Why people fail to repay VICOBA loans

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By Mnaku Mbani
Large size of the families has been identified as the main reason for failure to pay back loan in VICOBA as many members having a lot of dependents in their family. This implies that large number of members in the family cannot be able to engaged in economic activities, so the loan which is obtained from VICOBA acts as the only source of income in the family to solve different issues rather than channeling in income generation so that they cannot be able to repay loan on time.

According to the findings of a study titled Failure and Collapse of Village Community Banks in Tanzania: Some Findings from Meru District in Arusha Region by Jeremiah S. Kitomari and Furaha G. Abwe of Mount Meru University.
The study respondents mentioned family problem as other social factor affect in loan repayment.
The findings of the study indicate that large number of dependents within the family lead to the problem in repayment of loan due to the fact that loan given is acting as the only source of income to solve and help in the family rather than basing in economic generation as the result they fail to pay loan on time.
“Family conflicts that lead to misunderstandings among the family members on the other hand a factor that contributes to loan defaulting among the VICOBA clients in the study areas. When the families are in conflicts no economic activities can be undertaken, this leads to poor performance of the business, hence leads to low loan repayment rate,” says the study findings.
The findings show that most of respondents claimed that extended family is the source of conflict in the family.
Further, another problem is the nature of economic activities. From the findings, it has been observed that majority of members engaged into business activities which are very small in capital and small return with very high risk.

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