Financial Linkages and Performance of Rural Microfinance Cooperatives: Tanzanian Case‪.‬

Abstract Despite the significant number of microfinance institutions (MFIs) targeting people in rural areas, majority of them seem unsustainable and have limited outreach. These weaknesses are, among others, associated with limited funds and management skills. Linking MFIs to commercial banks is viewed as an option to overcome them. Previous studies on selected cases of commercial banks reported a positive relationship between financial linkages and MFIs' outreach. This paper utilises a survey of MFIs to associate the outreach and income of MFIs with their linkages with commercial banks. It reveals limited association, which might be explained by immature financial linkages and or stringent conditions faced by MFIs when accessing loans from commercial banks. On the other hand, the paper reveals that MFIs' outreach and income generation are significantly associated with internal finance, hence the need to promote internal mobilisation of funds.