The aim of this research was to find out the impact of Microfinance institutions
(MFIs) on Micro and Small business performance. The research is cross-section
research design employing the use of questionnaires. The research was conducted in
Dodoma Municipality Tanzania, covering 73 small and micro-enterprises. The
hypothesis was operating cost, amount of loan delivered, training given to loan
applicants and the amount saved, all variables have positive relationship with
enterprise’s gross operating profit except one variable which is training. From the
results obtained it shows existence of negative correlation between training and gross
operating profit. Although theoretically training has positive correlation with
enterprise’s gross operating profit.
The research employed econometric model using OLS as analysis tool of the results
drawn from SPSS and STATA software packages.
The employed model has shown to have significantly represented the real world by
more than 96%. Upon observation there has been discovered that all the variables
under test significant and positively relating with dependent variable, except one
variable (training). Amount saved, amount of loan delivered, operating cost and
training respectively correlate with gross operating profit.
Policy issue regarding to the findings of this research would be that; first to stabilize
Microfinance institutions (MFIs) capacity to expand services by increasing more
products and coverage so that many people are reached. The second is to soften the
conditions so as to increase capacity for entrepreneurs to partner with MFIs. Third is
to emphasize entrepreneurs’ partner with the MFIs to access loans services and be
able to save in financial services so as to create loan ability and through tracing their
financial flows. Also to put emphasis on MFIs to provide training and advice to all
their clients so as to boost up the performance of their businesses. Microfinance
institutions (MFIs) have proved distinguished impact to positively impact business
performance.