Department of Finance

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Energy payback time analysis and return on investment of off-grid photovoltaic systems in rural areas of Tanzania
(Elsevier, 2020-10-24) Tsuchiya, Yooko; Swai, Tobias A.; Goto, Fumiyuki
Owing to a vast land area, abundant solar radiation, and overseas support, the use of photovoltaics (PV) as a source of electricity is rapidly spreading in Sub-Saharan Africa. To understand the actual application situations, two cases of PV electricity generation systems in the rural areas of Tanzania were investigated via life cycle assessment. The energy payback time (EPBT) calculated from the utilisation of the PV systems, taking into consideration the inventory data of the International Energy Agency, revealed an unsatisfactory performance. Specifically, the EPBTs based on actual power generation at the sites greatly exceeded the expected value-based solar radiation calculations. At one site, the EPBT even exceeded the lifespan of the PV panel, indicating that energy recovery was impossible. With respect to the energy return on investment (EROI), it was evident that the income generated from the investments was insufficient to cover current operational costs, suggesting negative returns on investment. Conversely, diesel power generation appeared to be more suitable in these areas owing to the low and discontinuous demand for power. Furthermore, the operation of a more efficient PV system would require improved maintenance and management, as well as an increase in the demand for electricity.
The Influence of Relationship Lending on SMEs Loan Repayment Performance
(Sage, 2021) Mori, Neema; Ng´urah, Godfrey
The study examined the influence of relationship lending on repayment performance of small- and medium-enterprise (SME) credit facilities. Four hypotheses were developed and tested using data from 395 sampled borrowers of the largest Tanzanian bank. Data for independent variables were obtained through an administered questionnaire while the data for dependent variable were obtained from the borrowers’ records with the bank. Descriptive and econometric analyses were conducted. Findings show that length and depth of relationship between bank and customers positively and significantly influence the repayment performance. Contrary to other empirical works, the findings revealed the scope of the relationship has no influence on repayment performance, while proximity has a negative association with repayment. The article contributes to the debate over the challenges of ex ante selection (adverse selection) and ex post action (moral hazards) by examining an aspect of trust. The bank and the borrower need to develop and cultivate relationship for the loan to perform well; hence, establishing mutual trust and building a long-term relationship is ideal. The article also contributes to the concept of social collateral which has not received much attention in the literature. With the current effects of COVID-19 on the banking and SME sectors, a major mitigator is to rely on their relationship banking for loan repayment, restructuring, and additional loans to boost businesses. Focusing on transactional banking might prove difficult when turmoil and unexpected pandemic like COVID-19 hits the bank and the firm.
The process of female borrower discouragement
(Elsevier, 2021-06) Naegels, Vanessa; Mori, Neema; D’Espallier, Bert
Recent entrepreneurial finance literature identifies ‘borrower discouragement’ as an important phenomenon explaining why female entrepreneurs hold less capital to grow their venture. But how do you become a discouraged borrower? We apply grounded theory to interviews with Tanzanian female entrepreneurs and model the process via which these entrepreneurs become discouraged. Our model suggests that entrepreneurs hold negative perceptions regarding loan application, allocation and payback procedures shaped by both internal and external information sources. We demonstrate that negative perceptions cause an unfavorable attitude towards formal loans which together with entrepreneurs’ perceptions of societal norms lead to a low intention to apply.
An Exploratory Study on Corporate Governance Practices of the Selected Oil and and Gas Companies in TanzaniaTANZANIA
(University of Dar es Salaam, 2019) Mzenzi, Siasa; Mori, Neema; Kurt, Alfred
The main objective of this study was to explore the governance practices of ten oil and gas companies operating in Tanzania. Using content analysis of annual reports of the studied companies, the study sought to particularly examine board structure and composition as well as functioning of the board and audit committees. The findings revealed that given the size and scale of operations, the number of board members in the studied oil and gas companies ranged from six to eleven and most of these board members were foreigners. In terms of gender, most companies had both male and female members in the board of directors, with an exception of two companies which had all male members on their boards. Also, the number of executive and non-executive directors varied from one company to another, the majority being non-executive directors. Findings further revealed that all CEOs were executive members of the board; however, they were not chairpersons. In addition, board meetings were being conducted and the practice of board evaluation was noted for some companies. The audit committees of the studied companies were found to be effective in assisting the board to discharge its financial oversight roles. Our findings support both the Agency Theory and Resource Dependency Theory.
Perceived problems with collateral: The value of informal networking
(Elsevier, 2020) Naegels, Vanessa; Bert D’Espallier, Bert; Mori, Neema
Many businesses in emerging economies are financially constrained due to their limited use of formal loans. Recent evidence suggests that negative perceptions discourage entrepreneurs from applying for loans. One of the main issues entrepreneurs mention is unattainable collateral re- quirements. In this paper, we contribute to this line of research by investigating the effect of networking with fellow entrepreneurs on perceived collateral problems. Drawing on quantitative and qualitative data originating from female entrepreneurs in Tanzania, we find that through networking, entrepreneurs are exposed to stories of their peers’ experiences with loans which influence their perceptions of formal loans. While existing research suggests that networking generally eases access to finance, we find that the effect depends on the type of networking. Informal networking reduces problems with collateral while formal networking increases prob- lems. Additionally, we find that once entrepreneurs come into contact with formal loans, they are less likely to report problems with collateral. Our results suggest that networking with fellow entrepreneurs, especially in a formal manner, leads to an overestimation of perceived collateral problems paving the way for borrower discouragement.
Determinants of customers’ adoption of mobile banking in Tanzania: Further evidence from a diffusion of innovation theory
(2020) Mori, Neema; Mlambiti, Rosallia
The main goal of this study was to examine the influence of demographic factors on the adoption of innovative mobile banking services in Tanzania. It utilized Rogers’ Diffusion of Innovation Theory (DIT) to ascertain the importance of situation-based demographic factors. A survey was conducted with 416 customers of a leading bank in Tanzania. The study applied self-administered questionnaires completed by the respondents who had agreed to participate. The data were analyzed using a combination of descriptive and multivariate analyses. The descriptive results revealed that the majority of respondents used mobile banking once to three times a week to check their balance, download a mini-statement, pay different bills, transfer funds from their account to a mobile telecom network, and buy airtime. The regression results further showed a positive and significant relationship between level of income and education attainment on the one hand and the adoption of mobile banking on the other. The study argues that promotional practices and awareness-raising campaigns are needed to capture the demographic profiles of customers in order to encourage them to adopt mobile banking. Theoretically, the study has shown the relevance of applying the situation-based theory to the adoption of innovative technologies as regards banking services in Tanzania. It also broadens our understanding of the importance of demographic factors that have received little attention from the dominant socio-psychological theories.
Financial Leverage and Labor Productivity in Microfinance Co-operatives in Tanzania.
(Taylor & Francis, 2019) Towo, Nathaniel; Mori, Neema; Ishengoma, Esther
Microfinance co-operatives (MFCs) are increasingly accessing loans from other financial institutions to finance their lending activities. However, knowledge about the association between loans from other institutions and MFCs’ performance is limited. Therefore this paper contributes to the body of knowledge by extending the application of agency theory to investigate the effe of financial leverage on MFCs’ labor productivity. The paper applies fixed effect regression models on panel data of 442 observations established from a sample of 115 MFCs operating in five regions in Tanzania. The results show that financial leverage has a negative effect on labor productivity. The findings revealed that an increase in financial leverage results in lower labor productivity, which could be due to underinvestment because of the debt overhang problem, higher financing costs (which reduce future invest- ments), high labor costs resulting from the high monitoring of lending, and loan collection activities. Such findings suggest that MFCs have to contain their costs and ensure that they generate more revenues from loans accessed from other financial institutions.
Board Composition and Social Performance of Microfinance Institutions: Evidence from East Africa
(Strategic Change, 2015) Mori, Neema; Gholersaki, Sougand; Randøy, Trond; Hermes, Niels
Board composition and poverty outreach of MFIs appear to be related. The proportion of independent, international, female, and/or founding board members appears to be associated with measures of outreach performance using data on MFIs in East Africa. Findings suggest that outreach performance is improved when MFI boards have a higher share of independent, international, and/or female members, which supports the hypothesis that board composition is important in helping MFIs to achieve their social objectives.
Determinants of Individual Savings among Tanzanians
(Emerald Publishing Limited, 2019) Mori, Neema
Purpose Savings help to provide for future personal and households needs. The purpose of this paper examined Tanzanians’ determinants of saving. It studied the relationship between individual characteristics (gender, marital status, age, education level and financial education) and saving behaviour. Design/methodology/approach The paper used 2017 national baseline survey data with 8,959 observations from all over Tanzania. Descriptive analysis and econometric models were used to test the developed hypotheses. Findings Descriptive results show that Tanzanians mainly associate saving with setting money aside to keep it safe for future use. The results also show that most Tanzanians keep their money at home – a very informal way of saving. The results indicate that age and education level are key characteristics that determine positive saving by Tanzanians. Research limitations/implications This study used FinScope survey data which was limited to Tanzania. Since FinScope surveys are done in other African countries, using similar methodologies, it would be interesting to investigate similar trends in other contexts. Practical implications The study recommends promoting awareness of saving in formal institutions. This will benefit not only customers but the financial institutions and mobile telecom companies themselves. Originality/value This study contributes to the life-cycle theory by showing how families, societies and exposures influence individuals to save. Gender and marital status seem to play a lesser role than social- and exposure-related aspects of age and education. Exposure and social interactions are key determinants in the attitude to saving.
Impact of Capital Structure on the Portfolio Behaviour of Commercial Banks in Tanzania
(African Journal of Economic Review, 2019-07) Swai, Tobias A.
This study examined the impact of bank capital structure measured by leverage ratio as defined in Based III based on tier 1 capital to total assets, on the portfolio behaviour of commercial banks in Tanzania by using fixed balance panel of annual financial statements data of 20 banks from 2002 to 2017. The studied banks had more than 89 percent of the total commercial banks’ assets in 2017 and 79 percent of total loans. Consideration of portfolio behaviour was explained based on choice assets (loans, investment in government securities and interbank loans) and non-choice items (non-earning assets including cash, required reserved and investment in fixed assets). The study examined the impact of capital structure on the bank portfolio holding with respect to the size of the bank and ownership. Findings revealed that only 35% of the banks are undercapitalized as at the end of 2017. The variables tested were significant at p <0.01 and p <0.001 except for the bank size measure. This means size of the bank is not a measure for its leverage structure, but with positive relationship.
INDUSTRIALIZATION DRIVE, FISCAL POLICYAND CROSS BORDER TRADE PERFORMANCE AMONG EAST AFRICAN COUNTRIES
(University of Dar es Salaam Business School, 2020-08) Swai, Tobias A.; Magai, Petro S.
Industrialization has been considered as a key to the development of nations. Since its re-established in 1993, the East African block has been striving to develop various strategies to ensure equitable development within the region and increasing trade opportunities. For the past four years, the industrialization has been the key budgeting focus of the states. This study as analyses the policy reforms towards industrialization drive among the countries and its implications to the performance of the trade across the nations. A contextual analysis of the fiscal policies was undertaken based on Pelkmans (2006) industrial policy framework and review of the performance of the regional cross border trade based on the Country Similarity Theory and Porter’s National Competitive Advantage Theory. The results suggests that Tanzania’s fiscal focus have been industrial infrastructure development while the rest of the countries has been local manufacturing initiatives. EAC countries through common external tariffs have been in the recent years focusing on the promotion of local industries by setting high tariffs on the importation of processed food items and vegetable oils. However, Tanzania has been in the past five years a net exporter of raw food items and Kenya a net importer of food items across the member states. Kenya seems to leading the EAC bloc in industrialization and incentives provided as well as local tax revenues to the fiscal policy. It is therefore recommended from this study that strategic alliances for clustering and promotion of industrial policies based on the Pelkmans (2006) should be adopted for sustainable industrial policy in the region.
BANKERS’ PERCEPTION ON THE IMPACT OF COVID-19 IN THE BANKING SECTOR
(Center for Banking and Financial Services Research, 2020-05-20) Swai, Tobias A.; Richard, Evelyn
The presentation offers results from an online survey of 127 Bankers on the Impact of COVID-19 in the banking sector in Tanzania. The respondents indicated that COVID-19 might have a long term impact to businesses and the economy. Mostly affected sectors being tourism, hotel and restaurants. Banking profitability, foreign exchange exposure, new savings and risks profile of current investments likely to be affected. Intervention by Central bank on policies related, special minimum reserve, liquidity support, revision of net open position is highly recommended.
Municipal Owned Community Bank: Capital Raising Dilemma
(Emerald Emerging Markets Case Studies (EEMCS), 2019-10-05) Swai, Tobias A.
This is a Case study for Business students. The case introduces student to basic understanding of banking sector in Tanzania as well as the strategies and struggle to raise capital through shareholders’ funds. Application of Banking theory and Pecking order theory is evidenced from the case. The case outlines why the bank struggled to raise capital and what triggers the capital raising strategies. It also give students an opportunity to think about applicable theories of capital structure and bank capital, and strategies the bank could use to rescue its capital crunch in the future. Case overview/synopsis The case provides details of how the Capital Community Bank (CCB) raised its capital through strategic financial engineering which enabled it to raise the minimum regulatory capital required to be licensed as a financial institution unit, to a regional financial institution, to a fully fledged commercial bank. The bank started with a paid up capital of TZS 472.3m in 2002, involving four Local Government Authorities and individual investors. Capital raised to TZS 31.3bn in 2014 and down to TZS 20.6bn at the end of 2016. The minimum regulatory capital required is TZS 15bn, while paid up capital was 16.9bn. With the change of the management team in 2017, the bank is looking for avenues to raise further capital to meet the regulatory limits and continue to survive as a commercial bank, given dramatic changes in the banking sector in Tanzania. Complexity academic level The case is suitable for third year students in Bachelor of Commerce/Economics specializing in banking/financial services. It also suits postgraduate/master's students seeking a Postgraduate Diploma or Master of Business Administration in financial institutions/banking course
Factors Influencing Usage of Mobile Banking Services: The Case Of Ilala District In Tanzania.
(2017) Richard, Evelyn M; Mandari, Eliamringi
The study assessed key factors that influence the usage of mobile banking services in Tanzania using TAM and transaction theory. A sample of 120 mobile phone users collected through a structured questionnaire was used. Descriptive, Pearson correlation and multiple regressions were employed for analysis. The study found that customers’ awareness and perceived ease of use have a significant positive influence while perceived risk and transaction cost have a significant negative influence on the usage of mobile banking services. Customers’ awareness and perceived ease of use have relatively greater influence on the usage of mobile banking services than perceived risk and transaction costs.
Determinants of Capital Structure of Oil and Gas Companies in Tanzania
(2019) Richard, Evelyn M; Chalu, Henry; Ngohelo, Angela H
This study examined the determinants of capital structure of oil and gas companies in Tanzania. Based on two theories - Pecking Order and Trade-Off - the study tested tangibility, firm size, growth, profitability and tax shield. To test these variables, secondary data of eight oil and gas firms operating from 2008 to 2014 was used. Using multiple regression analysis, the study found that the effect of the independent variables on leverage differs with the level of operations. When all firms are considered, the size of the firm, profitability, tax effect and growth rate tend to be negatively but insignificantly related with the capital structure. Tangibility has an insignificant positive relationship with capital structure. When considering only firms that are at the selling level, profitability, tangibility and growth variables significantly but negatively relate with capital structure. Tax significantly affects the capital structure positively while size has no effect. The study contributes to the Pecking Order Theory that firms tend to use for internally generated funds before using external sources. It challenges the Trade-Off Theory which suggests that there is a positive relationship between tangible assets and leverage. Practically, the study suggests that determining factors differ along the project life cycle. Their effect on the capital structure may not be significant at the initial and developmental stage but significant during the selling and growth stages.
The Effect of Debtors on Performance of Small and Medium Enterprises
(2018) Richard, Evelyn M; Mori, Neema G
The paper assesses effect of credit sales on performance of small and medium enterprises (SMEs) in Tanzania using the credit risk management perspective. Asymmetric information and trade-off theory of liquidity guided the study whereby a dataset of 6,134 Tanzanian SMEs was used. Descriptive and regression methods were used as analyses techniques. Results confirm that majority of SMEs sell on credit (54%). Despite efforts they put into managing their debtors, 26 percent of them default. The results further showed that SMEs incur relatively high costs when managing debtors, an aspect, which hampers their performance. Costs incurred relate to financing, administration and moral hazards problems. The paper contributes to asymmetric information and tradeoff of liquidity theories by showing how the relationship between SMEs and debtors can be hampered by ex-post asymmetric information whereby debtors decide to act in their own interests but against seller's interests, a pattern, which contravenes terms of their contracts. The study highlights main challenges faced by SMEs while managing debtors. Bad debts put pressure on SMEs’ cash flow thereby limiting growth of their businesses. Education level was seen to be important when managing debtors.
Account Receivable Management Practices of SMEs in Tanzania: A Qualitative Approach
(BMR, 2019) Richard, Evelyn M; Kabala, Benedicto
This paper focused on establishing how micro, small and medium enterprises (MSMEs) operating in Tanzania manage debtors. The study used an exploratory approach and was informed by the asymmetric information theory. Saturation point was reached in the fifteenth case. A content analysis was used for the data analysis. The findings show that MSMEs are aware of the importance of managing debtors; they use different means to screen prospective debtors and follow them so that they get paid on time.The same methods are used to monitor and control bad debts. Informal networking, calling debtors, and visiting their residencesor workplaces are mostly used to reduce asymmetric information problems. The paper contributes to the theory by stressing the importance of searching for relevant information while managing debtors.The results further depict the formal credit risk management process and contribute to the literature on the actual methods used by MSMEs while managing debtors. Results suggest that less costly methods of monitoring debtors should be sought and used.
Demographic Characteristics of Credit Officers and Risk Management in MFIs in Tanzania
(Practical Action Publishing, 2019) Richard, Evelyn M; Mori, Neema G; Swai, Martha
Purpose: This article examines the effect of demographic features of credit officers on risk management in MFIs Methodology: A dataset of 200 credit officers from 20 MFIs in Tanzania was used. Descriptive and econometric models were used for analysis. Findings: Work experience, age and education level of credit officers influence credit risk management. Based on the information asymmetry theory the study observed that the gender, marital status and the location of MFIs do not influence credit risk management. Practical implications: MFIs should consider the demographic profile of their credit officers and employ educated, skilled and experienced personnel for screening and monitoring the use of the loan to reduce the risk of the loan not being repaid. Originality: The study contributes to the theory by showing that experience and education matter in terms of organizations' ability to reduce information asymmetric problems, which in turn helps risk management.
Board Gender Diversity: Challenges and Implications for Corporations in East African Community
(Journal of African Business, 2019) Richard, Evelyn M; Mori, Neema, G
East African Community’s (EAC) corporations are required to follow a regional treaty of mainstreaming gender equality. This article discusses challenges encountered by corporate boards of the EAC’s corporations when adding women. Agency and resource dependence theories led the study, while a review of the literature was the methodology. We discuss the benefits of diverse boards and challenges faced when developing this diversity. We show how power distance, masculinity, and certainty avoidance prevent women from corporate boards. Furthermore, we discuss how social orientation and business environment impact women’s participation. The article discusses various strategies to be considered for increasing diversity.
REGIONAL AND DOMESTIC INDUSTRIALISATION POLICIES IN AFRICA: CASE STUDY OF TWO SADC STATES
(INTERNATIONAL ACADEMY OF AFRICAN BUSINESS AND DEVELOPMENT, 2019-05) SWAI, TOBIAS; Mkwizu, Kezia; Monametsi, Gladness
The growing dependence of economic growth on industrialisation has prompted the need for the development of industrialisation policies both at regional and national levels. The Southern African Development Community (SADC) bloc developed an industrial development framework for its member states with the aim of promoting industrial development. Botswana and Tanzania as member states of SADC have undertaken commitment under the framework and consequently recognised the need to align their own national industrial policy in order to achieve the desired outcomes. The study seeks to analyse the synergies created by adoption of both SADC policy framework and the domestic national policy. This is done through the general analysis of the overall policy environment for industrial development in both countries by highlighting reasons for success and failures as well as policy gaps to be addressed by governments. Suggestions for improvement on review and policy strategy are given based on identified success and failures. The recommendations will guide strategic policy formulation in dealing with prevailing national needs.

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