Impact of access to microfinance services on farm households’ income in Iringa region, Tanzania.
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Date
2012-11
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Publisher
SUA
Abstract
Most development proponents believe that microfinance can change the livelihood
of poor households. Microfinance are said to smoothen consumption and alleviate
capital constraints of poor people. However, despite these possible roles of
microfinance, empirical evidence on its impact on poor households remains divisive.
This thesis is about the impact of microfinance services on selected rural farm
household crop income and asset accumulations. It provides empirical information
in a Tanzanian context on the nature and extent of the impact of access to
microfinance services on farm income, farm investments, financial savings, and
physical asset accumulation on rural farm households. The study also explored the
factors affecting farm household decisions to participate in microfinance institutions
and the nature, extent and determinants of demand for credit of farm households.
The study involved a survey of rural farm households in Mufindi, Njombe, and
Kilolo districts in Iringa region of Tanzania. A sample size of 419 households was
involved of which 200 were microfinance members and 219 were non-members.
Results show that participation decisions are affected by instability of crop income,
level of education, availability of non-farm income, age, and assets endowment.
Demand for credit is found to be affected by loan duration, location, and type of
microfinance program, education, and dependents ratio. Regarding the impact of
MFIs services on households, the study has found mixed results. MFIs services have
positive but insignificant impact on crop income levels and farm variable inputs.
Results show positive and significant impact on savings and asset accumulation. In
order for MFIs services to have impacts on farm households’ crop income, three policy responses are proposed: One, formation of specialized agricultural
microfinance banks to deal with unique credit needs of farm households. Two,
investment in social, agricultural, and transportation infrastructure in rural areas to
enhance agriculture production and transportation. Three, reforms on marketing of
agricultural products policies to alleviate volatility of prices. Future researches can
use panel data, randomized controlled trials (RCTs) and involve more farm
households in more regions of Tanzania.
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Keywords
Microfinance services, Farm households’ income, Farm investments, Iringa, Tanzania