The performnace and sustainability of micro financing institutuions in Tanzania

Abstract

In recognition of the dynamic role of micro- and small enterprises and the need to find alternatives to the formal financing system, over 50 Micro Financing Institutions (MFIs) have been established in Tanzania in recent years. This research evaluated the performance and financial sustainability of a sample of these micro-finance institutions in terms of the overall institutional and organizational strength, client outreach, and operational and financial performance. The overall performance of MFIs has been found to be poor. Few MFIs have clear objectives, or a strong organizational structure. They lack participatory ownership and many are donor driven. Client outreach is increasing, with branches opening in almost all regions of the Tanzanian mainland. Nevertheless, MFI activities remain centered around urban areas. Operational performance demonstrates low loan repayment rates. Capital structure reveals a high dependence on donor or government funding.