Factors Influencing Financial Performance of Self-Managed Microfinance Funds in Arusha

The study investigates factors affecting the financial performance of Self-Managed Microfinance Funds (SMMFs) in Arusha, Tanzania, with a focus on their role in urban economic empowerment. The study adopted a pragmatic research philosophy suited to the study's focus. Using a descriptive research design, the study sampled 50 employees from SMMFs, employing both quantitative and qualitative data collection through questionnaires, interviews, and financial reports. A multi-sampling technique was employed, involving purposive identification of the population, followed by simple random stratification, and finally, convenient sampling for data collection. Key findings revealed that 70% of the respondents indicated their SMMFs had clear governance structures, with regression analysis showing a positive correlation (r = 0.67) between strong governance and higher profitability. Additionally, 20% of respondents participated in financial literacy training, and 80% of them reported improved loan and savings management. Loan repayment rates were high, with 75% of respondents reporting rates above 80%, and a strong positive correlation (r = 0.72) was observed between financial literacy and repayment success. Challenges included capital shortages, with 40% of respondents reporting inadequate capital, alongside external issues such as poor economic conditions and weak regulatory enforcement. Despite this, 60% of respondents noted sufficient capital availability. The study concluded that governance structures, financial literacy, and capital availability are crucial to SMMFs' financial sustainability. It recommended enhancing governance practices through leader training, expanding financial literacy programs for all members, improving access to capital by partnering with local governments, and developing risk mitigation strategies to address economic challenges. These measures aim to strengthen the financial performance and long-term sustainability of SMMFs.