Microfinance and the challenge of institutional development: A case study on microfinance institutions in Tanzania
Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
This thesis is about microfinance and the challenges microfinance institutions might face when they try to incorporate the principle objectives of the public support to microfinance. These objectives are that the institutions become financially sustainable, target a large number of poor, and have a significant impact of their lives. However, it is challenging for the institutions to combine these objectives simultaneously. Some have managed to combine them, but many have also reported difficulties. Serving poor people with financial services is costly and difficult and the goal of profitability can therefore easily hurt the commitment to the poor. The purpose of this thesis is to analyze the dominant microfinance institutions in Tanzania and their progress towards incorporating the principle objectives of the public support to microfinance. To do this, qualitative and quantitative data was used. Financial data was derived from a database and income statements, and the qualitative data was gathered from personal interviews with microfinance managers and customers. Two models referring to institutional development were used; the critical triangle of microfinance and the impact frontier. The field study concluded that none of the institutions had managed to combine the three objectives equally and independently over time. The NGOs were aiming of reaching sustainability but to reach it, they had developed products that targeted richer clients, who generated more profit. The commercial banks, who had a clear profitability goal had not even scaled down to target poor people. Their customers were living abouve the poverty line. The NGOs generated a low impact and many of their customers did only experience a small income generation from the loans. In fact, it was not unusual that the clients were worse off than before taking the loan. The clients of the commercial banks had invested the money in their ongoing businesses and many had managed to increase their turn-over significantly. They clearly had a high impact.
Place, publisher, year, edition, pages
IdentifiersURN: urn:nbn:se:su:diva-6000OAI: oai:DiVA.org:su-6000DiVA: diva2:195912