gap.<sup>15</sup> Despite government interventions, FGD participants reported that many governmentsupported credit programs have not reached them at all.

51. Anecdotal evidence from the FGD study shows that managing the loaned money is a daunting task for HEs owing to business risk, household risk, and fungibility problems, which create the potential for delayed repayment or default. In such cases, the response from some of these creditors can be disproportionately adverse. Some FGD participants narrated their ordeal when the credit-lending organization raided the house of one of the defaulters and parted with belongings worth more than the value of the credit. Managing a large lump sum of borrowed money also poses risks to borrowers and creditors alike. As noted by participants in the FGD study: “If you give a loan of TSh 200,000 to an individual who needs only TSh 20,000 for capital, he/she will not be able to use it. He/she will use TSh 150,000 for other purposes unrelated to the business.” _Male participant, Mwanza_ .

“I borrowed TSh 900,000 one year ago from Akiba Commercial Bank (ACB), and one of the group members borrowed TSh 2,000,000. She disappeared. We are paying for her loan and can‟t get any new loans until we pay up her debt. I would rather do _kibati_ (merry-go-round) from the neighborhood than to be part of a group whose fate can be this devastating.” _Youth participant, FGD, Arusha_ .

52. The “soft” loans provided under most microfinance programs are often viewed not to be so. The additional conditions attached to them, including the need for some form of collateral, or a business registration certificate, or reference from a group lending association, work against the expectation of many HEs. Both the quantitative and qualitative analyses revealed that the youth are more vulnerable to this credit constraint because they are under-age to qualify for a loan. Compared to older traders, they are also more mobile, but with less unmovable assets, hence they are less trusted. This is a common predicament among the _Machingas_ , over 95 percent of whom are young people (Lyons and Msoka, 2007).

53. Most NGO and government microfinance programs consider women more trustworthy and effective in using loaned money for intended impact.<sup>16</sup> Women may be constrained from borrowing from other sources because the assets they seek to use as collaterals are legally owned by men. But these donor- or NGO-assisted projects target women not only because they lack

> 15 However, it is interesting to note that most FGD participants had some broad knowledge of loan conditionality, including the setting of interest rate. This was attested by their response to hypothetical test question during the FGD. For example, they were asked: If you were given a loan of TSh 5 million, would you accept it? If not, why? If yes, what would you do with it? Those whose sales turnover was much higher said they will accept it, as opposed to those with less who said they will not. Those in between had plans to expand their business, mostly to buy equipment or move to another more lucrative business. These were often the ones who had applied for but were denied loans earlier.

> 16 Some microfinance institutions, such as BRAC and PRIDE, have programs that are biased towards women. Also, there are specific government programs for women, for instance, the Women Development Fund (WDF) and Equal Opportunity Trust Fund (EOTF), but none for men. Globally, the Microcredit Summit Campaign reports that 80 percent of microfinance clients are women, with the proportion varying by region. The larger shares were in Asia, followed by Africa and Latin America (Karlan and Goldberg, 2007).

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