Abstract:
This study identified the effect of MFIs on income of MSE owners who had better access to credit facilities. Micro credit was found to be a critical instrument in improving the income of poor people. The present study examined the extent to which microfinance services were successful in delivering their promise, particularly to the poor and its resultant effect on household income. Both primary and secondary data were used in the study. The study collects data from 110 respondents, including 60 beneficiaries and 50 non-beneficiaries of MFIs credit. A survey design in this study involved both participant of MFI and non-participant. The results of the study showed that contribution of microfinance had significant medium effect on the income of owners of MSEs which can be geared towards improving self employment opportunities. Although microfinance is vital for MSE survival its operations is often associated with several transactions cost imposed not only by time spent in the application process but also complying with monitoring and supervision rules. The results also showed these microfinances faced a significant transaction cost on credit; the average transaction cost on loan was about 28% which is higher compared to IIM (2014) where transaction cost was around 7%. The high Transaction Cost (TC) associated with these loans has always been the concern of both researchers as well as policy makers. A significant reduction in TC for clients has been advocated as the main mantra of microfinance.
