Financial Linkages and Active Poor Access to Microcredit in Tanzania and Kenya

Abstract

This study explores the role of financial linkages in mitigating barriers to rural active poor to access microcredit. Through the interview to 34 Microfinance institutions (MFIs) and their 74 clients selected from Tanzania and Kenya, the exploratory research using the Content Analysis technique established that financial linkages have significantly contributed in increasing MFIs loanable funds but have not addressed the types and size of collaterals, mandatory savings/deposits amount, higher-than-market interest rates, hidden charges, unbending repayment arrangement, short grace period and inflexible initial loan size which are among key barriers to rural active poor to access microcredit despite its availability. Findings implication appeals for objective national microfinance policy revisit to address aforementioned barriers in both countries if the sector is to benefit the rural active poor.