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The Effect of Attitudes Towards Money on Over-Indebtedness Among Microfinance Institutions’ Customers in Tanzania

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Abstract

Microfinance institutions (MFIs) are believed to be the best source of finance for lifting the poor from poverty. However, the vast majority of MFIs’ customers in the world appear to be over-indebted. This study investigates the effect of the four attitudes towards money (FAM), namely security, love, freedom, and power, on over-indebtedness among MFIs customers in Tanzania. This relationship has not been investigated in previous studies. The study used an analytical cross-sectional design involving a survey of 428 MFI customers using a semi-structured questionnaire. Structural equation modeling (SEM) was employed for data analysis. The findings show that power (β = 0.432, p = 0.000), love (β = 0.114, p = 0.004), and freedom (β = 0.101, p = 0.02) significantly and positively affect over-indebtedness, while security (β = -0.243, p = 0.003) negatively and significantly affects over-indebtedness. This study provides an alternative way for MFIs to reduce over-indebtedness by focusing on borrowers’ attitudes towards money. This will, in turn, enhance loan repayment rates, sustainability of MFIs, poverty reduction and quality of life among MFI customers.

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Data Availability

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Abbreviations

MFI:

Microfinance institution

FAM:

Four attitudes towards money

LC-PI:

Life-cycle-permanent-income

MAS:

Money attitude scale

HTMT:

Heterotrait-monotrait

AVE:

Average variance extracted

CMV:

Common method variance

CFA:

Confirmatory factor analysis

KMO:

Kaiser Meyer Olkin

SEM:

Structural equation modeling

VIF:

Variance inflation factor

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Acknowledgements

The authors extend sincere gratitude to:

• The Editor of this Journal, who will initially desk reviewed, arranged a rigorous blind peer review process.

• All anonymous reviewers who will provide constructive feedbacks for thorough revision, improvement, extension and fine tuning of the paper.

• All colleagues and assistants researchers who assisted the authors to complete this task.

Funding

No funding was received for this research.

Author information

Authors and Affiliations

  1. Department of Accounting and Finance, The University of Dodoma, Dodoma, Tanzania

    Pendo Shukrani Kasoga

  2. Department of Business Administration and Management, The University of Dodoma, Dodoma, Tanzania

    Amani Gration Tegambwage

Authors
  1. Pendo Shukrani Kasoga
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  2. Amani Gration Tegambwage
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Contributions

“PSK conceptualized the introduction, reviewed the literature, analyzed the data, discussed the findings, wrote the conclusion, and was a major contributor in writing the manuscript. AGT collected the data regarding the attitudes towards money and over-indebtedness from the MFIs, and proofread the paper. All authors read and approved the final manuscript.

Corresponding author

Correspondence to Pendo Shukrani Kasoga.

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Ethics Approval and Consent to Participate

During data collection, participants were informed about the purpose of the study. Participation in this study was voluntary and confidentiality of respondents was observed.

Competing Interests

There are no competing interests in this submission.

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Appendices

Appendix A

Table 5, 6, 7

Table 5 Demographic characteristics of respondents
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Table 6 Assessment of the measurement model for the attitude towards money
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Table 7 Assessment of the measurement model for over-indebtedness
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Appendix B

Figure 2

Fig. 2
figure 2

AMOS picture with path coefficients and goodness of fit indices. CMIN = 15.537, DF = 8; p = 0.060; CMIN/DF = 1.942; RMR = 0.006; GFI = 0.993; AGFI = 0.951; NFI = 0.996; RFI = 0.976; IFI = 0.998; TLI = 0.988; CFI = 0.998; RMSEA = 0.047; PCLOSE = 0.506. Note. χ 2, chi-square; df, degrees of freedom RMR, root mean square residual; GFI, goodness of fit index; NFI, normed fit index; RFI, relative fit index; IFI, incremental fit index; TLI, Tucker–Lewis index; CFI, comparative fit index; RMSEA, root mean square error of approximation; PCLOSE, parsimony close

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Kasoga, P.S., Tegambwage, A.G. The Effect of Attitudes Towards Money on Over-Indebtedness Among Microfinance Institutions’ Customers in Tanzania. Applied Research Quality Life (2024). https://doi.org/10.1007/s11482-024-10294-0

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