Factors influencing self-sufficiency of microfinance institutions in Kinondoni and Temeke municipalities, Dar es Salaam, Tanzania

Abstract

Microfinance institutions (MFIs) are considered important in that they offer small-scale loans to poor, low-income people and communities who are considered unbankable. The study was conducted to examine factors influencing self-sufficiency of microfinance institutions in Tanzania. The study was guided by profit incentive theory. The research design that was adopted in this study was a cross-sectional design. The simple random sampling technique was used in selecting microfinance institutions at Kinondoni and Temeke municipal councils. A quantitative research approach was preferred in the current study. This study used a total of 327 registered microfinance institutions as the population of this study. Thus, a sample size of 10 microfinance institutions was used, and secondary data was extracted from annual reports that span from 2015 to 2024. Penal regression analysis was used in analyzing quantitative data collected. The findings revealed that there was a positive and significant relationship between the number of borrowers and the self-sufficiency of MFIs. Firstly, the findings revealed that there was a positive and significant relationship between the amount of loan and the self-sufficiency of MFIs. Secondly, the findings revealed that there was a significant relationship between revenue diversification and self-sufficiency of MFIs. Finally, the findings revealed that there was a positive and significant relationship between the size of microfinance and the self-sufficiency of MFIs. The study concluded that factors that influence self-sufficiency of MFIs include average loan size, firm size, number of active borrowers, and revenue diversification. The study recommended that managers of MFIs should increase the size of loans, the geographical area covered, the retention of active borrowers, and engage in revenue diversification.