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Most development proponents believe that microfinance can change the livelihood of poor households. Microfinance are said to smoothen consumption and alleviate capital constraints of poor people. However, despite these possible roles of microfinance, empirical evidence on its impact on poor households remains divisive. This thesis is about the impact of microfinance services on selected rural farm household crop income and asset accumulations. It provides empirical information in a Tanzanian context on the nature and extent of the impact of access to microfinance services on farm income, farm investments, financial savings, and physical asset accumulation on rural farm households. The study also explored the factors affecting farm household decisions to participate in microfinance institutions and the nature, extent and determinants of demand for credit of farm households. The study involved a survey of rural farm households in Mufindi, Njombe, and Kilolo districts in Iringa region of Tanzania. A sample size of 419 households was involved of which 200 were microfinance members and 219 were non-members. Results show that participation decisions are affected by instability of crop income, level of education, availability of non-farm income, age, and assets endowment. Demand for credit is affected by loan duration, location, and type of microfinance program, education, and dependents ratio. Regarding the impact of MFIs services on households, the study has found mixed results. MFIs services have positive but insignificant impact on crop income levels and farm variable inputs. Results show positive and significant impact on savings and asset accumulation. In order for MFIs services to have impacts on farm households‟ crop income, three policy responses
are proposed: One, formation of specialized agricultural microfinance banks to deal with unique credit needs of farm households. Two, investment in social, agricultural, and transportation infrastructure in rural areas to enhance agriculture production and transportation. Three, reforms on marketing of agricultural products policies to alleviate volatility of prices. Future researches can use panel data, randomized controlled trials (RCTs) and involve more farm households in more regions of Tanzania. |
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