The Effect of High Interest Rates on Community Capital Access among Microfinance Borrowers in Dar es Salaam, Tanzania

Abstract High interest rates remain a barrier to community capital access, possibly preventing borrowers from obtaining affordable, adequate credit from microfinance institutions in Tanzania. This study looked at how high interest rates affect community capital access for microfinance borrowers in Dar es Salaam, concentrating on credit availability, affordability, and adequacy. Using Credit Rationing Theory and Institutional Theory as guides, the study used a method and a cross‑sectional design. Data came from questionnaires filled out by 369 respondents. The data were examined with statistics, correlation, and ordinary least squares regression in SPSS. The results showed a significant negative link between high interest rates and community capital access (B = − 0.186, β = −0.187, t = − 3.653, p < 0.001). The model was statistically significant (F = 13.344, p < 0.001). It explained only 3.5% of the changes in community capital access (R² = 0.035). The study concludes that high interest rates are a financial barrier, though other factors also shape access to capital. It recommends that interest‑rate disclosure be transparent, that lending practices be responsible, that regulatory oversight be stronger, and that credit arrangements be affordable all to boost inclusion and community economic development.