Some Factors Associated with Operations of Village Community Banks (VICOBAs) for Poverty Alleviation in Tanzania
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Village Community Bank (VICOBA) is a grassroots based lending scheme focusing on fostering participant’s ability to innovate and manage viable income generating activities. This aimed to reduce extreme poverty among group members in the community for achievement ofthe Millennium Development Goal one (MDG1). VICOBA members share knowledge on how to generate income and how to use the savings through provision of small loans for themselves. In some
VICOBA groups, there was lack of capital because loans taken by some members are not paid on time. Loan repayment in VICOBA is a challenge although all transactions are made transparently to all members of the group. A community based cross sectional study was employed in analysing loan repayment determinants in VICOBA. A multistage sampling technique was used to obtain the study participants. A structured questionnaire on loan repayment was administered to the sampled members from the selected groups. The collected information was analysed by Statistical Package for Social Science (SPSS). Multivariate analysis (logistic regression) was used to determine factors for loan repayment. The survey involved 404 VICOBA members from Ilala District. More than three quarters; 82.7% (334 of 404) of the VICOBA members owned loan from their groups. Overall, 16% (53 of 334) of VICOBA members who own loan were loan defaulters. Factors for loan default were the use of loan for investing in a new business (P = 0.001), short loan duration (P = 0.001), sickness (P<0.001) and poor performance of the business (P<0.001).There was high lending of loan in VICOBA in Ilala District. Also, loan defaulting by VICOBA members was fairly high (16%). Use of the loan for investing in a new business, falling sickness, poor performance of the business and short duration of the loan were factors for loan repayment by VICOBA members; therefore implementers of VICOBA should revise loan duration for borrowers to reduce loan defaulting. Also, implementers should continue to train VICOBA members on business management after two years of group inception or at the beginning of the new cycle.
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