The Big Five personality traits and loan repayment intention among microfinance customers in Tanzania

Abstract

This study investigates the influence of the Big Five personality traits on loan repayment intention among microfinance borrowers in Tanzania. While microfinance institutions (MFIs) play a crucial role in promoting financial inclusion and poverty reduction, loan defaults remain a significant challenge threatening their sustainability and outreach. Traditional borrower assessments often neglect personality factors that can drive repayment intention and behavior. Drawing on the Big Five personality theory and the theory of planned behavior, this research examines how agreeableness, conscientiousness, extraversion, openness to experience, and neuroticism affect repayment intention. A survey of 900 microfinance clients was conducted, and data were analyzed using partial least squares structural equation modelling (PLS-SEM). The results reveal that conscientiousness and openness positively and significantly influence loan repayment intention, whereas extraversion and neuroticism have negative and insignificant effects on loan repayment intention. Agreeableness positively but insignificantly affects loan repayment intention. These findings highlight the contextual complexity of personality’s role in loan repayment and suggest the value of integrating personality assessments into microfinance lending practices. The study contributes to behavioral finance theory and offers practical and policy recommendations for enhancing loan repayment and hence promoting sustainable microfinance in developing economies like Tanzania.