Sarcouncil Journal of Economics and Business Management

Abstract: Microfinance has become very important in global poverty reduction debates. The popular assumption is that enabling poor households access to credit helps households begin micro entrepreneurship which would enable them improve their incomes and eventually escape poverty. The purpose of this paper is to introduce practical evidence about challenges facing microfinance institutions in meeting their mission of poverty alleviation and to examine what role microfinance institutions can play in eradication of poverty particularly in Dodoma City. A survey research method has been adopted to examine challenges facing microfinance institutions (MFIs) in poverty alleviation. The data were collected through questionnaires filled by forty five (45) respondents equally selected from three (3) microfinance institutions operating in Dodoma, namely; FINCA Microfinance Bank, BRAC Tanzania and ASA Microfinance. The results of the questionnaire were then analyzed with the aid of SPSS using descriptive statistics. The results revealed that microfinance institutions have a positive impact on alleviation of poverty among poor people, however insufficient support from governments, default risk inherited from borrowers and communication gaps and inadequate awareness found to be the major challenges facing MFIs in meeting their mission of poverty alleviation