The role of Microfinance Institutions in Poverty Alleviation

Microfinance is being recognized by different researchers as an effective tool to fight poverty by providing financial services to those who do not have access to or are neglected by the commercial banks and financial institutions. Microfinance Institutions were established to help the poor access loans by financing Micro and Small Enterprises. Improved access and efficient provision of savings and credit facilities in particular can enable the poor to smooth their consumption, manage their risks better, gradually build their asset base, develop their Micro and Small Enterprises, enhance their income earning capacity, and enjoy an improved quality of life. The overall objective of this study was to examine the extent to which Microfinance Institutions contribute to poverty alleviation in Tanzania. The study used one region as a sample, hence contributing an in-depth specific case. Information collected from both Microfinance Institutions and their clients revealed that operations of these Microfinance Institutions in the country, to a large extent, have changed the life of poor people positively. The clients have increased their incomes, profits and capital invested.