Microfinance regulation influence on small firms’ financing in Tanzania
| Pages | 64-74 |
| DOI | https://doi.org/10.1108/13581980410810696 |
| Published date | 01 March 2004 |
| Date | 01 March 2004 |
| Author | Tadeo Andrew Satta |
| Subject Matter | Accounting & finance |
Microfinance regulation influence on small
firms’ financing in Tanzania
Tadeo Andrew Satta
Received (in revised form): 12th August, 2003
Institute for Development Policy and Management, The University of Manchester, Harold Hankins
Building, Precinct Centre, Oxford Road, Manchester M13 9QH, UK; tel. +44 (0)161 223 9277;
e-mail: tsatta68@hotmail.com; t.a.satta@stud.man.ac.uk
Tadeo Andrew Satta is a researcher with
The Institute for Development Policy and
Management (IDPM), University of Man-
chester. His recent publications include
‘Financial information and access to
finance in developing countries’, ‘Enter-
prise characteristics and constraints in
developing countries’ and ‘Foreign-entry
influence on bank lending to small firms’.
His other research interests include finan-
cial regulation, small firms finance and
financial sector development.
ABSTRACT
KEYWORDS: microfinance regulation,
small firms, financial sector, economic
development, Tanzania
Small firms in developing countries continue to
experience difficulties in accessing finance from
formal financial institutions.
1
This paper argues
that regulating microfinance operations and
activities is likely to strengthen microfinance
institutions’ (MFIs) financial sustainability.
This in turn could provide an important source
of finance to small firms. Using the case of the
microfinance industry in Tanzania, the paper
aims at moving the microfinance regulation
debate forward by generating a number of rele-
vant inputs towards the formulation of a regula-
tory framework. This contribution probably
comes at an opportune moment when the Tan-
zanian government is in the process of formu-
lating a framework to regulate and supervise
microfinance institutions.
INTRODUCTION
Despite doubts whether the enthusiasm
with microfinance will last
2
there is wide
acceptance that the legitimacy of microfi-
nance institutions (MFIs) is an important
facet of the financial system.
3,4
Over the
last two decades for example, the microfi-
nance industry particularly in Latin Amer-
ica and Asia has shown impressive results as
a means of delivering financial services to
microenterprises and poor communities
(Bancosol in Bolivia; Grameen Bank in
Bangladesh; Bank Rakyat in Indonesia).
Recent literature also indicates that there is
evidence of growth of the industry in
Africa (K-REP in Kenya; PRIDE in
Kenya and Tanzania). As a result govern-
ment development agencies and the donor
community in developing countries are
increasingly taking a very keen interest in
the use of MFIs in reaching more of those
who the formal financial sector finds
unprofitable.
Existing literature in support of develop-
ing the industry argues that microfinance
can act as a ‘partner’ to small entrepreneurs
in supporting their development into
mainstream banking.
5
Similarly microfi-
nance programmes seem to provide pro-
mise for millions of small businesses in
Page 64
Journal of Financial Regulation and Compliance Volume 12 Number 1
Journal of Financial Regulation
and Compliance, Vol. 12, No. 1,
2004, pp. 64–74
#Henry Stewart Publications,
1358–1988
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