Effects of microcredit on performance of women owned microenterprises and household welfare in Arusha, Dar-Es Salaam and Mwanza Cities in Tanzania

PhD ThesisMicrocredit schemes have been proliferating all over the world. However, although the impact of those schemes on the borrowers’ businesses and household welfare is widely contested, the number of women borrowers has been on a sharp increase. This study assessed the effect of microcredit obtained from various sources on the performance of women owned microenterprises and household welfare. Specifically, the study sought to: (a) examine the performance of women owned microenterprises in terms of sales revenue, net profit and business net worth; (b) determine the role of microcredit from various sources in business performance in terms of sales revenue, net profit and business net worth; (c) determine correlations between the selected credit characteristics and business performance in terms of sales revenue, net profit and business net worth; (d) estimate the effects of credit characteristics on business performance in terms of sales revenue, net profit and business net worth; and (e) determine the contribution of microcredit to the households’ welfare. The study involved 400 respondents including 217 borrowers and 183 non-borrowers. Data were collected through questionnaire based interviews, key informant interviews and focus group discussions. The results of t-test for mean comparison indicated that businesses of borrowers performed significantly better than those of non-borrowers (p < 0.01). Size of credit (Beta = 0.410, p < 0.001) and borrowing experience (Beta = 0.195, p = 0.049) had statistically significant positive effects on total sales. Also, size of credit had statistically significant positive effect on net profit (Beta = 0.268, p = 0.004). Further, size of credit (Beta = 0.308, p = 0.001) and repayment period (Beta = 0.399, p < 0.001) had significant positive effects on business net worth. It was also found that borrowers had more household assets than non-borrowers. It is concluded that women’s participation in microcredit schemes improves the performance of their businesses as well as their household welfare. It is recommended that more efforts should be made by the government of Tanzania and other stakeholders to expand outreach of microcredit services to women through scaling up Savings and Credit Cooperative Societies (SACCOS)