Potential of Microfinance Self-Help Group Lending Approach on Street Vendors’ Access to Financial Resources: Experience from Arusha, Tanzania

Abstract

This paper aimed to assess the potential of microfinance Self-Help Group Lending (SHGL) approach on street vendors’ access to financial resources. The study was conducted in Arusha district in Arusha City Tanzania. The study was guided by Social Capital Theory (SCT) and Life-Cycle Hypothesis Theory (LCHT). A cross-sectional research design was used where a Sample size was purposively selected at one point in time based on one’s engagement in group lending activities. A Cochran (1977) formula was used to calculate the sample size for the unknown population where 400 street vendors were reached. Questionnaire and key informants’ interviews were used to collect primary data. Quantitative and qualitative data analysis supplemented each other to enable in-depth description of the potential of microfinance SHGL approach on access to financial resources by street vendors. Findings revealed that there is a relationship between group lending and access to financial services at Pearson Correlation 0.782. However, Nature of the business of the borrowing member, individual repayment history, insufficient savings by members, entrepreneurial skills and uncertainty of the market safety and operating environment hinders group lending operations. It is recommended that local authorities and formal banking systems should open microfinance windows for small business to access financial resources to enable their business operations.