The Contribution of Microfinance Institutions to Poverty Reduction at South District In Zanzibar

Haji, Haji Yussuf (2013) The Contribution of Microfinance Institutions to Poverty Reduction at South District In Zanzibar. Masters thesis, The Open University of Tanzania.

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Abstract

The overall objective of this study was to assess the contributions of Microfinance Institutions (MFIs) in Zanzibar and determine their effectiveness in reducing poverty. The problem behind this study was that, there was no adequate MFI’s contribution to SMEs in Zanzibar. The study used a mixed methods approach in data collection and analysis. It was conducted in South District of Zanzibar. The study focused on 50 participants that responded to all questions and one MFI surveyed in order to assess its breadth and depth of its contributions in its respective operational areas. Following the information collected from both microfinance institutions and their clients, it was revealed that MFIs have changed the life of poor people in a positive way. MFIs’ 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, loan deposit (loan security) and MFIs coverage have been limiting factors for poor people to access the MFI services. Based on the results of this study, it was recommended that, MFIs should be able to issue loans to needy potential customers and collaterals shouldn’t act as barrier. It was further recommended that MFIs need empowerment initiatives including special tax incentives, business and entrepreneurship skills, and special policies that focus to empower in providing loans to indigenous enterprises and individuals who lacks collateral to access financial resources that will results into increasing income, creating employments, eradicating poverty and attaining development sustainability unless the poor will remain poor forever.

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