Msemwa,Cornel2025-04-242025-04-242008https://www.suaire.sua.ac.tz/handle/123456789/6673ThesisMicrofinance is access to financial' services by poor households. The essence of microfinance is uncollateralized loans to borrowers who have not a constant source of income from income generating activity or from a wage job. Microfinance can help small farmers and the self-employed individuals who cannot or will not post standard physical collateral such as a mortgage or real estate. In fact, lenders may not accept collateral for small loans since the cost of seizure and sale may exceed the debt owed. Lack of collateral, however, increases the costs for lenders to judge risk and to enforce repayment (Nagarajan and Meyer, 1995). Microfinance aims to provide financial services to those who do not have the possibility to obtain them from the informal and the formal financial markets. The formal financial sector (banks and other financial institutions) is largely urban-based and organized primarily to meet the financial needs of the modern sector. Many MFI clients do not have any experience with formal banks, or do not qualify for services (lack of collateral and lack of business license). For others, the next bank is simply too far away. Informal financial markets arc ubiquitous; they are generally characterized by personal relationships,, ease of access, simple procedures, rapid transactions, and flexible size and terms of loans. However, not all households have access to informal money sources. Even close family members or good friends are often reluctant to lend money. Moreover, the amounts of money available from friends and relatives are often too smallii to be used as a business investment. Of the various services offered by micro-finance institutions, clients mainly use credit services; savings and advisory services, including tiaining. aic also quite frequently used. Formal banks lend to operate in urban areas leaving rural areas short of sources of finance. This situation causes the emergence of SACCOS as an alternative aiming at filling the gap left by the formal financial providers in rural areas. 1 his research paper highlights the operation of intermediary microfinance institutions in Mbcya region which arc in the partnership with CRDB Microfinance Company Limited. The study is focused on the provision of microfinance services in rural areas. It includes the challenges and the alternative solutions to solve them. The information used in this research paper was collected by conducting physical visit to the selected intermediary microfinance institutions which are working in partnership with CRDB Microfinance hub at CRDB Bank Mbcya branch. The source of information was from monthly report of the microfinance institutions, and focus group discussions with managerial team that were held during the visit. Also some information was collected from Microfinance office at the hub. During the study, it was observed that the main challenges faced by these intermediary microfinance institutions included; lack of innovation and creativity to come up with reliable and relevant products and services to the clients, technical know-how of MFIs staff was still low, working on voluntary basis which could in long run undermine theiii morale of MFIs staffs, and weak MFIs outreach. The paper stipulates some of alternative solutions to improve the situation of these microfinance institutions.enMicrofinance institutionsFinancial servicesMortgageFinancial marketsArticle