Contribution of microfinance loans to women entrepreneurs in Tanzania: Reflections from the case of the National Microfinance Bank (NMB) in Arusha City

Abstract

This research looked at the contribution of National Microfinance Bank (NMB) loans to women entrepreneurs in Arusha City, Tanzania. The need for this present study stems from ongoing discussions in the literature regarding microfinance’s function in bettering the livelihoods of the poor. This is more so in emerging economies, e.g., the Philippines, India, Indonesia, and several countries in Africa, where evidence has remained vague. Notwithstanding the fact that microfinance institutions (MFIs) in Tanzania have undergone accelerated growth, the vast majority of small-scale businesses struggle to remain afloat. It has been noted that most businesses stagnate or, worse, fail within the first five years of operation. As such, this issue underscores the value of critically evaluating whether microfinance interventions, especially those focusing on women entrepreneurs, are attaining their intended objectives, namely poverty reduction and economic empowerment. This study was guided by the following specific objectives: (i) to document and analyze benefits of NMB’s loan to women entrepreneurs, (ii) to examine the use of loans by women entrepreneurs, and (iii) to identify factors affecting loan performance in women enterprises and NMB. This research was anchored on the empowerment theory. This study utilized a case study research design. The targeted population encompassed women entrepreneurs and NMB staff in Arusha City. A sample size of 138 responders was purposively and randomly chosen. Data was obtained through structured questionnaires and interviews and later analyzed thematically and statistically in order to address the study objectives. The key findings indicated that NMB loans contributed positively to women entrepreneurs. This was through boosting incomes, bettering asset ownership, and raising their social standards. Accessing loans allowed women beneficiaries to finance basic needs like food, education, shelter, and health care. In addition, it assisted in diversifying their business portfolios. Nonetheless, challenges were encountered.They comprised diversion of loans, deceit, and late repayment. These curtailed the sustainability of the program. In the same vein, the minimum loan amounts availed proved to be meager to generate substantial profits. As a result, it limited entrepreneurs' capacity to expand their businesses. This study's outcomes concluded that despite the fact that NMB loans have the ability to lift the well-being of women entrepreneurs, their impact on poverty eradication remains limited without complementary measures. This research recommended that NMB ought to empower borrowers by means of training them in business management and operational skills. It also suggested that loan amounts should be increased so as to enhance business growth and sustainability. These kinds of interventions will be beneficial to the institution through better repayment rates. To the beneficiaries, there will be increased profitability and long-term business success.