserved areas. It recommends that microfinance institutions and local authorities strengthen financial education, expand community-based and digital financial services, develop flexible loan products suited to small-scale borrowers, and improve outreach in geographically underserved wards.