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

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.