TITLE:
Determinants for Sustainability of Microfinance Institutions in North “A” District in Zanzibar
AUTHORS:
Zacharia S. Masanyiwa, Tafuteni N. Chusi, Ali U. Haji
KEYWORDS:
Microfinance Institutions, Sustainability, Operational Self-Sufficiency, Financial Self-Sufficiency
JOURNAL NAME:
Open Journal of Business and Management,
Vol.10 No.4,
June
7,
2022
ABSTRACT: Sustainability of microfinance institutions
has been at the centre of many studies in the microfinance industry because it
provides a promising direction for improved access to financial services. This
paper examines the determinants for sustainability of microfinance institutions
in North “A” district in Zanzibar. The specific objectives of the study were to
establish operational self-sufficiency of MFIs, establish financial self-sufficiency of microfinance
institutions, and determine factors influencing operational
and financial self-sufficiency. Primary data were collected from 150 randomly
selected members and 50 purposively selected leaders of microfinance
institutions using questionnaires and checklists. Quantitative data were
analyzed for descriptive statistics, one-way analysis of variance (ANOVA) and multiple
linear regression. It was found that microfinance
institutions expended high administrative
expenses compared to operating and financial expenses which are likely
to affect their operational self-sufficiency, thus, generating low profit. Microfinance
institutions had low capital base compared to their operating time, which
jeopardized their sustainability. Return on assets contributed more to microfinance
institutions’ revenue compared to return on equity and deposit mobilization.
Number of active borrowers and loan portfolio were found to have significant
influence on operational self-sufficiency of microfinance institutions in the
study area. Loan portfolio had negative significant influence (p = 0.057) on financial self-sufficiency
whereas interest rate on loan charged to borrowers was significantly (p = 0.069) associated with financial self-sufficiency of microfinance
institutions. It was recommended that microfinance institutions should minimize
operating and administrative expenses in order to ensure that their profits are not affected by high
operational expenses. Microfinance institutions should also diversify other
profitability businesses in order to increase revenue and capital base.