Over-indebtedness of Microfinance in Rural Africa

A Sociological Perspective of Tanzania

Abstract

Focusing on Tanzania’s examples, this article aims to enumerate and analyse social factors, identifying the specificity of microfinance (MF)’s over-indebtedness in African rural areas for further discussions. As globalisation advances due to the remarkable development of information and communication technology, ‘financial inclusion’ has become a new slogan for poverty reduction. The financialisation of the MF movement proceeds as a part of financial inclusion. However, MF movements in Asia, Latin America, and Africa have not advanced as expected. Since the early 2000s, MF markets and institutions have experienced severe global crises. Over-indebtedness is a severe problem in the ‘developing’ and the ‘developed’ countries, including those in Sub-Saharan Africa, facing rapid urbanisation. The increasing expenditures to meet daily necessities and satisfy material desires make people depend on debts. The vicious circle of the debts deteriorates the borrowers’ daily lives and puts the MF institutions’ performance quality at risk. Although over-indebtedness can be explained by an individual’s lack of financial literacy, this clarification is not enough regarding the rural social structure, mode of production, and social relationships, playing important roles in redressing the balance of household management.