Factors Affecting the Performance of Microfinance in Zanzibar

Khamis, Latifa M. (2023) Factors Affecting the Performance of Microfinance in Zanzibar. Masters thesis, The Open University of Tanzania.

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Abstract

This study assessed the factors that affect microfinance institutions’ performance in Unguja urban, Zanzibar. The study specifically assessed the effect of employee training on microfinance institutions’ performance, the effect of capital lending on microfinance institutions’ performance, and the effect of risk management practice on microfinance institutions’ performance. Descriptive research design was adopted as a research design. The study involved a sample size of 176 respondents. Data were collected using questionnaire. Analysis of the findings revealed that, training needs, training content, training evaluation, and training implementation has influence on microfinance institutions’ performance. It was also found that, peer selection, peer monitoring, dynamic incentives, collateral substitutes, and repayment schedule influences individual and institutional performance. On the other hand, risk management practices which were found to influence microfinance institution performance include risk identification, risk measurement, and monitoring and management. An econometric analysis using Multiple Linear regression revealed that, employee training, capital lending, and risk management has a significant relationship with microfinance institutions’ performance. The factors explained 44% of the performance variation. The study recommends that, microfinance institutions should establish and implement a management information system and an internal risk assessment system that are appropriate for the type, scale, and complexity of their operations. Key words: EmployeesTraining, CapitaLending, RiskManagement, MFIs Performance

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