Hofstede’s Cultural Model And Borrowing Incurring Joint Versus Individual Liability In Tanzania

Culture is an important factor that influences acceptance of microfinance institutions lending models. Many scholars have applied Hofstede’s cultural model to understand how values affect people’s behaviors or decisions. However, researchers had overlooked applying Hofstede’s cultural model on microfinance institutions lending models. This study integrates Hofstede’s cultural model with borrowing decisions incurring joint vs. individual liability. To address these challenges, a study is conducted from two microfinance institutions namely, PRIDE (T) and FINCA (T) located in two regions within Tanzania namely, Dodoma and Arusha. The study employs explanatory research design involving 420 respondents. Selection of respondents was conducted using systematic technique. Questionnaires were used to collect information. The Structural Equation Modeling was used to perform the analysis. The findings have shown that individualism exist among the majority of joint liability borrowers and influences negatively borrowing incurring joint liability making joint liability an inappropriate lending model. Likewise, collectivism was found to exist among few joint liability borrowers and influences positively borrowing incurring joint liability, making joint liability an inappropriate lending model. Therefore, cultural values influence the appropriateness of the microfinance institutions lending model. It is recommended that more emphasis should be put on improving the microfinance institutions lending model to take into consideration differences in cultural values. This will in turns encourage the majority of low income people to borrow from microfinance institutions, thereby improving the chances for the achievement of the goal of poverty alleviation.