The Determinants Of Credit Demand For Micro Enterprises A Case Study Of Southern Highlands Of Tanzania

ABSTRACT

Existing literature suggests that determinants of demand for credit have not been well understood and measured. This study was conducted to assess influence of micro enterprises owners’ characteristics on credit demand. The study was also designed to identify lending conditions of semiformal and formal sources of credit in the study area. The study assessed whether the availability of credit sources has influence on micro entrepreneurs’ choice for credit. Data were collected from a sample of 183 micro entrepreneurs in Iringa, Mbeya and Sumbawanga districts. Multistage and simple random sampling techniques were used to select respondents. Data analysis employed both descriptive and quantitative methods, where as regression analysis entailed the use of Probit and Tobit models. The study revealed that micro entrepreneur’s characteristics substantially influenced the decision to apply for credit and hence the actual amount demanded. The credit demand was found to be high in all the three districts. The most important reason for demanding credit was to expand enterprises. Regression results indicate that marital status and micro entrepreneurs’ business experience had significant positive influence on the demand for credit at P