The impact of commercialization on financial performance of microfinance institutions in Tanzania

This study examined the impact of commercialization to financial performance and outreach of MFIs in Tanzania. The question of concern is on profitability and how MFIs adhere to the social mission of reaching the poor while they scale up and commercialize. The study examined nine MFIs which have their data readily available in the mix market; these are taken to be representative of the Tanzania MFI’s industry. The study assessed the status of Tanzania MFIs commercialization, the extent of the mission drift and the impact of commercialization on financial performance of the MFIs. This study employed the commercialization framework, trend analysis and regression analysis to assess the appropriate indicators in each aspect. The results indicate that there is a general low level of commercialization, no significant mission drift and insignificant contribution of commercialization on financial performance the MFIs in Tanzania. Commercialization of microfinance in Tanzania holds the promise of capitalizing on the achievements in financial performance and outreach. The general improvement in MFI’s financial self sufficiency and efficiency are promising but the industry is far from achieving all potential benefits of microfinance commercialization.