Impact of micro finance on poverty reduction in Tanzania: a case study of Sido in Ilala district

Poverty is enemy number one within our country and other parts of the world. A number of strategies have been designed to enable its total alleviation in the country and the world at large. A country with poor people has low economic growth, but people with strong economic power will guarantee a high economic growth rate of the country. This study sets out to investigate the Impact of Micro Finance on Poverty Reduction in Tanzania, using the case study of SIDO in Ilala District which disburses loans to small and medium enterprises throughout the whole Country. Data for the study were collected between April to May 2007 from 30 clients of SIDO, from two districts, Ilala and Temeke. Survey information collected by the study indicates that in order for the business to grow it needs more capital, training, lower interest rates and a reduction of different charges without forgetting a conducive environment for business operations. It is difficult for a poor country to benefit from micro finance if the environment is not conducive; otherwise the credit system is looked at as the means of distributing income to the poor. Throughout the study various weaknesses were identified that need both the institutions and the government together to resolve in order to achieve poverty reduction through the Micro finance scheme. Furthermore, the study revealed that, although loans from SIDO is for poor people who have no tangible assets and it was set to cater for them, the programme does not follow those principles. The amount of money clients receive is too small to boost the growth of their business and so the institution needs to get more seed fund in order to enhance business growth. Changes in the programme's operations need to take place because a comparison of SIDO loan borrowers and non borrowers indicated that there is no significance difference, which means that the loan did not help much and something was needed to supplement the loan. If changes were made, SIDO loans would be a more effective tool in the effort to alleviate poverty.