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Financial sustainability of rural microfinance institutions (MFIs) in Tanzania

Financial sustainability of rural microfinance institutions (MFIs) in Tanzania

Nyamsogoro, Ganka Daniel (2010) Financial sustainability of rural microfinance institutions (MFIs) in Tanzania. PhD thesis, University of Greenwich.

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Abstract

An enduring problem facing microfinance institutions is how to attain financial sustainability. Several studies have been conducted to determine the factors affecting financial sustainability of microfinance institutions using large and well developed MFIs in various countries. However, no such study has been conducted in rural Tanzania where majority of MFIs are small, most of which are member-based (cooperatives). Consequently, the factors affecting their financial sustainability are not known. This study, therefore, was set to bridge this knowledge gap.

This study followed a quantitative research approach using panel data regression as the main data analysis technique. The study was based on four years primary and secondary data obtained from 98 sampled rural MFIs in Tanzania. We found that microfinance capital structure, interest rates charged, differences in lending type, cost per borrower, product type, MFI size, number of borrowers, yield on gross loan portfolio, level of portfolio at risk, liquidity level, staff productivity, and the operating efficiency affect the financial sustainability of rural microfinance institutions in Tanzania.

The study makes the following key contributions to knowledge in addition to determining factors affecting financial sustainability of rural microfinance institutions in Tanzania: First, the study reveals that there exists simultaneous causality relationship between financial sustainability and breadth of outreach. When this relationship is not considered in determining factors affecting financial sustainability there may be inconsistent evidence on the existence of mission drift. Second, it unveils the trade-off between financial sustainability and breadth of outreach with regards to the minimum loan size when group lending is used. That is, larger loan size, while improves profitability, reduces the breadth of outreach. Third, the study provides empirical evidence that the impact of a particular lending type on microfinance institution‟s profitability will depend on the term to maturity and number of instalments reflected in its lending terms. Fourth, consistent with the institutionists‟ view, the study provides empirical evidence that financial sustainability of microfinance institutions improves their breadth of outreach. Lastly, the study documents the applicability and limitations of previous studies to rural microfinance institutions in Tanzania.

Item Type: Thesis (PhD)
Additional Information: uk.bl.ethos.533605
Uncontrolled Keywords: microfinance, Tanzania, financial institutions,
Subjects: H Social Sciences > HG Finance
Faculty / Department / Research Group: Faculty of Business > Department of Accounting & Finance
Last Modified: 14 Oct 2016 09:16
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
URI: http://gala.gre.ac.uk/id/eprint/6366

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