Financial leverage and labor productivity in microfinance co-operatives in Tanzania

Microfinance co-operatives (MFCs) are increasingly accessing loans from other financial institutions to finance their lending activities. However, knowledge about the association between loans from other institutions and MFCs’ performance is limited. Therefore this paper contributes to the body of k...

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Autores principales:	Nathaniel Towo, Neema Mori, Esther Ishengoma
Formato:	article
Lenguaje:	EN
Publicado:	Taylor & Francis Group 2019
Materias:	financial leverage microfinance co-operatives labor productivity Business HF5001-6182 Management. Industrial management HD28-70
Acceso en línea:	https://doaj.org/article/644d8895f4864c75bd5f628282b7f668
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spelling	oai:doaj.org-article:644d8895f4864c75bd5f628282b7f6682021-12-02T16:42:10ZFinancial leverage and labor productivity in microfinance co-operatives in Tanzania2331-197510.1080/23311975.2019.1635334https://doaj.org/article/644d8895f4864c75bd5f628282b7f6682019-01-01T00:00:00Zhttp://dx.doi.org/10.1080/23311975.2019.1635334https://doaj.org/toc/2331-1975Microfinance co-operatives (MFCs) are increasingly accessing loans from other financial institutions to finance their lending activities. However, knowledge about the association between loans from other institutions and MFCs’ performance is limited. Therefore this paper contributes to the body of knowledge by extending the application of agency theory to investigate the effe of financial leverage on MFCs’ labor productivity. The paper applies fixed effect regression models on panel data of 442 observations established from a sample of 115 MFCs operating in five regions in Tanzania. The results show that financial leverage has a negative effect on labor productivity. The findings revealed that an increase in financial leverage results in lower labor productivity, which could be due to underinvestment because of the debt overhang problem, higher financing costs (which reduce future investments), high labor costs resulting from the high monitoring of lending, and loan collection activities. Such findings suggest that MFCs have to contain their costs and ensure that they generate more revenues from loans accessed from other financial institutions.Nathaniel TowoNeema MoriEsther IshengomaTaylor & Francis Grouparticlefinancial leveragemicrofinance co-operativeslabor productivityBusinessHF5001-6182Management. Industrial managementHD28-70ENCogent Business & Management, Vol 6, Iss 1 (2019)
institution	DOAJ
collection	DOAJ
language	EN
topic	financial leverage microfinance co-operatives labor productivity Business HF5001-6182 Management. Industrial management HD28-70
spellingShingle	financial leverage microfinance co-operatives labor productivity Business HF5001-6182 Management. Industrial management HD28-70 Nathaniel Towo Neema Mori Esther Ishengoma Financial leverage and labor productivity in microfinance co-operatives in Tanzania
description	Microfinance co-operatives (MFCs) are increasingly accessing loans from other financial institutions to finance their lending activities. However, knowledge about the association between loans from other institutions and MFCs’ performance is limited. Therefore this paper contributes to the body of knowledge by extending the application of agency theory to investigate the effe of financial leverage on MFCs’ labor productivity. The paper applies fixed effect regression models on panel data of 442 observations established from a sample of 115 MFCs operating in five regions in Tanzania. The results show that financial leverage has a negative effect on labor productivity. The findings revealed that an increase in financial leverage results in lower labor productivity, which could be due to underinvestment because of the debt overhang problem, higher financing costs (which reduce future investments), high labor costs resulting from the high monitoring of lending, and loan collection activities. Such findings suggest that MFCs have to contain their costs and ensure that they generate more revenues from loans accessed from other financial institutions.
format	article
author	Nathaniel Towo Neema Mori Esther Ishengoma
author_facet	Nathaniel Towo Neema Mori Esther Ishengoma
author_sort	Nathaniel Towo
title	Financial leverage and labor productivity in microfinance co-operatives in Tanzania
title_short	Financial leverage and labor productivity in microfinance co-operatives in Tanzania
title_full	Financial leverage and labor productivity in microfinance co-operatives in Tanzania
title_fullStr	Financial leverage and labor productivity in microfinance co-operatives in Tanzania
title_full_unstemmed	Financial leverage and labor productivity in microfinance co-operatives in Tanzania
title_sort	financial leverage and labor productivity in microfinance co-operatives in tanzania
publisher	Taylor & Francis Group
publishDate	2019
url	https://doaj.org/article/644d8895f4864c75bd5f628282b7f668
work_keys_str_mv	AT nathanieltowo financialleverageandlaborproductivityinmicrofinancecooperativesintanzania AT neemamori financialleverageandlaborproductivityinmicrofinancecooperativesintanzania AT estherishengoma financialleverageandlaborproductivityinmicrofinancecooperativesintanzania
_version_	1718383577108840448

Financial leverage and labor productivity in microfinance co-operatives in Tanzania

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