Department of Finance

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https://repository.udsm.ac.tz/handle/123456789/58

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Browsing Department of Finance by Author "Charles, Goodluck"

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    Effects Of Collateral On Loan Repayment: Evidence From An Informal Lending Institution
    (Taylor and Francis, 2016) Charles, Goodluck; Mori, Neema
    We examine the effect of the collateral informal lenders use to ensure loan repayment. Specifically we measure how the use of movable and immovable assets affects loan repayment and delinquency rate, and assess the extent to which guarantorship and relationship-lending act as collateral to improve loan repayment. With a dataset of 835 individual borrowers drawn from an informal Tanzanian lending institution, we run descriptive and econometric models. The results suggest that movable assets increase the likelihood that borrowers perceived to be less creditworthy will obtain loans from informal sources and repay them. We also find a small proportion of customers to have pledged immovable assets as collateral when borrowing from informal lenders. The results also show the positive effect of referral, which implies that relationship lending and social collateral is key to increasing access to finance through informal lenders. Our results contribute to the advancement of economic theory, specifically in the ex-ante and ex-post-related literature.
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    Loan repayment performance of clients of informal lending institutions Do borrowing histories and dynamic incentives matter?
    (Emerald, 2017-07) Mori, Neema; Charles, Goodluck
    Purpose – The purpose of this article is to examine the effects that dynamic incentives and the borrowing histories of clients of informal lending institutions have on loan repayment performance, in particular, the extent to which multiple borrowing and progressive lending affect the repayment of loans. Design/methodology/approach – The paper uses a data set of 835 borrowers drawn from an informal lending institution in Tanzania. Descriptive analysis and econometric models are used to test the developed hypotheses. Findings – Whereas clients with multiple loans are associated with poor loan repayment, progressive lending contributes to positive repayment outcomes. Multiple borrowers face increased debt levels and thereby an increased inability to meet their repayment obligations; in contrast, progressive lending by building up a lender–client relationship helps clients to obtain higher loans with a minimum amount of screening. Research limitations/implications – This was a cross-sectional study based on a sample of individual clients drawn from a single institution. However, since the majority of clients had also taken out loans with other financial institutions, the sample is considered to be representative. Practical implications – A client’s past repayment performance and multiple loan history must be assessed so that multiple borrowing can be prevented and credit absorption capacity can be gauged more accurately. The repeated nature of the interactions and the threat to cut off any future lending (if loans are not repaid) can be exploited to overcome any information deficit. Originality/value – This study was conducted in a context in which the degree of information sharing was low and institutional access to clients’ credit histories was limited. It contributes knowledge on how lenders minimise the risk flowing from the ex ante information gap and moral hazards arising from the ex post information gap.
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    The Role Of Boards Of Directors Of Family-Owned Microfinance Institutions Lessons From The Boardroom
    (Emerald, 2018-03) Mori, Neema; Charles, Goodluck
    Purpose – The purpose of this paper is to investigate the composition and role of a board of directors in a family-owned microfinance institution (FO-MFI) in Tanzania. Design/methodology/approach – The paper is based on a longitudinal analysis of the board practices based on boardroom observations for the period between 2012 and 2015. The study further collected and analyzed qualitative data from interviews with board members, management, and institution staff. Findings – The findings indicate that even though external board members were appointed as a result of their diverse expertise and skills, their personal relationships with shareholders, life-cycle stage of the institution, and the nature of the industry influenced their selection. It was also found that the board played more of the service role in strategy formulation, resource mobilization, and networking, and, through that, members were also able to exercise control of the firm. Research limitations/implications – Because this paper is based on a qualitative approach, it suffers from the challenge of generalization. However, numerous research issues have been raised that require further investigation. Originality/value – This study contributes to the governance literature by showing what really happens in a family-owned firm, as it is based on a unique data set drawn from the boardroom of the FO-MFI in a context of a developing economy. This context is unique, given that most private MFIs operating as family enterprises do not have a professional board of directors. The study shows how the board contributes to a strategic direction of the firm in which the management and ownership are not separated, and the first generation is running the firm