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The level of poverty in Tanzania is relatively high. Access to finance is cited as one of factors hampering economic growth and poverty alleviation. Microfinance is seen as one of the effective tootls that can address poverty alleviation by engaging the poor in sustainable economic activities. Microfinance services have existed in Tanzania since the late 1990s, yet they have not attained growth. The main providers of microfinance services consist mainly of Micro-lenders, Non-Govermental Organizations (NGOs), Savings and Credit Cooperative Societies (SACCOS), Public Financial Institutions (PFI) and to a less extent Commercial Banks (CB). This research report aimed to study and identify the factors that inhibit growth in the microfinance sector in Tanzania by measuring the perceptions about such issues among Micofinance Institutiond (MFIs) in Tanzania. The findings of this study revealed that lack of regulatory and policy framework, lack of capital and high operational costs were the main problem areas hampering the growth of MFIs in Tanzania. Microfinance clients have increased their incomes, capital invested and therefore expansion of their businesses. Despite these achievements it was further observed that, some conditions like grace period for loan repayment, collateral and microfinance coverage have been limiting factors for poor people to access the microfinance services. The most important include the educational levels of clients, lack of capital to lend to clients and staff related incentives and skills development. These findings indicate phenomena that deserve consideration from legislators. Also prominent is the dual nature of the finance sector, with the conventional banking institutions experiencing factors differently to the Savings and credit Cooperative Societies (SACCOs), which by their nature have a lower cost structure and have better information about their own clients, but lack sufficient access to loan capital. The study made recommendations which are aimed at enhancing the growth of microfinance institutions. |
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