This paper examines the relationship between the economic wellbeing of microfinance cooperatives’ (MFCs) clients and financial linkage intensity, moderated by multiple linkages and linkage duration. It applies regression models on data from 575 clients of 20 MFCs which were involved in financial linkages with formal financial institutions (FFIs). Findings revealed that the MFCs clients’ income is positively associated with linkage intensity. However, multiple linkages and linkage duration weakened the association between linkage intensity and MFCs clients’ income. This could be an outcome of high costs of maintaining multiple linkages, unfavourable conditions and terms of loans from multiple FFIs as well as high costs of lock-in among MFCs with a long-term relationship with FFIs. The costs trickle down to MFCs clients and worsen their economic wellbeing. MFCs need to avoid borrowing from multiple FFIs at the same time and linkage duration which may lock them in. They should also use their long-term relationship with FFIs to bargain for better terms.

Aryeetey, E. (2008) ‘From informal finance to formal finance in sub-Saharan Africa: lessons from linkage efforts’, paper presented at the African Finance for the 21st Century High-Level Seminar, IMF Institute in Collaboration with the Joint Africa Institute Tunis, Tunisia, 4–5 March 2008.

Baltagi, B.H. (2011) Econometrics, 5th edn, Springer-Velarg, Berlin Heidelberg.

Bashar, T. and Rashid, S. (2012) ‘Urban microfinance and urban poverty in Bangladesh’, Journal of the Asia Pacific Economy 17(1): 151–70 <http://dx.doi.org/10.1080/13547860.2012.640019>.

Bharath, S.T., Dahiya, S., Saunders, A. and Srinivasan, A. (2011) ‘Lending relationships and loan contract terms’, Review of Financial Studies 24(4): 1141–203 <http://dx.doi.org/10.1093/rfs/hhp064>.

Boot, A.W.A. (2000) Relationship banking: what do we know? Journal of Financial Intermediation 9: 7–25 <http://dx.doi.org/10.1006/jfin.2000.0282>.

Bystrom, H.N.E. (2008) ‘The microfinance collateralised debt obligation: a modern Robin Hood?’ World Development 36(11): 2109–26 <http://dx.doi.org/10.1016/j.worlddev.2007.11.012>.

Chowdhury, T.A. and Mukhopadhaya, P. (2012) ‘Assessment of multidimensional poverty and effectiveness of microfinance-driven government and NGO projects in the rural Bangladesh’, The Journal of Socio-Economics 41(5): 500–12 <http://dx.doi.org/10.1016/j.socec.2012.04.016>.

CRDB Bank Microfinance Services Company Ltd (2012) Annual Report 2012 [pdf] <http://74.50.50.249/files/doc/4.pdf> [accessed 3 April 2020].

D’Espallier, B., Hudon, M. and Szafarz, A. (2013) ‘Unsubsidized microfinance institutions’, Economics Letters 120: 174–6 <http://dx.doi.org/10.1016/j.econlet.2013.04.021>.

Degryse, H. and Van Cayseele, P. (2000) ‘Relationship lending within a bank-based system: evidence from European small business data’, Journal of Financial Intermediation 9: 90–109 <http://dx.doi.org/10.1006/jfin.1999.0278>.

Duvendack, M., Palmer-Jones, R., Copestake, J.G., Hooper, L., Loke, Y. and Rao, N. (2011) What is the Evidence of the Impact of Microfinance on the Well-being of Poor People? [pdf], EPPI-Centre, Social Science Research Unit, Institute of Education, University of London <https://www.givedirectly.org/pdf/DFID_microfinance_evidence_review.pdf> [accessed 20 June 2018].

Ellis, K., Lemma, A. and Rud, J. (2010) Financial Inclusion, Household Investment and Growth in Kenya and Tanzania [pdf], Project Briefing No. 43, ODI, London <http://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/5776.pdf> [accessed 18 September 2017].

Elyasiani, E. and Goldberg, L. (2004) ‘Relationship lending: a survey of the literature’, Journal of Economics and Business 56: 315–30 <http://dx.doi.org/10.1016/j.jeconbus.2004.03.003>.

FinScope (2013) FinScope Tanzania 2013 [pdf] <https://www.nbs.go.tz/nbs/takwimu/references/FinScope-Brochure-2013.pdf> [accessed 3 April 2020].

Fisher, I. (1930 [1974]) The Theory of Interest: As Determined by Impatience to Spend Income and Opportunity to Invest It, Augustus M. Kelley Publishers, Clifton, NJ.

Harhoff, D. (1998) ‘Lending relationships in Germany: empirical results from survey data’, Journal of Banking & Finance 22(10–11): 1317–53 <https://doi.org/10.1016/S0378-4266(98)00061-2>.

Hossain, S. (2013) ‘Is commercialisation of microfinance responsible for over-indebtedness? The case of Andhra Pradesh crisis’, Journal of Economics and Sustainable Development 4(17): 2222–855.

Ishengoma, E.K. (2004) The Role of Firm-Resources: Performance Differentials between Women- and Men-owned Micro-enterprises in Tanzania, University of Leipzig Papers on Africa, No. 70.

Ishengoma, E.K. (2010) ‘Financial linkages and cost efficiency: lessons from microfinance cooperatives in Tanzania’, Business Management Review 14: 1–29.

Ishengoma, E.K. (2013) ‘Linkage banking and outreach: a case of microfinance cooperatives in Tanzania’, Business Management Review 16: 95–113.

Ishengoma, E.K. (2018) ‘Entrepreneur attributes and formalization of micro, small and medium enterprises in Tanzania’, Journal of African Business 19(4): 492–511 <http://dx.doi.org/10.1080/15228916.2018.1472480>.

Ishengoma, E.K. and Towo, N.N. (2016) ‘Bank requirements and governance for savings and credit co-operative societies (SACCOS) in Tanzania and Kenya’, Enterprise Development & Microfinance 27(3): 236–54 <http://dx.doi.org/10.3362/1755-1986.2016.013>.

Ivatury, G. and Reille, X. (2004) Foreign Investment in Microfinance: Debt and Equity from Quasi-Commercial Investors [pdf], Focus Note No. 25, CGAP, Washington, DC <https://www.cgap.org/sites/default/files/CGAP-Focus-Note-Foreign-Investment-in-Microfinance-Debt-and-Equity-from-Quasi-Commercial-Investors-Jan-2004.pdf> [accessed 18 September 2017].

Kaleshu, J. and Temu, S. (2012) Expansion of rural financial services through linkage banking in Tanzania: is joint action between savings and credit cooperative societies (SACCOS) a promising approach? Enterprise Development and Microfinance 23(2): 146–60 <http://dx.doi.org/10.3362/1755-1986.2012.015>.

Littlefield, E., Morduch, J. and Hashemi, S. (2003) Is Microfinance an Effective Strategy to Reach the Millennium Development Goals? [pdf], CGAP Focus Note 24 (January), CGAP, Washington, DC <https://www.cgap.org/sites/default/files/CGAP-Focus-Note-Is-Microfinance-an-Effective-Strategy-to-Reach-the-Millennium-Development-Goals-Jan-2003.pdf> [accessed 20 June 2017].

Nghiem, S., Coelli, T. and Rao, P. (2012) ‘Assessing the welfare effects of microfinance in Vietnam: empirical results from a quasi-experimental survey’, Journal of Development Studies 48(5): 619–32 <http://dx.doi.org/10.1080/00220388.2011.638051>.

Pagura, M. and Kirsten, M. (2006) ‘Formal-informal financial linkages: lessons from developing countries’, Small Enterprise Development 1(March): 16–29 <http://dx.doi.org/10.3362/0957-1329.2006.005>.

Reille, X., Forster, S. and Rozas, D. (2011) Foreign Capital Investment in Microfinance: Reassessing Financial and Social Returns [pdf], CGAP Focus Note No. 71, CGAP, Washington, DC <https://www.cgap.org/sites/default/files/CGAP-Focus-Note-Foreign-Capital-Investment-in-Microfinance-Reassessing-Financial-and-Social-Returns-May-2011.pdf> [accessed 20 June 2017].

Romer, P.M. (1990) ‘Endogenous technological change’, Journal of Political Economy 98(5): 71–102 <http://dx.doi.org/10.1086/261725>.

Rooyen, C.V., Stewart, R. and Wet, T.D. (2012) ‘The impact of microfinance in sub-Saharan Africa: a systematic review of the evidence’, World Development 40(11): 2249–62 <http://dx.doi.org/10.1016/j.worlddev.2012.03.012>.

Seibel, H.D. (2005) Linkages between Banks and Microfinance Institutions in Mali: A Case Study [pdf], Working Papers, Universität Köln <https://www.microfinancegateway.org/sites/default/files/mfg-en-case-study-linkages-between-banks-and-microfinance-institutions-in-mali-a-case-study-mar-2005.pdf> [accessed 3 April 2020].

Solow, R.M. (1959) ‘A contribution to the theory of economic growth’, The Quarterly Journal of Economics 70(1): 65–94.

Temu, S.S. and Ishengoma, E.K. (2010) ‘Financial linkages and performance of rural microfinance cooperatives: Tanzanian case’, Indian Journal of Economics and Business 9(2): 285–302.

Towo, N., Mori, N. and Ishengoma, E. (2019) ‘Financial leverage and labour productivity in microfinance co-operatives in Tanzania’, Cogent Business Management 6 <http://dx.doi.org/10.1080/23311975.2019.1635334>.

United Republic of Tanzania (URT) (2015) The Cooperative Societies Regulations, 2015, Government Notice No. 272, Dar es Salaam, United Republic of Tanzania.

Aryeetey, E. (2008) ‘From informal finance to formal finance in sub-Saharan Africa: lessons from linkage efforts’, paper presented at the African Finance for the 21st Century High-Level Seminar, IMF Institute in Collaboration with the Joint Africa Institute Tunis, Tunisia, 4–5 March 2008.

Baltagi, B.H. (2011) Econometrics, 5th edn, Springer-Velarg, Berlin Heidelberg.

Bashar, T. and Rashid, S. (2012) ‘Urban microfinance and urban poverty in Bangladesh’, Journal of the Asia Pacific Economy 17(1): 151–70 <http://dx.doi.org/10.1080/13547860.2012.640019>.

Bharath, S.T., Dahiya, S., Saunders, A. and Srinivasan, A. (2011) ‘Lending relationships and loan contract terms’, Review of Financial Studies 24(4): 1141–203 <http://dx.doi.org/10.1093/rfs/hhp064>.

Boot, A.W.A. (2000) Relationship banking: what do we know? Journal of Financial Intermediation 9: 7–25 <http://dx.doi.org/10.1006/jfin.2000.0282>.

Bystrom, H.N.E. (2008) ‘The microfinance collateralised debt obligation: a modern Robin Hood?’ World Development 36(11): 2109–26 <http://dx.doi.org/10.1016/j.worlddev.2007.11.012>.

Chowdhury, T.A. and Mukhopadhaya, P. (2012) ‘Assessment of multidimensional poverty and effectiveness of microfinance-driven government and NGO projects in the rural Bangladesh’, The Journal of Socio-Economics 41(5): 500–12 <http://dx.doi.org/10.1016/j.socec.2012.04.016>.

CRDB Bank Microfinance Services Company Ltd (2012) Annual Report 2012 [pdf] <http://74.50.50.249/files/doc/4.pdf> [accessed 3 April 2020].

D’Espallier, B., Hudon, M. and Szafarz, A. (2013) ‘Unsubsidized microfinance institutions’, Economics Letters 120: 174–6 <http://dx.doi.org/10.1016/j.econlet.2013.04.021>.

Degryse, H. and Van Cayseele, P. (2000) ‘Relationship lending within a bank-based system: evidence from European small business data’, Journal of Financial Intermediation 9: 90–109 <http://dx.doi.org/10.1006/jfin.1999.0278>.

Duvendack, M., Palmer-Jones, R., Copestake, J.G., Hooper, L., Loke, Y. and Rao, N. (2011) What is the Evidence of the Impact of Microfinance on the Well-being of Poor People? [pdf], EPPI-Centre, Social Science Research Unit, Institute of Education, University of London <https://www.givedirectly.org/pdf/DFID_microfinance_evidence_review.pdf> [accessed 20 June 2018].

Ellis, K., Lemma, A. and Rud, J. (2010) Financial Inclusion, Household Investment and Growth in Kenya and Tanzania [pdf], Project Briefing No. 43, ODI, London <http://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/5776.pdf> [accessed 18 September 2017].

Elyasiani, E. and Goldberg, L. (2004) ‘Relationship lending: a survey of the literature’, Journal of Economics and Business 56: 315–30 <http://dx.doi.org/10.1016/j.jeconbus.2004.03.003>.

FinScope (2013) FinScope Tanzania 2013 [pdf] <https://www.nbs.go.tz/nbs/takwimu/references/FinScope-Brochure-2013.pdf> [accessed 3 April 2020].

Fisher, I. (1930 [1974]) The Theory of Interest: As Determined by Impatience to Spend Income and Opportunity to Invest It, Augustus M. Kelley Publishers, Clifton, NJ.

Harhoff, D. (1998) ‘Lending relationships in Germany: empirical results from survey data’, Journal of Banking & Finance 22(10–11): 1317–53 <https://doi.org/10.1016/S0378-4266(98)00061-2>.

Hossain, S. (2013) ‘Is commercialisation of microfinance responsible for over-indebtedness? The case of Andhra Pradesh crisis’, Journal of Economics and Sustainable Development 4(17): 2222–855.

Ishengoma, E.K. (2004) The Role of Firm-Resources: Performance Differentials between Women- and Men-owned Micro-enterprises in Tanzania, University of Leipzig Papers on Africa, No. 70.

Ishengoma, E.K. (2010) ‘Financial linkages and cost efficiency: lessons from microfinance cooperatives in Tanzania’, Business Management Review 14: 1–29.

Ishengoma, E.K. (2013) ‘Linkage banking and outreach: a case of microfinance cooperatives in Tanzania’, Business Management Review 16: 95–113.

Ishengoma, E.K. (2018) ‘Entrepreneur attributes and formalization of micro, small and medium enterprises in Tanzania’, Journal of African Business 19(4): 492–511 <http://dx.doi.org/10.1080/15228916.2018.1472480>.

Ishengoma, E.K. and Towo, N.N. (2016) ‘Bank requirements and governance for savings and credit co-operative societies (SACCOS) in Tanzania and Kenya’, Enterprise Development & Microfinance 27(3): 236–54 <http://dx.doi.org/10.3362/1755-1986.2016.013>.

Ivatury, G. and Reille, X. (2004) Foreign Investment in Microfinance: Debt and Equity from Quasi-Commercial Investors [pdf], Focus Note No. 25, CGAP, Washington, DC <https://www.cgap.org/sites/default/files/CGAP-Focus-Note-Foreign-Investment-in-Microfinance-Debt-and-Equity-from-Quasi-Commercial-Investors-Jan-2004.pdf> [accessed 18 September 2017].

Kaleshu, J. and Temu, S. (2012) Expansion of rural financial services through linkage banking in Tanzania: is joint action between savings and credit cooperative societies (SACCOS) a promising approach? Enterprise Development and Microfinance 23(2): 146–60 <http://dx.doi.org/10.3362/1755-1986.2012.015>.

Littlefield, E., Morduch, J. and Hashemi, S. (2003) Is Microfinance an Effective Strategy to Reach the Millennium Development Goals? [pdf], CGAP Focus Note 24 (January), CGAP, Washington, DC <https://www.cgap.org/sites/default/files/CGAP-Focus-Note-Is-Microfinance-an-Effective-Strategy-to-Reach-the-Millennium-Development-Goals-Jan-2003.pdf> [accessed 20 June 2017].

Nghiem, S., Coelli, T. and Rao, P. (2012) ‘Assessing the welfare effects of microfinance in Vietnam: empirical results from a quasi-experimental survey’, Journal of Development Studies 48(5): 619–32 <http://dx.doi.org/10.1080/00220388.2011.638051>.

Pagura, M. and Kirsten, M. (2006) ‘Formal-informal financial linkages: lessons from developing countries’, Small Enterprise Development 1(March): 16–29 <http://dx.doi.org/10.3362/0957-1329.2006.005>.

Reille, X., Forster, S. and Rozas, D. (2011) Foreign Capital Investment in Microfinance: Reassessing Financial and Social Returns [pdf], CGAP Focus Note No. 71, CGAP, Washington, DC <https://www.cgap.org/sites/default/files/CGAP-Focus-Note-Foreign-Capital-Investment-in-Microfinance-Reassessing-Financial-and-Social-Returns-May-2011.pdf> [accessed 20 June 2017].

Romer, P.M. (1990) ‘Endogenous technological change’, Journal of Political Economy 98(5): 71–102 <http://dx.doi.org/10.1086/261725>.

Rooyen, C.V., Stewart, R. and Wet, T.D. (2012) ‘The impact of microfinance in sub-Saharan Africa: a systematic review of the evidence’, World Development 40(11): 2249–62 <http://dx.doi.org/10.1016/j.worlddev.2012.03.012>.

Seibel, H.D. (2005) Linkages between Banks and Microfinance Institutions in Mali: A Case Study [pdf], Working Papers, Universität Köln <https://www.microfinancegateway.org/sites/default/files/mfg-en-case-study-linkages-between-banks-and-microfinance-institutions-in-mali-a-case-study-mar-2005.pdf> [accessed 3 April 2020].

Solow, R.M. (1959) ‘A contribution to the theory of economic growth’, The Quarterly Journal of Economics 70(1): 65–94.

Temu, S.S. and Ishengoma, E.K. (2010) ‘Financial linkages and performance of rural microfinance cooperatives: Tanzanian case’, Indian Journal of Economics and Business 9(2): 285–302.

Towo, N., Mori, N. and Ishengoma, E. (2019) ‘Financial leverage and labour productivity in microfinance co-operatives in Tanzania’, Cogent Business Management 6 <http://dx.doi.org/10.1080/23311975.2019.1635334>.

United Republic of Tanzania (URT) (2015) The Cooperative Societies Regulations, 2015, Government Notice No. 272, Dar es Salaam, United Republic of Tanzania.