The Contribution of Microfinance Institution Services in the Development of Small and Medium Enterprises: Evidence from Ilala City, Tanzania

Abstract

The objective of this study was to examine the contribution of microfinance institutions (MFIs) to the development of small and medium enterprises (SMEs) in Ilala City in Tanzania. The study aimed to determine the influence of financial and non-financial services provided by MFIs on SME capital growth, income growth and employment generation. Data on the identified variables were collected using questionnaires from 158 owners of SMEs and analysed using multivariate analysis of variance (MANOVA). The data used in the study had a Cronbach's Alpha of 0.84, which is above the required value of 0.7 (rule of thumb)The study found that MFI services had a positive influence on capital and income growth of SMEs, while MFI services had a positive but non-significant impact on the ability of SMEs to create jobs. The study therefore recommends that public sector analysts and managers develop specific policies that impact on SME growth.