Saving by borrowing? Motives to join a Tanzanian microcredit organisation

This paper investigates microcredit as a strategy for overcoming constraints to saving, using data from the microfinance institution PRIDE Tanzania. My hypothesis is that many people join PRIDE because they are unable to save due to weakness of will, conflicting interests in the household or claims from extended family. This hypothesis is supported by publications that demonstrate that other financial tools have been used to overcome these constraints. My empirical investigation shows that a large share of PRIDE loans is spent on other purposes than income-generating activities, contrasting the conventional explanation of microcredit. Both quantitative data from surveys and qualitative responses from the in-depth interviews confirm that weakness of will, conflicting interests in the household and claims from extended family are real concerns, though only a small minority agree that these are the reasons why they borrow from PRIDE, rather than save. Furthermore, both responses to survey questions and an experiment in the form of a lottery confirm and underline that women generally have less bargaining power in the household than men do. These findings give particular weight to the household allocation motive