Tax Regulation and Sustainability of Microfinance Institutions in Masvingo Urban, Zimbabwe

Munyaradzi Duve, Rejoice Mandizvidza, Tendai Chibaya, Moses Nyakuwanika

Abstract

The study seeks to evaluate the effect of the current tax regulatory regime on the sustainability of microfinance institutions (MFIs) in Masvingo urban.  Many governments raise public finance through the taxation of individuals and the business community. Undertaking of this study was mainly motivated by the increase in the number of microfinance institutions after the introduction of the multicurrency system in 2009, but the government is failing to meet its revenue targets. The study was done on 24 loan officers and 8 managers of MFIs. Data was collected using a Likert scale questionnaire. Quantitative data was presented using SPSS. This study found that a tax regulation can enhance the sustainability of MFIs if properly simplified to promote investment in microfinance business through provision of tax exemptions, tax incentives, free registration, simplified record keeping procedures, and reduced tax rates. The study recommends that MFIs should not be heavily taxed if they are to meet a major objective of poverty alleviation.  

Keywords

Tax regulation; sustainability; microfinance; microfinance institutions

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