The role of microfinance in poverty alleviation in Tanzania: a case of national microFinance bank (NMB) – Mwenge Branch

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University of Dar es Salaam
Microfinance can be a critical element of an effective poverty reduction strategy especially for developing countries. The services provided by microfinance institutions can enable the poor to obtain their requirements, manage their risks better, build their assets gradually, enhance their income earning capacity and enjoy an improved quality of life. This paper examined the extent to which Microfinance Institutions (MFIs) contribute to poverty reduction in Tanzania. 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 and the capital invested and therefore the expansion of their businesses. Despite these achievements it was further observed that some conditions like the grace period for loan repayment, collateral and MFI coverage have been factors limiting poor people from accessing the MFI services. Over the last six years, a large number of microfinance programmes have successfully contributed to lifting people out of poverty in many countries of the world. Financial services enable the poor to increase their incomes and diversify their sources of income, and to build up and change their mix of assets. In addition to income-generating activities, the poor use microcredit for better nutrition; improved health; access to schooling; for supporting public infrastructure, such as improved housing, water and sanitation; or for the purchase of animals and consumer durables. Access to microfinance enables poor people to reduce their vulnerability in times of crisis. In particular, microfinance allows poor women to have a greater number of choices and to have a voice in family and community matters. It also enhances their self-esteem and self-confidence and opens up new opportunities for them to operate as Micro and Small Enterprises. Hence the role of Microfinance in poverty alleviation is crucial.
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Microfinance, Poverty alleviation, National Microfinance Bank, Tanzania
Augustino, M