Financing Preferences Among Rural Women in Tanzania: The Role of Socio-Economic Attributes

Abstract

This study investigates the socio-economic determinants shaping rural women’s financing preferences in Tanzania, with the goal of informing inclusive financial systems that support women’s economic empowerment. The study is grounded in Demand Theory and the Life Cycle Hypothesis with a multidimensional approach. The study considered financing options in three broad categories: financial exclusion, represented by women who do not use any form of credit; formal credit, comprising loans obtained from banks and public financing programmes; and informal credit, which includes borrowing from family and friends, obtaining loans from moneylenders, and asset-based financing such as selling farmland or other productive assets. Data were collected from 415 randomly selected rural women in the Arusha, Katavi, Mbeya, and Simiyu regions of Tanzania between June and December 2023. Cross-tabulations, likelihood ratio tests, and a multinomial logit regression model were used to analyse the data. The results indicate that age, education, income, household size, occupation, and credit cost are significant determinants of financing decisions. Women who are older, with higher education, and have higher income levels are more likely to get formal credit, while women who have high credit costs and limited financial capacity are more likely to borrow informally or be excluded from the financial system. The study suggests that rural areas need formal credit that is affordable, accessible, and gender-sensitive to reduce reliance on informal, high-risk alternatives and encourage equal participation in the financial system.