The Effectiveness of Micro Financing Services in the Growth of Micro and Small Entrepreneurs A Case of Azania Bank Plc, Express Microfinance Company Limited.

Abstract

Microfinance industry has become increasingly important in the world as a major strategy in the development agenda for poverty reduction and in the promotion of Small and Medium Enterprises (SMEs). The introduction of micro financial institutions is seen as the best alternative source of financial services for low income earners in both rural and urban areas as a means to raise their income, hence reducing their poverty level. SMES's need both financial and non-financial services like provision of loans, advice on how to manage and use their funds effectively to enhance their productivity, profitability and growth. Hold the view that access to financial and business development services are essential for growth and development of Micro and Small Enterprises. After running a regression in which loan portfolio performance is the dependent variable, the study found a positive significant coefficient of 0.79 and (p=0.42) on group lending without moderating factors. When moderating factors were included the coefficient becomes 0.38 and (p=0.19). The null hypothesis was therefore rejected. There is no significant relationship of individual lending on performance of loan portfolio in the regression despite finding a positive coefficient of 0.41 and (p=0.27). Therefore there is no effect on individual lending on performance, another study on microfinance in TanzaniaAccording to the latest information made available by BOT, there are in Tanzania 4 microfinance banks. Therefore, the study recommends Authority to invest in building capacity by providing the training to upgrade with new knowledge and techniques.