The Relationship between Client Appraisal and Financial Sustainability among Microfinance Institutions in Tanzania
Gasper Chuwa – Mbeya University of Science and Technology (MUST), Rukwa Campus College, Department of Business Management
Saganga Kapaya – The Open University of Tanzania (OUT), Faculty of Business Management, Department of Accounting and Finance
Email: gasper.chuwa@must.ac.tz
Abstract: The research aimed to investigated the degree to which client appraisal relate to financial sustainability among Microfinance Institutions in Tanzania. And aimed to test the hypothesis, H1: client appraisal has a statistically significant positive relationship with the financial sustainability of microfinance institutions. It was informed by Resource Based View theory. The research employed an explanatory research design. In total 291 Microfinance Institutions from Dodoma, Iringa and Shinyanga regions were visited for data collection. Semi-structured questionnaire in form of 5-point Likert scale was a tool for data collection, and analysed by descriptive (inferential) method. Research findings revealed a negative but statistically insignificant relationship between client appraisal and financial sustainability (β = -0.196, p = 0.193). This research findings implied that client appraisal practices, as currently implemented in various Microfinance Institutions in Tanzania did not significantly predict financial sustainability. It was generally concluded that research findings underscored the complexity of multi-layered nature of financial sustainability in Microfinance Institutions in Tanzania. Besides, and the requirement for context-specific strategies that could balance risk management with operational flexibility. The subsequent recommendations were made, first, Microfinance Institutions need to strengthen client appraisal frameworks using predictive analytics and digital tools to improve risk assessment accuracy and minimize default rates. Second, regular training is needed be offered to Microfinance Institutions staff in order to maintain consistency and precision in evaluation processes. Future longitudinal research is needed which should include other variables including, macroeconomic trends, regulatory impacts, and client-level outcomes to minimise the limitations of present research.
