The Impact of Migration on Access to Credit Markets

Abstract

This paper sought to explore whether rural-urban migration and urban dwellers have equal access to credit services. Data were collected from two case-study emerging urban centres in Kilolo and Mufindi districts in Tanzania. Statistics encompassing measures of association, mean differences and a recursive bivariate probit model were used. Findings revealed marginal difference between the proportions of rural-urban migrants and urban dwellers with access to credit services in the case study areas. The model identified annual income, membership to local network/associations dealing with capital mobilisation and credit services as well as ownership of tangible assets as the main factors leading to increased access to credit. The study recommends policy interventions that can raise labour productivity and effectively engage young people in economic activities both in urban and rural areas. Access to formal credit among potential borrowers can be enhanced through dedicated support in training and sensitization to mobilize collective savings and initiate credit services as means to improve their creditworthiness and access to loans from formal institutions.