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This study is about the effectiveness of microfinance services to poor rural
households inUnguja, North Region, Tanzania. The objective was to explore out the
perception of the rural households towards the microfinance sector in poverty
alleviation or reduction. It also aims at identifying or examining the challenges facing
the microfinance sector in Tanzania, identify the major sources of finance that rural
households have access and assessing the favorability of loan terms and conditions of
MFIs to poor rural households.
The research design was case study research design which employed both
quantitative and qualitative research approaches. The study obtained data and
information through questionnaires, focus group discussion, observation and
documentary reviews whereby both quantitative and qualitative data analysis’
techniques were used to analyze the data. The stratified random sampling technique
was used to select respondents made up of the general public in different villages of
the study area simple random sampling was used to select microfinance stakeholders
such politicians, leaders, MFIs staffs and field experts, the number of respondents
selected was 350 for rural households 50 for other stakeholders.
The finding reveals that most of the rural households are not accessible to these
services due to limited number of Microfinance Institutions (MFIs) operating in rural
regions, unfriendly loan requirements to the rural people including high interest rate
and high valuable securities and poor regulatory and supervisory framework of
MFIs.Further finding reveals that most of the rural households are not aware with
role of microfinance services, variety of financial and related products and services,
also finding reveals that most of the rural households especially who are illiterate use
the informal sources of loans whereby the large proportion of these loans are spent in
consumption, social expenses and entertainment/festivals rather than investment.
Based on the should adopt the group lending approach used by some MFIs from |
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