Assessment of Factors Influencing Revenue Performance of Microfinance Institutions in Tanzania

Abstract

The objective of this study was to assess factors influencing revenue performance of MFIs in Tanzania: A case of Tunakopesha Limited. The study utilized a secondary data set that was gathered from Tunakopesha Limited for a period of twenty years, from 2002 to 2022. The independent variables in the study were firm size, loans disbursement and liquidity, while the dependent variable was the revenue performance of Microfinance Return on Assets. National micro-finance policy, Grameen solidarity group theory and theory of the firm were utilized in this study. For this study, a correlation research design was utilized. The correlation and regression analysis were used to analyze the relationship between dependent and independent variables. Findings portrayed that there is significant relationship between firm size and ROA (0.0757). Also, results indicated that there is significant relationship between loans disbursement and ROA (r =0.0757). Similarly, findings showed that there is insignificant relationship between liquidity and ROA (r = -0.6245). The results value of R2 was 68.01% which is significant level to explain about our model. Based on the findings of the study, it can be concluded that firm size has a strong negative correlation with ROA, indicating that as the size of the institution increases, its ROA decreases. However, loans disbursement has a positive correlation with ROA, meaning that the more loans the institution disburses, the higher its ROA. Moreover, the study found that liquidity has a moderate negative relationship with ROA, suggesting that a higher level of liquidity may not necessarily lead to higher ROA. The study recommends investigation on the impact of technology adoption, such as mobile banking and digital finance, on the revenue performance of MFIs in Tanzania. Also, a comparative study between different types of MFIs in Tanzania, such as community-based versus commercial-based institutions, to gain insights into their unique challenges and opportunities. Keywords: Firm Size, Loans Disbursement, Liquidity, Microfinance Institutions, Return on Assets