Credit where it’s due: Growing Tanzania’s rural economy
16 May 2007
In Tanzania, a scheme supported by DFID and other donors is helping to build the
economy in rural areas. The Financial Sector Deepening Trust (FSDT) addresses
the major problem of a lack of access to credit for those who live outside the
cities, assisting small businesses to establish partnerships with banks and
other financial institutions and so achieve growth and prosperity.
An example of how FDST can work successfully is the story of its support for
Dunduliza. Dunduliza is the name for a Tanzania-wide network of savings and
credit co-operatives (SACCOs), which are owned by their members and which
provide financial services to households and small businesses. The individual
co-operatives are able to access money, personnel and other resources from
Dunduliza.
Nurturing local talent and encouraging enterprise
Heavens Raymond is a Dunduliza manager of 19 rural SACCOs in the Mwanza and Mara
regions in the north-west of the country. His job is to help rural communities
to develop their own co-operatives, and part of this involves looking out for
and nurturing local talent like Nestory Sendama. After Heavens saw the
potential of Nestory, a fresh high school graduate, he invited him on to an
eight-week training course. Nestory was subsequently offered a job as the
manager of the Kabila SACCO in rural Mwanza.
With his new-found knowledge, Nestory registered 36 members within two months,
which increased to 829 within three years (2003 – 2005). Dunduliza continued to
help Nestory to develop his career, handing over to him the management of two
rural co-operatives, in Kabila and Magu.
Within one year, the newly-established Magu SACCO had 916 members, which is a
testament to a good, trusting relationship with the local community. Some
members of the Magu community had initially been sceptical of the SACCO, due to
past experiences of financial institutions misusing their money. But under
Nestory’s management the SACCO showed its effectiveness, with local
businesses able to get loans at the average size of Tanzanian shillings (TSh)
350,000 (approximately US$ 270), enabling them to purchase equipment, supplies and
labour.
A stable and productive future
With Dunduliza’s help, Nestory has introduced changes to attract more women
to the Magu SACCO. Women borrowing in groups of three to five members no longer
require guarantors or collateral and can expect to receive bigger loans (TSh
100,000 instead of the usual TSh 50,000) with lower interest rates.
After the training and experience of managing two rural SACCOs, Nestory now
hopes to move on to a co-operative which has greater deposits and larger average
loans, and which will serve even more poor households and small businesses.
Dunduliza has shown that training young Tanzanians like Nestory to run
institutions such as SACCOs is a good way to help create a more economically
stable and productive future for rural communities.
Key facts
- The
2001 Tanzania Household Survey showed that just over 6% of all households had a member with a savings or current account, down from 18% a decade before.
- Approximately 85% of micro and small businesses do not currently access any form of credit.
- In Tanzania, overall private sector credit is 9.4% of GDP (2004) compared to over 20% in Kenya and in excess of 100% in developed countries.
- FSDT was launched in October 2005 to allocate funding to micro-finance institutions over a five year period.
- FSDT is currently supported by the
- The five donors have, through the FSDT, provided over £1.5m in grant funding to Dunduliza and its technical partner, Canada's
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