Effectiveness of Microfinance Markets in Alleviating Poverty

Abstract

Micro-Finance Institutions (MFIs) have been the focus of many studies because of their importance in poverty alleviation. This study was on effectiveness of micro-finance institutions in alleviating poverty. The research problems were that, despite the fact that the majority of Tanzanians lived in rural areas and were entangled by vicious circle of poverty and savings were expected to have at least equal weight to credit in MFIs, most microfinance institutions concentrated more in urban areas than rural areas and gave less weight to savings than credit. The objective of the study was to examine the effectiveness of savings and credit microfinancing market in poverty alleviation in Tanzania. Specific objectives included examining: • whether or not savings were given equal weight as credit; • the factors which made MFIs more prominent in urban than rural areas; and • their effectiveness in poverty alleviation. The research addressed three questions; namely: • How had microfinance institutions been oriented to the supply side? • How far had they served the rural clients? and • How effective had MFIs’ operations been in alleviating poverty. Further, the study was guided by three hypotheses; namely: • MFIs were not oriented to the supply side; • Services of micro-credit institutions to rural clients were negligible; and • MFIs' services were not effective in alleviating poverty. 2 A multiple case study was purposely opted for as a research design because a case study design per se provided for a deep analysis of a single unit, the results of which were particular to that study unit. Such results could not be directly generalised or inferred to the entire population. The multiple case study design, on the other hand, contained all elements of the case study and involved several cases. As such, findings from a multiple case study could tentatively lay a basis for inference to the population.