The influence of sources of finance on MFIS Sustainability: case of Dar es Salaam

The general objective of this study was to find out the influence of sources of finance on MFIs sustainability in Dar-es-Salaam region. To attain the above general objective of this study, the specific objective covered two important components which are to identify available sources of finance to Microfinance Institutions and to identify factors affecting financial sustainability of Microfinance Institutions. The study used descriptive research design. Simple random sampling was employed to collect data from 95 microfinance institutions using interviews and questionnaires. The data was analyzed descriptively and presented through figures, tables and percentages. Quantitative data were collected through questionnaires which were processed using the Statistical Package for Social Science (SPSS). Generally, the findings indicate that source of funds have stronger influence to the MFIs sustainability (69.73% on average). The findings also indicate that the available major sources of finance to MFIs in Tanzania are members’ contributions (31.6%) and owners’ capital fund (47.3%) which cumulatively accounted for 78.9% of all sources of funds followed by grants from donors (15.9%). Findings indicate that customers and profits affect the financial sustainability of MFIs, whereas others factors like competitions from Mobile Network operators (36.8%), competition from commercial banks (89.5%), government policies related to MFIs (31.6%) affect the MFIs sustainability to large extent. Out of all 95 MFIs engaged in this study 93% have small capital with the ability to lend between 1,000,000 and 40,000,000 a year. It is recommended that small MFIs especially VICOBA should form the joint ventures to enable them accumulate large capital and customer base instead of the existing situation. There is also, the need for MFIs to get trained in financial management areas which will enhance their understanding and preparations for their business strategies.