Je, unatumia taasisi yoyote ya kifedha iliyopo katika wilaya hii?88%12%HapanaNdiyoHOWPOORPEOPLEINMOROGORO,DODOMA,SINGIDA,A...
Page 2Access to FinanceContentspageSummary of findings _____________________________________________________ 4Chapter 1 __...
Page 3Chapter 5 ______________________________________________________________ 59A Strategy for Greater Access ___________...
Page 4Access to FinanceSummaryoffindingsIn almost every part of the world, limited access to finance is a seriously bindin...
Page 5Bank (8.1 percent), groups (6.8 percent), and two major financialNGOs (5.7 percent). In terms of services, less th...
Page 6Access to Financeas likely the first major cause of financial exclusion, however, is highcost of service, inconvenie...
Page 7budgeting, managing credit, and their own responsibilities towardsbuilding responsible financial intermediaries to t...
Page 8Access to FinanceChapter1BACKGROUND&INTRODUCTION1.1 INTRODUCTIONThis report presents the results of a baseline surve...
Page 9country with Bujumbura, Burundi, by boats on Lake Tanganyika, and further on toRwanda by road. The parallel road rou...
Page 10Access to Finance1.2 SURVEY OBJECTIVESRLDC considers the baseline survey as an important part of its 10-step proces...
Page 11discussed separately in a parallel report, is the number of households presentlyaccessing relevant business develop...
Page 12Access to Financethey deal almost exclusively with their shareholding customers only. Accordingly, thesurvey treate...
Page 131.4 DATA COLLECTION AND SAMPLINGThree sets of data were collected using separate instruments: the first and primary...
Page 14Access to FinanceAs planned, the households selected for interview from each cluster were pickedrandomly at appropr...
Page 15TABLE 1.2: GEOGRAPHICAL DISTRIBUTION OF SAMPLE BY SPATIAL LOCATIONThe survey obtained all relevant EA maps for samp...
Page 16Access to Financegroups or institutions and their identity, location, and approximatedistance from where the respon...
Page 17 Total paid workers in the enterprise Total number of workers at start of enterprise; and The major constraints ...
Page 18Access to Finance Legal status and sources of funding for the provision of financialservices Target customers eli...
Page 19 The assessment of critical success factors that would definitelyfacilitate the expansion of financial services to...
Page 20Access to Financeimportant conclusions, recommendations (Appendices 4) and insight into the currentscale of outreac...
Page 21could provide greater access to finance. Although a fully-fledged intervention andindependent of the others, yet an...
Page 22Access to FinanceDuring the survey, there were four banks operating in Morogoro with 14branches—most of them at dis...
Page 23A random sampling and study of three of these 89 SACCOS during the baselinesurvey shows that, except for a handful,...
Page 24Access to Financehaving nearly three times more people than Singida, about twice as many people asDodoma, and almos...
Page 25Figure 3: Je Chanzo kipi kikuu kinacho kuingizia kipato?81%4%14%1%kilimo na ufugajiajira au vibaruabiasharanone / m...
Page 26Access to FinanceFigure 4: Je, kuna biashara yoyote unayofanya kwa sasa?0.0 20.0 40.0 60.0 80.0 100.0 120.0buko mbe...
Page 270200,000400,000600,000800,0001,000,0001,200,0001,400,000Meanincome(TZS)rural urban totalLocationFigure 5: Mean inco...
Page 28Access to Financeevidently slightly higher than for the female-headed households (Tshs 225,000).Besides current sou...
Page 29Total 2441 100TABLE 2.4: POSSESSION OF OCCUPATIONAL SKILLS BY HOUSEHOLDSCarpentry (21.2 percent), masonry (19 perce...
Page 30Access to Financehelp activities, followed by the households’ interest in improving livelihoods generally(44.2 perc...
Page 311470 218658 880 500 1000 1500 2000HouseholdsMaleFemaleUsingvsNotusingFigure 8: Je, kwa sasa unatumia taasisi yoyote...
Page 32Access to FinanceProviders Known Closest Distance kms Overall Household Use(mentions, Percent)(Mentions,Percent)(Me...
Page 33which was mentioned 29.1 percent of the time). Probably because of its relativelyextensive network; by December 200...
Page 34Access to FinanceFigure 9: Which one of the providers in your district are you usingcurrently0102030405060bank SACC...
Page 35TABLE 3.3: TYPICAL DISTANCES TO NEAREST FINANCIAL SERVICE PROVIDERClearly, the table above shows that lack of inter...
Page 36Access to FinanceFigure 10: How Householdswith Current Accessare usingProviders01020304050nahifadhifedhazangukupata...
Page 37followed by the demand for safe and secure facility for storing personal savings. Yetanother 17.9 percent of the ho...
Page 38Access to FinanceFigure 12: Katika taasisi za kifedha zinazofahamika wilayani,zipi zina huduma bora?170132392819212...
Page 39Figure 14: Mentionsof Poor Service Providers0102030405060NMBSACCOSFINCAPRIDESEDACRDBBankTASAF/othergovernmentNBCOth...
Page 40Access to FinanceIn this regard, NMB with whom a relatively large number of the households bankwith is also the lea...
Page 41Total 255 100TABLE 3.7: HOUSEHOLD’S ASSESSMENT OF POOR SERVICE PROVIDERSDue to all these factors combined, most poo...
Page 42Access to FinanceFigure 17: Je, kwa sasa, kuna mtu yoyote au taasisi unayoidaindio25%hapana75%TABLE 3.8: MEANS OF S...
Page 43Similarly, nearly one in every five of the poor rural households (19.3 percent) hada current loan. The fact that ne...
Page 44Access to FinanceTABLE 3.9 (B): NUMBER OF CURRENT LOANS TO POOR RURAL HOUSEHOLDSThe fact that there are as many poo...
Page 45Figure 18: Size Distribution of Informal Credits23%30%30%13%4%Tshs below 10,000Between Tshs 10,000 toTshs 50,000Bet...
Page 46Access to Financeaccounts and loans, the corresponding number of households in surveyed areas is128,194 and 270,633...
Page 47Chapter4BARRIERS TO ACCESS4.1 FINANCIAL SERVICES INFRASTRUCTUREOf the four regions studied, Shinyanga had the most ...
Page 48Access to FinanceTABLE 4.2: SIZE DISTRIBUTION OF SACCOS IN SURVEY AREASBesides their regional geographical distribu...
Page 49Figure 20: Je, ni sababu gani zinakufanya usitumie taasisi za kifedhazilizopo katika wilaya hii?other (e.g., I fear...
Page 50Access to Finance Increasing and improving the quality of physical infrastructureavailable within the rural commun...
Page 51TABLE 4.2: CURRENT LEADING OBSTACLES TO GREATER OUTREACHPoor infrastructure and lack of basic communication equipme...
Page 52Access to Finance…”the local financial intermediaries technically and financially assisted byCRDB Bank Limited to u...
Page 53Starting with 20 groups of five each, the intermediary provided every one abicycle with a wholesale loan obtained f...
Page 54Access to FinanceNetwork4 argues about why this lack of confidence among the poor rural householdsis not one to be ...
Page 55available services and benefits, it is possible to encourage greater access withoutundertaking major investments.Ho...
Page 56Access to FinanceLack of power: up to now, Bukombe district is one of the few areas withoutpower, yet the technolog...
Page 57targeted by RLDC. Accordingly, a primary conclusion of this survey is thatcollaborating with these SACCOS that RLDC...
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
Financial Access: Options for the poorest in Tanzania
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Financial Access: Options for the poorest in Tanzania

  1. 1. Je, unatumia taasisi yoyote ya kifedha iliyopo katika wilaya hii?88%12%HapanaNdiyoHOWPOORPEOPLEINMOROGORO,DODOMA,SINGIDA,ANDSHINYANGAREGIONSOFTANZANIAMANAGETHEIRFINANCESA SURVEY ANDSTRATEGY FORGREATEROUTREACH, JULY/AUGUST2006By Henry Oloo OketchMaarifa Consultants Limited,Apartment B3, Lantana GardensDennis Pritt/Maalim Juma RoadP.O. Box 45304 GPO 00100, NAIROBI KenyaRural Livelihoods Development CompanyLimited, P.O Box 2978, Dodoma, TanzaniaPhone +255 26 232 1455Fax +255 26 232 1457E-mail: info@rldc.co.tz
  2. 2. Page 2Access to FinanceContentspageSummary of findings _____________________________________________________ 4Chapter 1 _______________________________________________________________ 8Background & Introduction ___________________________________________________ 81.1 Introduction___________________________________________________________________81.2 Survey objectives_____________________________________________________________101.3 Definitions and conceptual framework ________________________________________111.4 Data Collection and Sampling ________________________________________________131.5 Data type and analysis _______________________________________________________151.5.1 Household demand survey ________________________________________________151.5.2 Supply-side inventory study ________________________________________________171.6 Baseline Context of surveyed Areas____________________________________________201.6.1 Physical Infrastructure _____________________________________________________20Morogoro Region ________________________________________________________________21Dodoma Region_________________________________________________________________22Singida Region __________________________________________________________________23Shinyanga Region _______________________________________________________________23Chapter 2 ______________________________________________________________ 25General Baseline Results _____________________________________________________ 252.1 Residency and Age ________________________________________________________252.2 The People and Social capital_______________________________________________25Chapter 3 ______________________________________________________________ 31financial Access & Exclusion _________________________________________________ 313.1 Percentage with current access_______________________________________________313.1.1 Awareness of financial services ____________________________________________313.1.2 Financial Literacy _________________________________________________________323.1.3 From knowledge to use ___________________________________________________333.1.4 Proximity is no Guarantee of use ___________________________________________343.2 Patterns of Use of Available Services ___________________________________________363.2.1 Types of Accounts Held ___________________________________________________373.3 Perception of the intermediaries_______________________________________________383.4 Current methods of saving ____________________________________________________413.5 Current Access to Loans ______________________________________________________423.6 Conclusions __________________________________________________________________45Chapter 4 ______________________________________________________________ 47Barriers to Access ___________________________________________________________ 474.1 Financial services Infrastructure________________________________________________474.2 households’ perspective on barriers ___________________________________________484.3 provider’s perspective on Barriers______________________________________________504.4 a deeper understanding of Obstacles _________________________________________514.5 Opportunities for Greater Access ______________________________________________564.5.1 The Institutional side_______________________________________________________564.5.2 The consumer side ________________________________________________________574.6 Bridging the divide ___________________________________________________________58
  3. 3. Page 3Chapter 5 ______________________________________________________________ 59A Strategy for Greater Access ________________________________________________ 595.1 Guiding principles ____________________________________________________________595.2 Collaboration with existing providers___________________________________________605.3 Possible interventions __________________________________________________________25.4 Internal capacity and strategy formulation______________________________________45.5 Conclusion____________________________________________________________________5Appendices_____________________________________________________________ 7Annex 1.1 ________________________________________________________________________8Annex 1.2 Main survey questionnaire_______________________________________________1Annex 1.4 Supply-side survey instrument ____________________________________________1Appendix 2 Endnotes & References________________________________________________1
  4. 4. Page 4Access to FinanceSummaryoffindingsIn almost every part of the world, limited access to finance is a seriously bindingconstraint to private sector growth. This is especially true of the poor people inTanzania, many of whom both have the urge and ideas to improve their livelihoodbut is financially excluded from reliable service.In the case of present RLDC survey, accessibility was defined as the ease withwhich an individual can get services and facilities if he or she needed or desired todo so and it reflects the ability of that person whether directly or through his/her closeassociates to reach and use such services affordably.With greater and better access to finance, even poor people can create theirown jobs, build decent homes, and educate their children to their capacity, therebysecuring their lifetime labor market mobility. Thus, RLDC considers access toappropriate financial services by the poor and low-income families in the four regionswhere it currently has development activities as one of the critical success factors increating jobs, improving incomes, and helping the communities manage varioussocial and economic shocks, i.e., three of the company’s main objectives. Hence,results of the baseline survey commissioned in July and August 2006 to measure thepoor rural households’ access to financial services in the four regions of Morogoro,Dodoma, Singida, and Shinyanga, as intended by RLDC, provides insight into definingits priorities and strategies for widening and deepening access to financial services inthe said target areas.The survey involved 2,568 randomly selected households and 14 local levelfinancial intermediaries. The results of the survey show that: About 13.3 percent of the households presently use at least one ofthe existing financial service providers within their district. Another4.1 percent had another member also using the existingintermediaries, thereby increasing the overall percentage ofhouseholds currently using the existing intermediaries to 17.4percent of the population. Of the households using the existing intermediaries within theirdistricts, 32 percent rely on National Microfinance Bank (NMB),followed closely by savings and credit cooperative societies(SACCOS); at 28.1 percent. Other intermediaries used are CRDB
  5. 5. Page 5Bank (8.1 percent), groups (6.8 percent), and two major financialNGOs (5.7 percent). In terms of services, less than nine percent of the households keepan account with the intermediaries; with 57.4 percent of themdepending on various banks for services, 33.4 percent in SACCOS,and a far smaller number (9.2 percent) with either non-bankfinancial institutions or ROSCAS (Rotating Savings and CreditAssociations) groups. The majority of households currently having accounts maintain asavings bank account (88.6 percent); only 8.5 percent have abusiness or current account (through which some receive salariesand loans), 1.3 percent maintain term deposit accounts, and 1.7percent group accounts. Although a slightly higher number of the households have accessto credit; at 19 percent, this is largely accounted for by informalcredits (79.7 percent of all loans granted within 12 months prior tothe survey). Both SACCOS (six percent), financial NGOs (2.2percent), and banks (2.1 percent), provide just about 10 percentof the total credits granted to the poor rural households. This low access to both savings and loans by the poor ruralhouseholds is caused by a myriad of factors and not just by theabsence of many conveniently located financial intermediariesclose by the population; which is of course also a major constraint. Basically, the existing financial system is at odds with therequirements of the poor and low income households; forinstance, despite the presence of some such institutions within thedistricts where the households live, a whole 54.2 percent do notknow even of their presence. Based on analysis of the situation, financial exclusion of the poorrural households is caused by at least three related factors. Last inthe list is the population’s ignorance about the existence of theseinstitutions right within their midst –or alternatively, their ignoranceabout the benefits of effectively using the services provided bythese institutions to improving their livelihood. The second; but just
  6. 6. Page 6Access to Financeas likely the first major cause of financial exclusion, however, is highcost of service, inconvenience, and the unsuitability or poor qualityof services provided by most financial intermediaries operating inthe four regions. In this conclusion, the RLDC survey presentsevidence that is very similar to those established by the Bank ofTanzania Survey of 1997§ and the Vice President’s Office study inJune 2000. In a process typical of a vicious cycle, this combination of greaterdistances to nearest available financial institutions, high cost, poorservice, and poor information about potential benefits of usingvarious financial services, almost completely discourage formationor use of appropriate and conveniently located financialinstitutions in the concerned regions. Subsequently, without gainingthe necessary confidence of the local people in these institutions,the much hoped for greater access is undermined by their lack ofcredibility and intermediation capacity. If the analyses of the survey results are correct, the first and primarysolution to increasing greater outreach for RLDC would seem to bea two-pronged strategy that works simultaneously. These includeproviding better, more comprehensive, and more focusedfinancial education to the target population, while at the sametime enabling a few of the better focused and more deservingfinancial intermediaries closest to the people build their institutionalcapacity and acquire other resources necessary to deliver timelyand suitable products and services. The evidence from this baseline survey certainly shows a stronglocal demand and capacity among the target population forboth using financial services effectively—if rightly and correctlyinformed about their benefits—and contributing towardsestablishing and further building the capacities of the institutions.So, it is certainly a sound proposition for RLDC to pursue investing instrategic alliances with carefully selected local level financialintermediaries; mostly community-based savings and creditcooperatives, providing detailed financial education on savings,
  7. 7. Page 7budgeting, managing credit, and their own responsibilities towardsbuilding responsible financial intermediaries to the local people. As there are handsome returns to investing in institutional capacity,neither should RLDC shy away from providing budgetary supportto selected partners to undertake specific investments in buildingfinancial services infrastructure, developing people’s capacity forstrong leadership and service delivery, and developingappropriate management systems, undertaking relevant marketresearch, and even developing new and better products andservices. In this area, RLDC has much to learn from CRDB BankLimited, with which it has already made contacts and initiatedvaluable discussions. Finally, given its previous successes in mobilizing variouscommunities in the central corridor to undertake many livelihoods-enhancing activities and excellent reputation, RLDC has both themandate and self-interest in establishing diverse financial servicesactivities that would create the momentum and support towards agreater access to finance for the target population. These might include facilitation of financial literacy training to thepublic, formation of strategic alliances with financial institutions likethe CRDB Bank Limited; which seeks to increase poor households’greater access to financial services through strategic linkages withlocal financial intermediaries, funding of technical assistance andappropriate management systems development for deservingintermediaries, and even giving material support in badly neededstaff training, communication, and product developmentchallenges.Copyright ©2006 Rural Livelihood Development CompanyAll rights reserved.
  8. 8. Page 8Access to FinanceChapter1BACKGROUND&INTRODUCTION1.1 INTRODUCTIONThis report presents the results of a baseline survey carried out in July and August2006 by the Rural Livelihood Development Company (RLDC). The overall purpose ofthis combined baseline survey was to measure poor rural households’ access tofinancial services in the four regions of Morogoro, Dodoma, Singida, and Shinyanga,which are the areas where RLDC currently provides various development activities1.The four regions where the survey was done are also collectively and officiallyrecognized as the ‘Central Corridor’ area, evidently based on their location right atthe heartland of mainland Tanzania. It is a corridor that begins with the Dar esSalaam-to-Kigoma railway network (some 1,254 km in length), which connects the1RLDC is a not-for-profit enterprise based in Dodoma, Tanzania whose purpose is to improve the livelihood ofrural communities in the central corridor by helping and supporting the generation of greater income andemployment opportunities through various interventions, including:Promotion of skills improvementPromotion and direct provision of business development servicesPromotion of greater access to financial servicespromotion greater access to marketsEncouraging and enabling the development of market infrastructureEncouraging and enabling the development of a more conducive policy and regulatory environmentThe organization envisions a time and situation in which poor rural households and communities have openaccess to all markets relevant to enhancing their livelihood.
  9. 9. Page 9country with Bujumbura, Burundi, by boats on Lake Tanganyika, and further on toRwanda by road. The parallel road route also begins in Dar es Salaam via Dodoma,Singida, Nzega and further on to Lusahunga into Rwanda and Burundi.The study was to provide RLDC with the information it needed to formulate aneffective financial strategy, especially one with a focus on facilitating marketdevelopment for on-farm and off-farm livelihood activities within the corridor. Yet, tointervene effectively in this market development process, RLDC needed to know thedemand for financial services, i.e. proportion of the target population that is in needand able to pay for services if such service were made available, but are nonethelesspresently excluded.Secondly, because RLDC prefers undertaking a facilitative rather than direct rolein development work itself; including the provision of financial services, it needed toknow a little more about the institutions or individuals with whom it could collaboratein providing such services in the concerned area of intervention, i.e., their identity,mandates, location, and capacity, etc, so it could correctly choose the right ones.
  10. 10. Page 10Access to Finance1.2 SURVEY OBJECTIVESRLDC considers the baseline survey as an important part of its 10-step process2towards establishing viable, self-sustaining financial service organizations forachieving greater access to finance, lack of which it currently considers a majorconstraint to improving livelihoods in the four regions. Although considered a fully-fledged intervention independent of the others by RLDC, the company sees greateraccess to finance as a cross-cutting input that could make a critical difference in theachievement of its other interventions. Partly because of this consideration—andalthough presented and discussed separately in two parallel reports of equal depth,the survey also explored the number of households currently engaged in micro- andsmall-scale enterprise (SMEs) activities in the corridor, thereby specifically looking attheir present constraints that if properly harnessed could open up greateropportunities for enhancing livelihoods in RLDC’s area of operation.RLDC, along with many other development organizations of its kind, nowrecognizes SMEs to have become an increasingly important source of income formany poor Tanzanian families and therefore should neither be neglected nor left un-nurtured. Hence, the need during the survey to explore whether current access tofinance by concerned households is an obstacle to the growth potential of theseenterprises. Also investigated by the survey, but results similarly presented and2 These 10 steps starts with (1) demand stimulation (2) processing of requests/applications received forvarious inputs (3) rapid appraisal of requests and applications (4) project planning and presentation fordiscussion and approval (5) board approval (6) contracting/engagement (7) implementation (8)monitoring (9) evaluation (10) release of inputs/capitalization.
  11. 11. Page 11discussed separately in a parallel report, is the number of households presentlyaccessing relevant business development services (BDS), which are themselves alsoconsidered critical to successfully enhancing livelihoods in the corridor by RLDC.Among the BDS explored by the survey included current access to information bytype, source and provider and also whether they have received business training,technical support, and linkages to markets, etc. The two separate reports—one onSME constraints and opportunities, and the other on poor households’ access toBDS—are available directly from RLDC on request.1.3 DEFINITIONS AND CONCEPTUAL FRAMEWORK**For purposes of the survey, a financial service was defined as any service thatenables an individual, household or firm to: Send or receive money, Store and retrieve any surplus income not immediately required forconsumption or investment, Receive or make payments for goods and services supplied to orreceived from a third party, Sell or buy financial assets such as treasury bills, bonds, shares, andinsurance, etc Transform future income into current income by giving loans (or byfacilitating current consumption against future income), and; Exchange currencies.Amongst the poor rural households studied, these services are provided by a verydiverse group, e.g., individuals or specialized institutions (such as commercial banks)and non-bank financial institutions, financial cooperatives, financial NGOs, andinformal associations groups. Nonetheless, the survey recognized that each possibleprovider has own unique attributes that could influence the range, quality, andbenefits provided to different segments of the target population. For this reason, thesurvey sought to establish the share of households and small-scale firms presentlyincluded or excluded by different providers.Of these providers, the regulated and supervised group is known for takingparticularly nontrivial risks in intermediating third party deposits for a gain. Fortunately,one category of the unregulated and unsupervised providers faced no such risks, as
  12. 12. Page 12Access to Financethey deal almost exclusively with their shareholding customers only. Accordingly, thesurvey treated commercial banks and non-bank financial institutions as a distinctclass under the ‘regulated service provider’ category. Yet, among the non-regulated service providers, however, the survey created two sub-categories basedon their specialization, level of organization or formality of activities, as well as theunderlying motivation for business, which clearly have an influence on their conductand choices. In this regard, therefore, the survey distinguished between: Specialized, non-regulated providers as a cluster comprisingfinancial NGOs, financial cooperatives, welfare funds, and villagebanks, which may be small but relatively formalized in approachto service provision, and; Non-specialized, non-regulated providers, comprising Upatu-stylerotating savings and credit associations (ROSCAS).Also in the category of non-specialized providers the survey included anyinstitution or person that provides supplier credit. Finally, the survey identified a largegroup of individuals (precisely 1,711 or 70.1 percent of the households studied) thatwere providing informal credits, but do not belong with either of the two categoriesof providers discussed above. Finally, the survey also identified a few profit-motivatedmoneylenders within the individuals that were giving credits in the corridor, but againdo not belong with either of the two categories of providers discussed above.For exploring the extent of access, the survey looked at the different classes ofservices or products provided and have, thus, distinguished the degree ofaccessibility by households and firms in the central corridor area. This extent of accessis captured graphically by tracing the usage of a particular service or product as apercentage of the eligible population across time and penetration (see followingillustration, a Market Map):
  13. 13. Page 131.4 DATA COLLECTION AND SAMPLINGThree sets of data were collected using separate instruments: the first and primaryquestionnaire was an all-open structured set of response items administered face toface to a sample of 2,441 households (Appendices 1) randomly selected from 126enumeration area clusters throughout the four survey regions (Table 1.1).Region Districts Population(2002Census)Number ofHouseholds(2002Census)Enumeration Areas HouseholdsUrban Rural Total Urban Rural TotalDodoma 5 1,698,996 376,530 3 23 26 87 563 650Morogoro 6 1,759,809 385,260 7 19 26 173 477 650Shinyanga 8 2,805,580 445,020 3 23 26 65 585 650Singida 4 1,090,758 217,572 3 23 26 87 563 650Total 23 7,355,143 1,424,382 16 88 104 412 2,188 2,600TABLE 1.1: SURVEY SAMPLE DESIGNThese households were randomly selected from rural and urban cluster poolsestablished within the national sampling frame, which is based on the recent 2002Tanzania Population and Housing Census. The optimal number of households tointerview per cluster was determined at 25 based on the minimum units established inthe national sampling frame, while the optimal number of enumeration sites wasdetermined at 26, also as determined in the said sampling frame.Figure 1: Graphic Illustration of Market Penetration
  14. 14. Page 14Access to FinanceAs planned, the households selected for interview from each cluster were pickedrandomly at appropriate intervals representing a fixed proportion of its currentpopulation size. Hence, the fact that Shinyanga region had slightly more householdsdid not affect the representation of the total households ultimately interviewed vis-à-vis the other regions or overall sample size.In addition, since the first stage of sampling process required the clustering of allenumeration areas in the national sampling frame into urban and rural categories,this procedure ensured that each household’s probability for selection wasproportional to their population size (Table 1.2).District Households Location Total SMERural Urban1 Kondoa 162 1622 Mpwapwa 84 25 1093 Kongwa 115 1154 Dodoma rural 96 965 Dodoma urban 31 316 Dodoma urban 22 69 91Dodoma region 1127 Bukombe urban 15 158 Bariadi 122 1229 Maswa 19 1910 Shinyanga urban 31 19 5011 Kahama 77 7712 Bukombe rural 98 9813 Meatu 20 2014 Shinyanga rural 79 16 9515 Kishapu 39 3916 Iramba 248 24817 Manyoni rural 94 94Shinyanga Region 19318 Kilosa urban 25 2519 Morogoro rural 113 11320 Kilombero urban 25 2521 Morogoro urban 1 75 7622 Kilosa rural 100 1 10123 Mvomero 174 17424 Kilombero urban 26 2625 Ulanga 50 5026 Kilombero rural 61 61Mororogo Region 13627 Singida rural 176 17628 Singida urban 26 82 10829 Manyoni urban 25 25Singida Region 126Grand total 2038 403 2441 567
  15. 15. Page 15TABLE 1.2: GEOGRAPHICAL DISTRIBUTION OF SAMPLE BY SPATIAL LOCATIONThe survey obtained all relevant EA maps for sampled clusters from the NationalBureau of Statistics. However, all household listings were updated on site during fieldwork to incorporate changes in population size since the 2002 census. Once on site(and with the aid of the EA maps and village scouts), the names of all householdheads within the clusters were first listed by the field supervisors (Appendices 6), afterwhich a random sample of 25 were selected and interviewed.While systematically drawing random samples for interview from the householdlistings, there were a few instances where those randomly selected initially followingthe appropriate interval did not included enough SME-households to meet thedesired 25 interviews per cluster; of which 20% were to be SME-involved. Nonetheless;in such circumstances, the sampling interval was again systematically adjusted toyield the desired number of households for interview (Table 1.2), hence the overallresults of this survey as presented here in this report are unbiased and representativeof the 1.4 million households in the areas studied.1.5 DATA TYPE AND ANALYSIS1.5.1 Household demand surveyOn the demand side, respondents gave views on 20 different broad issues: fromreporting on their age, highest level of education attained, and possession of anyoccupational skills. They also gave information on the size of their households andcomposition, participation in development group activities, and their families’ currentassets portfolio. Various aspects of their financial wellbeing and current access werealso explored (Appendices 2). Of particular interest for the formulation of an effectivefinancial services intervention by RLDC, were respondents baseline information on: Current sources and levels of income and savings (if any). Current means of storing excess income (if any) and theirsatisfaction with the means chosen. Current stock of debt (if any), by amount, source, and purpose. Knowledge of financial service providers existing within theirdistrict, regardless of their legal status, e.g. whether individuals,
  16. 16. Page 16Access to Financegroups or institutions and their identity, location, and approximatedistance from where the respondents lived. Views on available providers (if any is known within district),products, and their perceived strengths or weaknesses. Immediate and long-term personal plans for improving livelihoods,alongside the underlying motivations for such plans andsuggestions on how to resolve hindrances. Ability and willingness to pay for various financial services if thesewere somehow available; along with preferences for terms andconditions for service.Lastly, since RLDC intended using the survey to establish baseline indicators formeasuring its financial services interventions, the following additional informationwere, hence, also collected: Current access to markets, advisory services, and inputs, e.g.,market information through radio, TV, newspapers, or word ofmouth, etc. Current use of market information. Listening and reading habits. Ability to pay for information services. Media preferences, etc. ListeningWhile the primary questionnaire explored the overall participation of the entiresample in micro/small-scale enterprises, a detailed secondary questionnaire whichwas part of it, was administered to 567 of the households that were then involved inSMEs (Appendices 3) and critically examined the following aspects of the enterprises: Type of economic activity Ownership Enterprise start date Sources of start up capital Total current workers in enterprise analyzed by their gender
  17. 17. Page 17 Total paid workers in the enterprise Total number of workers at start of enterprise; and The major constraints to enterprise growth/expansion currentlyDue to major oversight; undetected on the first three days of fieldwork, however,the Kiswahili version of the instrument omitted very important items concerning theannual inflow and outflow of enterprise income by source, periods when there isexcess income or shortage, and he specific needs or uses to which this income isannually applied. Secondly, for each current source of income, the English version ofthe questionnaire contained items on how the households were coping with incomeshocks or emergencies and how these could be reduced or contained towardsimproving livelihoods through SMEs that were again; regrettably, omitted duringtranslation. Consequently, there are many instances where a direct comparison ofthe SME insights from this survey and a similar one conducted earlier by SwisscontactEast Africa in the Uhuru corridor is not possible. These shortcomings notwithstanding,however, the current survey has produced some interesting facts about the growthpotential of SMEs in the areas studied –and particularly the negative consequencesof their financial exclusion.1.5.2 Supply-side inventory studyThe third survey instrument (Appendices 4) was administered to 14 randomlyselected financial intermediaries operating at the lowest level of intermediation in thesurvey areas. This supply-side instrument collected information critical to RLDC’sunderstanding of current obstacles faced by the local institutions in creating greateraccess to finance for concerned population.Thus, on the supply side, several intermediaries—actually numbering 110 –werecontacted on phone based on a 2005 Bank of Tanzania Directory of MicrofinanceInstitutions in Tanzania so that RLDC could get to know more about their activities andif they would be interested in cooperating in widening and deepening access to thepoor rural households. Those successfully located from this directory were contactedto provide information on the following aspects of their activities: Name and principal place of business (if any), together with allnecessary contact addressed not previously published by the Bankof Tanzania, e.g., email, phone, and fax numbers. If organization was also providing services in otherregions/describe its geographical focus in greater detail
  18. 18. Page 18Access to Finance Legal status and sources of funding for the provision of financialservices Target customers eligibility criteria for access Measures taken (if any) by the organization to reach greaternumbers of the poor rural households in target areas of operation Service delivery processes and requirements Products and services provided, especially if institution is dealingwith poor rural households in particular The size of organization as measured by (a) number of staff, (b)customers/shareholding-members, and (c) total assets/equitybase or savings Immediate long-term organizational plans Real and perceived opportunities and current obstacles inexpanding services, especially to the poor rural households Size and volume of business presently handled in terms of (a)deposits/savings or shares and (b) outstanding loan portfolio Three-year historical record of growth and expansion of eachprovider
  19. 19. Page 19 The assessment of critical success factors that would definitelyfacilitate the expansion of financial services to the presentlyunderserved or excluded population; and, Indicative areas for possible collaboration with RLDC towardsexpanding services to the presently excluded/underservedpopulation.Because a very high number of the sampled households were ignorant of thefinancial institutions existing within their districts, the Bank of Tanzania Directory ofMicrofinance published in November 2005 was an important reference for samplingintermediaries for interview. However, despite contacting many intermediaries forinterview from this directory3; just published in October 2005, no more than 22 werereachable and ready for interview: 14 were interviewed on phone while 17 insistedon face to face interviews. These 14 provided enough information to support3From the list under various districts in Dodoma, 21 were unreachable or wrong contacts forany appointment to be made for interview. In Shinyanga, 28 were unreachable or had wrongcontacts information for any appointment and in Singida, it was 32. Another 12; two in Dodoma,four in Morogoro region, three in Shinyanga, and a similar number in Singida were successfullycontacted but declined participation off site. Lastly, five of the intermediaries in the Bank ofTanzania directory declined outright any interview; including Hembeti Rural SACCOS—one of themost commonly featured in the survey with households.
  20. 20. Page 20Access to Financeimportant conclusions, recommendations (Appendices 4) and insight into the currentscale of outreach and constraints.1.6 BASELINE CONTEXT OF SURVEYED AREASFor a better appreciation of the access to finance baseline situation of the fourregions surveyed, it is first necessary to highlight the existing social and physicalinfrastructure, for instance, the availability and distribution of roads and various typesof financial intermediaries in the area of survey, which has a bearing on accessibilityand cost of service. Moreover, for certain financial services that have become highlyinformation-dependent, lack of access to electricity and telecommunicationrequired by the intermediaries to operate effectively can rule out their provision and,hence accessibility.In this regard, this section of the report presents some basic information about thefour study regions that will help highlight the emerging pattern of access to financeas well as potential challenges in trying to improve the situation. Secondly, the modeof production and consumption can often dictate the presence or absence offinancial services, hence, access or exclusion of households. Accordingly, anunderstanding of the people’s current livelihood systems, household composition,and levels of income, all have an influence on their demand for services and were,thus, thoroughly investigated.1.6.1 Physical InfrastructureThe area covered by the survey was vast, measuring approximately 212, 232square kilometers in size, and involved a population of nearly 8 million people (Table1.3). Hence, the use of a two-stage random sampling process in identifying the 2,568households interviewed was important in ensuring that both sample and baselineindicators were robust and representative; as earlier discussed.Region Land area(Sq. km)Population Households Districts SamplesitesSamplesizeMorogoro 70 799 1 759 809 385 260 7 26 670Dodoma 41 311 1 698 996 376 530 6 26 672Singida 49 341 1 090 758 217 572 4 26 664Shinyanga 50 781 2 805 580 445 020 8 26 562Total 212 232 7 355 143 1 424 382 25 104 2 568TABLE 1.3: SAMPLE SIZE AND DISTRIBUTIONIn any case, the baseline survey as a process was an important part of RLDC’s 10-step project cycle, as it seeks to establish viable, self-sustaining financial service that
  21. 21. Page 21could provide greater access to finance. Although a fully-fledged intervention andindependent of the others, yet an improved access to finance can catalyze manyother aspects of RLDC’s interventions.A brief discussion of the survey areas should present a clearer picture of thedevelopment challenge faced by RLDC:MOROGORO REGIONMorogoro is the largest of the four areas surveyed, with wonderfully fertile soils,beautiful mountains, and a vast area surface, which is nearly twice that of Dodomaor 1.5 times Singida’s total surface area. However, apart from a single trunk road,most of the region has seasonal roads of very poor condition. In addition to this trunkroad, there is similarly a single railway line running parallel to the said trunk road andalso connecting the region to the same adjacent areas (Figure 2).Figure 2: Central Corridor’s Rail andRoad Network
  22. 22. Page 22Access to FinanceDuring the survey, there were four banks operating in Morogoro with 14branches—most of them at district administrative centers. There were also four non-government organizations providing financial services, mostly credit. The fourincluded World Vision International, FINCA Tanzania, PRIDE Tanzania, and SEDA (SmallEnterprise Development Agency). Unlike, the banks however, all the NGOs wereoperating in Morogoro town only and, therefore, had no presence further a field inthe districts.Surprising, given its size and rich endowment with good rainfall, beautiful scenery,and fertile soils, Morogoro has relatively few SACCOS, numbering just 45 as at thetime, compared to, for instance, Dodoma, which receives much less annual rainfalland has poorer soils.One community development organization (CBO), TASAF, although notmandated or specialized in the provision of financial services, was widely treated asa financial intermediary by the local communities throughout the 104 cluster areascovered by survey. In addition, TASAF seems highly regarded as a financialintermediary.DODOMA REGIONThe smallest of the four regions covered by the survey, Dodoma, has a total landarea of 41,311 square kilometers. Nonetheless, with a population of 376,530households, it has nearly as many people as Morogoro, which is almost twice its size inarea. Much of the region is a plateau, with Bahi swamps found lying at 830 metersabove the sea level at the lowest points of region, and the highest point lying atsome 2000 meters above the sea level, is in the highlands north of Kondoa district.The whole of Dodoma is similarly linked to Morogoro and Dar es Salaam to theeast by a single trunk road and railway line. And despite being the national capitaland lying almost at the center of Tanzania mainland, the region has no good roadconnections to any of the adjacent regions to the west, northwards or south.At the time of survey, there were four banks and eight branches operating in theentire Dodoma region. Other financial institutions operating in the area included twoNGOs and a CBO, as well as 89 Savings and Credit Cooperatives; many of themlisted in the 2005 Bank of Tanzania Directory of Microfinance Institutions, but werehard to locate on the ground. Unlike the SACCOS, however, both banks and NGOsoperating in Dodoma concentrate their services at just three of the major districttowns, i.e., Dodoma municipality itself and nearby Mpwapwa and Kondoa districtheadquarters.
  23. 23. Page 23A random sampling and study of three of these 89 SACCOS during the baselinesurvey shows that, except for a handful, most are moribund. More insight into thecapacity of the SACCOS in providing access to finance to poor rural households,alongside their institutional constraints, is presented later in Chapter 3.SINGIDA REGIONThe entire Singida region with a surface area of 49,341 square kilometers has amere total road network of 3,238 kilometers and likewise a single railway line runningacross northwards to Shinyanga and Mwanza regions from Dodoma in the south.Technically, it means that for every 15 square kilometers of land area surface, there isjust about a kilometer of road in the entire region (Table 1.4).District Main road Region road District road Rural road Total kmSingidarural21 0 270 0 291Singidaurban161 295 325 430 1211Manyoni 343 279 104 123 849Iramba 85 271 147 384 887Total 610 845 846 937 3238TABLE 1.4: EXAMPLE OF INFRASTRUCTURE NETWORK IN SURVEY AREASThis scarcity of roads is most visible if one compares the total length of roadavailable by district and type of road, as in the table above. In addition to poor roadinfrastructure, Singida region also lacks many financial intermediaries. Although theregion had four different banks and six branches, five of all six were located either inSingida municipality itself or in Manyoni. The lone NBC branch in Kiomboi was the onlybranch operating from a relatively remoter and smaller town. Secondly, all of theonly two non-bank financial institutions in the region that were offering services, i.e.,TASAF and Community Development Trust Fund of Tanzania, too, were also based inthe regional municipal town or Manyoni. In addition, there were 46 SACCOSoperating in the region. A random sample of three of these SACCOS studied duringthe baseline survey also show the majority to be equally moribund as in Dodoma andMorogoro.SHINYANGA REGIONThe last region studied, which is located at the extreme upper end of the centralcorridor, is Shinyanga. With an area surface of nearly 51,000 square kilometers, it issecond largest amongst the regions of central corridor and the most populated;
  24. 24. Page 24Access to Financehaving nearly three times more people than Singida, about twice as many people asDodoma, and almost the same population as Morogoro (which has a much largerarea, see Table 1.3 above).
  25. 25. Page 25Figure 3: Je Chanzo kipi kikuu kinacho kuingizia kipato?81%4%14%1%kilimo na ufugajiajira au vibaruabiasharanone / msaada au penseniChapter2GENERALBASELINERESULTS2.1 Residency and AgeThe total age of respondents averaged 45.3 years, while residency tenure at theircurrent location ranged from 19.4 years in Shinyanga to 28.9 years in Singida (Table7.5).Kwa muda gani umeishi hapa?Meansyears ofresidencyAgeRegion NDodoma 605 24.7 42.5Morogoro 644 28.4 44.5Singida 643 28.9 51.9Shinyanga 534 19.4 41.5Total 2426 25.6 45.3TABLE 2.1: AGE AND RESIDENCY TENURE BY DISTRICT2.2 The People and Social capitalIn all of the four surveyed areas, agriculture remains the major source of livelihoodfor nearly 400,000 households, accounting for nearly 81 percent of reported sources(Figure 3).The second main source of livelihood in the areas surveyed is self-employment inmicro and small-scale enterprise activities, which accounts for 14 percent of all
  26. 26. Page 26Access to FinanceFigure 4: Je, kuna biashara yoyote unayofanya kwa sasa?0.0 20.0 40.0 60.0 80.0 100.0 120.0buko mbe urbanmanyo ni urbando do ma urbanshingida urbankishapukilo mbero urbanmanyo ni ruralshinyanga ruralmeatumaswashinyanga urbankilo sa urbankilo mbero urbansingida ruralkahamairambamo ro go ro urbanmpwapwabuko mbe ruraldo do ma urbanko ngwaulangakilo mbero ruralbariadiko ndo ado do ma ruralkilo sa ruralmvo meromo ro go ro ruralT o talNdiyo Hapanareported livelihood systems. Current participation in SMEs among the surveyedhouseholds ranged from seven percent in Maswa district to 85 percent of the samplein Iramba, which again underscores importance of small businesses as a source oflivelihood in the target area (Figure 4).Apart from the head of household (the main respondent), 12.4 percent of otherhousehold members were reportedly also self-employed in SMEs; hence bringing thetotal current participation of entire sample in SME to nearly a half of surveyedpopulation. Yet another 8.2 percent of the households were previously self-employedin an SME activity, but have since closed for some reason. The mean annual incomesfor the entire sample varied greatly by level of education; those with tertiary level ofeducation earned almost six times the annual income earned by households with noeducation, 5.5 times of those with primary education, 0.6 times of those withsecondary education, and 4.7 times of the sample average (Table 8).Education level Mean Median Maximum NNo education 491,103 220,000 1,510,000 220Primary education 534,136 258,000 24,080,000 1247Secondaryeducation1,764,194 800,000 11,700,000 79Tertiary 2,932,462 2,800,000 8,800,000 13Adult education 3,765,000 4,500,000 8,000,000 5Total 620,479 260,000 24,080,000 1,564TABLE 2.2: HOUSEHOLDS ANNUAL INCOME BY EDUCATIONSimilarly—and surprisingly, those with adult education level of education wereearning 6.1 times more the average annual sample income and 1.3 times more theannual incomes earned by those with tertiary level of education.
  27. 27. Page 270200,000400,000600,000800,0001,000,0001,200,0001,400,000Meanincome(TZS)rural urban totalLocationFigure 5: Mean income by Locationmean incomeFigure 6: Current Asset Holdings by Item (Percent of Households)0.00.00.00.00.10.10.10.10.30.30.30.30.50.61.01.21.42.93.04.64.69.49.614.020.824.80.0 5.0 10.0 15.0 20.0 25.0 30.0tractorOtherSolarMotor vehiclePoultySheepNyumbaThis seemingly odd phenomenon, in which adult education graduates wereearning more than the ones with tertiary level education, is likely the outcome of ahistory where the elderly have continued to dominate corporate and publicleadership in Tanzania. Among the rural-based households, annual incomes werealso very different (Figure 3); with the urban incomes more than triple the rural ones.However—probably because of the shared livelihoods base, i.e., agriculture andSMEs—the gender of male- and female-headed households evidently had littleinfluence on their annual incomes; at Tshs 664,399 for female-headed householdsand Tshs 603,260 for male-headed ones, there would seem to be some parity of sorts.Yet, the median annual incomes for male-headed households (at Tshs 280,000) were
  28. 28. Page 28Access to Financeevidently slightly higher than for the female-headed households (Tshs 225,000).Besides current sources of income, the majority of the households also hadaccumulated some savings and assets of varying value, ranging from owning land(24.8 percent of mentions), commercially and non-commercially tradable shelter(20.8 percent of mentions), and an equal assortment of livestock (27.2 percent ofmentions).The size and composition of surveyed households was also considered animportant factor in understanding their access to finance. Generally, the surveyshows that most households are very large, averaging 6.4 persons each (Table 2.3),and a sizeable number of the members are relatively young or jobless.TABLE 2.3: SIZE AND COMPOSITION OF SURVEYED HOUSEHOLDSIn addition to their level of education, nearly 30 percent of the female-headedand 34% of male-headed households had some valuable occupational skills invarious fields (Table 2.4). Secondly, besides the heads of household, almost 14% ofother members (13.7 percent) had various occupational skills.Je, una ujuzi wowote wa kiufundiFrequency PercentHapana 1697 69.5Ndiyo 744 30.5Indicator Total Shinyanga Singida Morogoro Dodoma#av. householdmembers6.4 8.2 6.3 5.3 5.9#av. under 18 years 3 4 3 2 3#av. Children out ofschool0.2 0.3 0.1 0.1 0.2#av. Unemployedadults1 2 0.3 1 2Av. Annual income 620,584 718,819 366,980 895,677 610,265Av. Savings amountTshsat home 44,061 73,758 45,528 36,386 24,812in account 54,980 40,647 29,243 125,100 19,584
  29. 29. Page 29Total 2441 100TABLE 2.4: POSSESSION OF OCCUPATIONAL SKILLS BY HOUSEHOLDSCarpentry (21.2 percent), masonry (19 percent), and tailoring (15.8 percent) wereby far the most common occupational skills amongst the surveyed households (Table2.5).Occupation N PercentCarpenter/wood worker 181 21.2Mason 162 19.0Tailor/tie-dye specialist 135 15.8Arts and crafts/Photographer 76 8.9Bicycle repair 60 7.0Mechanic 46 5.4Other 50 6.1Blacksmith/welder 20 2.3Technician 19 2.2Electrician 19 2.2Driver 19 2.2Brick maker 19 2.2Hair dresser/barber 18 2.1Lumber jack 12 1.4Shoe repair 10 1.2Plumber 6 0.7Total 852 100.0TABLE 2.5: OCCUPATIONAL SKILLS AMONGST POOR HOUSEHOLDSMoreover, an average 19 percent of surveyed households were involved invarious development group activities per district, a fact pointing towards goodprospects for RLCD in mobilizing the people to improve their access to finance (Table2.6).It is significant that amongst this group, the access needs for financial servicesseems the single strongest force for self-help initiatives (at 33% percent) of current self-
  30. 30. Page 30Access to Financehelp activities, followed by the households’ interest in improving livelihoods generally(44.2 percent).Group activitiesN Percent1 Financial associations/groups 161 332 Agriculture and Livestock 129 263 Joint enterprise/association 88 184 Social action 56 115 Welfare 34 6.96 Other, e.g. village security 15 3.17 Craft, arts 8 1.6Total 491 100TABLE 2.6: PARTICIPATION IN DEVELOPMENT GROUP ACTIVITIESIt is significant that almost 90 percent of the households’ surveyed were alreadyorganized for self-help in at least one such group activity, and another 10 percentparticipating more than one such activity (Figure 7).
  31. 31. Page 311470 218658 880 500 1000 1500 2000HouseholdsMaleFemaleUsingvsNotusingFigure 8: Je, kwa sasa unatumia taasisi yoyote ya kifedha iliyopokatika wilayani hii?NoYesChapter3FINANCIALACCESS &EXCLUSIONA major finding of this survey, though, is that lack of access by the poor ruralhouseholds may be a choice; and not necessarily due to a lack of intermediaries ortheir knowledge of their presence. This chapter looks more closely at the currentextent of access and present details on other factors that hinder the poor ruralhouseholds’ access to financial services.3.1 PERCENTAGE WITH CURRENT ACCESSOf the 2,670 households interviewed during the survey, 12.6% were using at leastone of the intermediaries existing within their district, in addition to another 4.1percent of the other members who were similarly using these intermediaries.Furthermore, both male and female-headed households were similarly inclined tousing the intermediaries; with 11.8% of the female-headed households reporting useof at least one intermediary, as compared to 12.9% by the male-headed households(Figure 8).However, just 8.9 percent of all households surveyed had a bank account andabout 19 percent a current loan.3.1.1 Awareness of financial servicesMore than a half of the population surveyed (54.2 percent) did not know of anyfinancial intermediary existing within their district (Table 3.1), yet they have lived herelong enough to know at least one or the nearest to their homes (Tables 3.2 to 3.5).
  32. 32. Page 32Access to FinanceProviders Known Closest Distance kms Overall Household Use(mentions, Percent)(Mentions,Percent)(Mentions,Percent)(Average) (Furthest)1 SACCOS 29.1 38.9 16 150 28.12 NMB 25.8 22.0 32.3 180 32.03 Public, TASAF 9.8 9.9 39 110 7.64 CRDB 7.3 2.4 22 80 8.15 NBC 7.2 4.6 32.5 500 4.16 PRIDE TZ 4.6 2.8 15.8 200 2.27 Post bank 5.0 2.0 27 85 1.78 SEDA/WVI 4.1 1.8 38.8 70 2.69 FINCA TZ 3.1 1.9 25.5 150 0.910 Public, other 0.9 0.4 39.5 78 0.211 Banks, other 1.3 1.2 18 37 1.112 NGOs, other 1.6 1.1 0 3.513 Group 0.2 0.4 3.2 5 1.1Undisclosed 6.8TOTAL 100.0 100.0 25.9 126.5 100.0TABLE 3.1: AWARENESS, PROXIMITY, AND USE OF INTERMEDIARIES3.1.2 Financial LiteracyThe fact that slightly more than a half of surveyed households (54.1 percent) didnot know about any existing financial intermediaries within their district –despitehaving lived there long enough (mean residency of 26 years), suggests several facts:firstly, this could reflect the great distances between where the providers are locatedand where the rural population lives. Secondly, it might reflect the low-levels ofoperation at which these intermediaries currently interact with the public, hence theirlow visibility and near-obscurity. Thirdly, this might reflect hopelessness among thepopulation for ever getting any access to services from sources other than their ownself-help initiatives, hence a widespread lack of interest about these institutions.Incidentally, and not surprisingly; by extension from the third argument for littleknowledge of intermediaries within the districts surveyed, the most widely knownproviders in the corridor were member-owned and member-managed SACCOS,
  33. 33. Page 33which was mentioned 29.1 percent of the time). Probably because of its relativelyextensive network; by December 2006 numbering 118 branches countrywide, NMBwas also widely known to surveyed households (25.8 percent of the mentions).Providers Which intermediariesdo you know of inyour district?Which ones is nearestto your homeDistance kmsMentions Percent Mentions Percent Average FurthestSACCOS 654 29.1 439 38.9 16 150NMB 580 25.8 248 22 32.3 180Public, TASAF 221 9.8 112 9.9 39 110CRDB 165 7.3 27 2.4 22 80NBC 162 7.2 52 4.6 32.5 500PRIDE TZ 104 4.6 32 2.8 15.8 200Benki ya Posta 112 5 23 2 27 85SEDA/WVI 92 4.1 20 1.8 38.8 70FINCA TZ 69 3.1 21 1.9 25.5 150Public, other 20 0.9 4 0.4 39.5 78Benki zinginezo 30 1.3 13 1.2 18 37CBOs/NGOs,other37 1.6 12 1.1 0ROSCAS 5 0.2 4 0.4 3.2 5TOTAL 2251 100 1128 100TABLE 3.2: HOUSEHOLD’S KNOWLEDGE OF AVAILABLE SERVICE PROVIDERS AND PROXIMITYAnother widely known intermediary in survey areas is the Tanzania Postal Bank(mentioned almost five percent of the time). And, among the financial NGOs, themost widely known ones are PRIDE Tanzania (4.6 percent of mentions), SEDA/WVI (4.1percent), and FINCA Tanzania (3.1 percent); all combined representing 11.8 percentof the mentions (Table 3.2).Surprisingly, the publicly-funded TASAF, which is really a social-action fund, seemshighly visible (mentioned 9.8 percent of the time) and is widely considered as one ofthe many present financial intermediaries in all surveyed areas.3.1.3 From knowledge to useRegarding the use and choice of provider, it seems clear from this survey that notknowing where to get a service is the first major hindrance to access. Not surprisingly,the most widely used intermediaries by households in the surveyed areas were,coincidentally, also the most well-known. Altogether as a group, the formal financialinstitutions were the second most well known intermediaries in surveyed areas afterSACCOS. Likewise, as a group, these formal institutions were also the most widely
  34. 34. Page 34Access to FinanceFigure 9: Which one of the providers in your district are you usingcurrently0102030405060bank SACCOS Financial NGOs Otherused intermediaries by the poor rural households; 52.4% amongst households usingvarious savings instruments (Figure 9), followed by financial cooperatives (30.5%), andlastly NGOs (17.1%).This observation notwithstanding, the survey also showed some significantdifferences in the types of financial services offered on the one hand and overalldepth of access by the households from different providers on the other hand.Typically, the survey show formal financial intermediaries leading in providing largelybanking services to the poor households. However, with regard to access to credit,cost, and quality of services to poor rural households, it is the SACCOS leading.3.1.4 Proximity is no Guarantee of useTo be able to get services, about 51.4 percent of the households would have hadto walk for at least three hours to reach the nearest intermediary (Table 3.3), whileslightly over 40 percent would have had to walk a minimum five hours to the nearestservice provider.Je ni umbali gani kwa kilometa?Range (in kms) Range (in hrs walkingtime)N Percent Cumulative Percent1 Within 5 1.3 452 39.3 39.32 5.01 -10.00 2.5 107 9.3 48.63 10.01 - 19.99 4.8 126 10.9 59.54 20.00- 24.99 6.3 66 5.7 65.25 25.00 - 50.00 12.5 233 20.2 85.56 50.01 - 99.99 25.0 123 10.7 96.27 beyond 100 25.0 44 3.8 100.0#answering 1151 100.0#not answering/do not know of thedistance1290 52.8
  35. 35. Page 35TABLE 3.3: TYPICAL DISTANCES TO NEAREST FINANCIAL SERVICE PROVIDERClearly, the table above shows that lack of intermediaries closer to thehouseholds is a hindrance to greater access to finance in areas studied. However,while distance is key influence, it also does not seem to be the only one determiningthe use or non-use of a specific provider by the households. For instance (Table 3.4),the survey shows many providers that are close enough to the target population, andyet are not necessarily the ones frequented.Je, ni taasisi gani kati ya hizo ipo karibu na wewe?Provider Mentions Percent1 SACCOS 439 38.92 Benki ya NMB 248 22.03 Public, TASAF 112 9.94 Benki ya NBC 52 4.65 Benki ya CRDB 27 2.46 Benki ya Posta 23 2.07 Zote ziko Karibu 59 5.28 Zote ziko Wilayani/mbali 61 5.49 PRIDE TZ 33 2.910 FINCA TZ 21 1.911 SEDA/WVI 20 1.812 Other banks 13 1.213 Other NGOs 12 1.114 Public, other 4 0.415 ROSCA/Upatu group 4 0.4Total 1128 100.0TABLE 3.4: PROXIMITY OF VARIOUS INTERMEDIARIES TO HOUSEHOLDSIn fact, within every range of distance, there were half as many providers thatwere not being used as there were being used by the population (Table 3.5). Forinstance, about four percent of the providers that were then used by the populationwere located beyond 100 kms, which was almost identical to the number unused bythe concerned population. Similarly, there were 10 percent more providers closer tothe population, but were not being used for one reason or another.Distances in kms USED NOT USEDN Percent N Percentbeyond 100 12 4.4 32 4.151 – 100 32 11.8 100 1321 – 49 30 11.1 179 23.211 to 20 57 21 143 18.56 to 10 16 5.9 42 5.4Within 5 124 45.8 276 35.8Total 271 100 772 100
  36. 36. Page 36Access to FinanceFigure 10: How Householdswith Current Accessare usingProviders01020304050nahifadhifedhazangukupata/kupokeanamarajeshoyamikopokupokeamsharaaupensenikupokeamsaadazahudumazajamiikusafirishahelaaukulipiabilimbalimbalinapatafaidazariba/ninatumiakununuahisaUsePercentofHouseholdswithAccessTABLE 3.5: DISTANCE VERSUS USE OR NON-USE OF PROVIDER3.2 PATTERNS OF USE OF AVAILABLE SERVICESIn terms of specific services, 91 percent of surveyed households had no bankingaccounts or receiving account-related services of any kind. Secondly, of thehouseholds (12 percent) currently using existing intermediaries within their districts, justnine percent have bank accounts.But among these households, as shown in Figure 10 above, most were using thebank accounts mainly to receive loans and make loan repayments (38.5 percent),
  37. 37. Page 37followed by the demand for safe and secure facility for storing personal savings. Yetanother 17.9 percent of the households were using their accounts to receive monthlysalaries and/or pensions. In addition to the heads of households, 4.1% of the surveyedfamilies also have one or more members holding an account, thereby increasing thenumber of households with accounts to just 16.7 percent of studied population. Thisnumber is very close indeed to the overall percentage of households holding bankaccounts nationally, as reported in the 2002 Household Budget Survey.The significance of this point is that there has been no improvement in outreachsince then; despite the noticeable increase in number of financial institutions inTanzania. Furthermore, about four percent of the households currently not havingany bank account were previously banked, but have since become excluded forsome reasons (explored at length in later sections of this report). Yet it is significantagain that one percent of the households maintained bank accounts to earn somedecent returns on their deposits, and equally noteworthy is that a similar numbermaintain bank accounts for making payments or money transfers regularly. In manyways, therefore, the current widespread notion that poor people also have diversefinancial needs just like their wealthier counterparts is a fact to consider wheneverexpanding or improving access to finance for this population. What is perhapsunusual, as previously shown by Figure 10 above, is the relatively high number of thepoor rural households (7%) willing to hold bank account once the benefits of doingso, e.g., automatic access to various individual or community-focused developmentservices—such as those offered conditionally by TASAF, are made clear andunderstood by the households.3.2.1 Types of Accounts HeldThe most popular bank account among the surveyed households currently usingintermediaries existing in their districts (by 81.4 percent) is the ordinary savingsaccount (Table 3.6), followed by a current account (6.4 percent) or loan accounts(6.8 percent).Kama ndio, je, ni akaunti za aina gani (a)?N Percent1 Akaunti ya akiba 192 81.42 Kuweka na kopa/akaunti ya mikopo 17 7.23 Akaunti ya kuweka na kuchukua/akaunti ya biashara 21 8.95 Akaunti ya vikundi 4 1.76 Akaunti ya muda maalumu 3 1.3Total 236 100
  38. 38. Page 38Access to FinanceFigure 12: Katika taasisi za kifedha zinazofahamika wilayani,zipi zina huduma bora?1701323928192124511SACCOSNMB BankCRDB BankTASAFNBC BankOther banksNGOsNoneOtherMentionsTABLE 3.6: ACCOUNTS HELD BY POOR RURAL HOUSEHOLDSWith nearly a half of the households (49.1 percent) reporting using their accountsfor at least once a month, there is a real demand for these services by the poor ruralhouseholds. As indicated in Figure 11 below, a very large number of the households(63.4 percent) were banking with NMB, followed by CRDB (12.8 percent) andSACCOS (12.3 percent).3.3 PERCEPTION OF THE INTERMEDIARIESWhile a majority of the rural population currently with bank accounts aremaintaining these with the more formal providers; as clearly reflected in Figure 11above, these intermediaries are not necessarily the most liked. In fact, the poor ruralhouseholds prefer banking with SACCOS (mentioned as the more liked in nearly 38percent of mentions) due to many factors (explored in Figure 13), followed far behindby NMB (mentioned as the more liked intermediary 29.4 percent of the time) andCRDB (mentioned 8.7 percent of the time).Figure 11: Je, akaunti yako/ zako zipo katika taasisi au benki gani?0510152025303540saccos nmb tasaf crdb nbc NGOs finca OtherbanksupatuhapamtaaniProviderPercentageofHouseholdsusing
  39. 39. Page 39Figure 14: Mentionsof Poor Service Providers0102030405060NMBSACCOSFINCAPRIDESEDACRDBBankTASAF/othergovernmentNBCOtherbankOtherNGOsAdversly Mentioned ProviderPercentoftimeadverselymentionedFigure 13: Attractivenessof Current Provider01020304050LoanspeoplelikemeSafeandsecuresavingsfacilityEasyaccesstoone’ssavings:Good/quickserviceCares/contributestoReasonable/easyloantermsLow/reasonableentryReasonablypricedloansStraightforwardprocess-“hainaExceptionallygoodcustomerFastpaymentservices/modestClosertohome,reliable,flexible,Professionalism/goodClearobjectives/noMost attractive attributePercentofMentionsAltogether, the financial NGOs, which as a group; at 42.7 percent of thementions, are the least liked providers due to poorly regarded products. In all theregions surveyed, the intermediaries offering access to loans on suitable terms wereseemingly the most liked the households. Also liked by the poor rural households arethe intermediaries able to offer safe and secure storage for one’s savings, which ismentioned nearly 11 percent of the time as a definite strength (Figure 13).The other factors that users consider in their satisfaction with services are ease ofaccess to one’s funds on demand without any undue restriction (mentioned abouteight percent of the time), quick service (7.2 percent of mentions), and the level ofcorporate citizenship demonstrated by a provider (6.7 percent of the mentions).
  40. 40. Page 40Access to FinanceIn this regard, NMB with whom a relatively large number of the households bankwith is also the least liked, largely because of its congested banking halls, andbureaucracy (Figure 13), while the NGOs in particular are least liked because ofpoorly designed products. Among the leading defects of the NGOs’ products (Table3.7) are what the poor households themselves deem unreasonable terms andconditions (mentioned nearly 28 percent of the times), overly priced services(mentioned nearly 14 percent of the times), and inordinate delays in loandisbursement (mentioned 11 percent of the time).Je, ni kwa nini haina huduma bora?Major defect N Percent1 Unsuitable terms and conditions 70 282 Interest on loans too high, while there too little or no interest at all ondeposits35 143 Inefficient and delay disbursement of loans especially 28 114 Undependable and unresponsive to customers needs 25 9.85 Very high entry requirements 20 7.86 Poor service 14 5.57 corruption and intrigue 12 4.78 Charges are much too high and too many 10 3.99 Selectiveness of clientele 8 3.110 Secretiveness about rules, procedures, and (even) intent 7 2.711 Too aggressive in collecting loans/closing idle bank accounts 6 2.412 Has no ATM/access to account restricted to specific branch 6 2.413 Too far from home or has no local presence 5 214 organization is poorly managed or unsafe for storing savings 4 1.615 Does not give loans 3 1.216 Unreasonable delays in transmitting/credit accounts 2 0.8
  41. 41. Page 41Total 255 100TABLE 3.7: HOUSEHOLD’S ASSESSMENT OF POOR SERVICE PROVIDERSDue to all these factors combined, most poor rural households resort to manyprimitive ways of saving, as discussed in the next section. But it was show earlier in thereport that just 13.1 percent of the households had bank accounts (about ninepercent of these through the head of household and 4.1 percent another member ormembers of the household). So, how do these many people who are without accessto banking services managing their financial affairs?3.4 CURRENT METHODS OF SAVINGThe survey looked at this matter and found the majority of poor householdscurrently without bank account resort to storing their precious savings themselves athome (mentioned 35.6 percent of the time) in desperation or ignorance of the risks.However, because these savings are locked in a suitcase somewhere in the house(mentioned 22.7 percent of the times), or hidden under a mattress or buried beneaththe floor, these precious resources risk being lost, stolen, or altogether put tounproductive and unplanned uses (Table 3.8). So much local liquidity is locked orkept out of circulation through these primitive instruments though.Kama huna akaunti yoyote ya benki kwa sasa je, unahifadhi vipi fedha zako?Means of saving N Percent1 Hide in an undisclosed place within home 729 35.62 Keep in locked suitcase or wooden box along with clothes 465 22.73 Keep inside shirt or trouser pocket or wrapped in a corner ofdress163 8.04 Hide under mattress/pillow or bed 113 5.55 All spent on immediate needs 100 4.96 Hide in the cupboard or bed drawer 86 4.27 Dug up within or outside the house 83 4.18 Entrust with wife or another trusted person, mostly shop owner 72 3.59 Store in form of cereals grain 58 2.810 Place in tin, bottle, or inside a water pot 54 2.611 Reinvesting in business/farming activity 54 2.612 Store in form of cattle 40 2.013 Hide under the carpet/table top cloth 12 0.614 Hide in other place (cattle shed, inside granary, or holes dugup in the farm)11 0.515 Hide inside the pages of a book 5 0.2Total 2045 100
  42. 42. Page 42Access to FinanceFigure 17: Je, kwa sasa, kuna mtu yoyote au taasisi unayoidaindio25%hapana75%TABLE 3.8: MEANS OF SAVING AMONG POOR HOUSEHOLDS WITHOUT CURRENT ACCESSClearly, with the exception of about five percent of the population studied thatlack adequate income for all their basic needs; there is a big segment of the poorrural households with a strong demand for savings. The actual saving variessignificantly from household to household, but nearly half of the funds exceed Tshs100,000, while the mean savings for all households surveyed was Tshs 54,980. Thedifferent ways in which the surveyed households currently save their fortunes, insteadof the more efficient instruments from formal financial institutions, are next discussedin Chapter 4.3.5 CURRENT ACCESS TO LOANSCompared to the number of households with bank accounts, there seems to beslightly more families with access to credit, i.e., 19.3 percent (Figure 16) against 13.1percent.In reality, however, the fact is that much of the lending reported by thehouseholds is by informal sources. For instance, nearly one in every four of thesurveyed heads of households (24.5%) was as at the time of survey owed or owingsome informal credit to another person or several persons (Figure 17).Figure 16: Je, una dani kutoka kwa mtu au taasisi yoyote kwa sasa?ndio19%hapana81%
  43. 43. Page 43Similarly, nearly one in every five of the poor rural households (19.3 percent) hada current loan. The fact that nearly 90 percent of the rural households have providedcredit to at least four people within the last 12 months prior to the survey (Figure 17),and that nearly one third (26.3 percent) reported having a current loan from morethan one source (Table 3.9), shows just how widespread informal lending is amongstthe population group.Je, ni watu au taasisi ngapi unazozidai?# credits suppliedby householdsN Percent Cumulative Percent1 279 47.4 47.42 127 21.6 693 71 12.1 81.14 34 5.8 86.95 26 4.4 91.36 13 2.2 93.57 8 1.4 94.98 3 0.5 95.49 1 0.2 95.610 14 2.4 98> 10 12 2 100Total 588 100TABLE 3.9 (A): NUMBER OF CURRENT CREDITS TO POOR RURAL HOUSEHOLDSJe, ni watu au taasisi ngapi zinazokudai?N Percent Cumulative Percent# active loans1 345 73.6 73.62 85 18.1 91.73 23 4.9 96.64 11 2.3 98.9> 4 5 1.1 100Total 469 100
  44. 44. Page 44Access to FinanceTABLE 3.9 (B): NUMBER OF CURRENT LOANS TO POOR RURAL HOUSEHOLDSThe fact that there are as many poor rural households providing as well asreceiving informal credit is clearly evident from the current sources of credits to thehouseholds (Table 3.10).Source of credit N PercentFamily and friends 372 80.2SACCOS 28 6.0Not disclosed 19 4.1NMB Bank 9 1.9NGOs 15 3.2Supplier credit 7 1.5Serikali ya mtaa 7 1.5Upatu 4 0.9Other 2 0.4Employer 1 0.2Total 464 100TABLE 3.10: CURRENT SOURCES OF CREDIT TO POOR RURAL HOUSEHOLDSTable 3.10 shows that 80.2 percent of the current loans to poor rural households insurveyed areas are informal, from friends and relatives. It also shows a completereversal of roles whereby the banks, which were providing more access to bankingservices to the poor rural households than SACCOS, are now almost the leastimportant in the provision of loans, i.e., the latter providing about six percent of thecurrent loans while the banks well under two percent. It is noteworthy that localgovernments are also playing an active role in credit provision (accounting for 1.5percent of the current loans held by the poor rural households), while employers playthe least role (providing 0.2 percent).Furthermore, the fact that current loan amounts are generally small; with up tonearly 70 percent of the amounts owing being within Tshs 50,000 (Figure 6), alsounderscores the predominance of informal sources in lending to poor ruralhouseholds rather than the more established financial intermediaries. What is perhapsmore significant is that a fairly large number of the informal credits (nearly one inevery five or 20 percent) are also quite sizeable, above Tshs 100,000), with about ashigh as 4.4 percent being above Tshs 400,000.
  45. 45. Page 45Figure 18: Size Distribution of Informal Credits23%30%30%13%4%Tshs below 10,000Between Tshs 10,000 toTshs 50,000Between Tshs 50,000 toTshs 100,000Between Tshs 101,000 toTshs 400,000Above Tshs 400,000Figure 19: Obstaclesto Credit05101520253035complicatedapplicationprocess,toohighinterest,nottrustedenoughlackedcollateral/guarantorloanstargetedtospecificindividualsnocashnofeedbackonapplicationfromproviderunreasonableterms/conditionstoodemandingObstaclePercentofMentionsbyHouseholdsIn addition to the nearly 20 percent of the households currently with loans as atthe time of survey, another 14.3 percent had tried to obtain credit within the last 12months of survey but failed to obtain any due to many factors (Figure 19).A leading obstacle to loans is what the poor rural households consider to be toodemanding terms and conditions, which they find hard to fulfill (27 percent). Otherhindrances to access include not knowing the requirements or procedures to followto get what they want (22 percent), being perceived unfairly as not having the abilityto repay (19 percent), and being treated unfairly in assessment and demand forcollateral (13 percent).3.6 CONCLUSIONSThis survey has shown low access to finance by the poor rural households in thecentral corridor where RLDC is involved in development activities. Firstly, the numberof households currently with access to existing financial intermediaries in their districtsis approximately 170,926 out of the 1.4 million households. In terms of access to bank
  46. 46. Page 46Access to Financeaccounts and loans, the corresponding number of households in surveyed areas is128,194 and 270,633, respectively. However, if access to informal credit is excludedfrom this analysis, the number of poor rural households able to get loans they needon demand is perhaps at par with those currently banked as at the time of survey.In retrospect, there has hardly been much improvement in the access to financesituation for the poor rural households of central corridor; just as it has been in the restof Tanzania for the last five years (Table 3.11).OverallAccessAccess status 1999/1992 2000/2001 RLDC Survey1 Households with bank account 18 6.4 16.72 Households with bank loan 1.2 0.6 1.93 With an informal savings group 5.1 5.7 31.0Rural1 Has account 12.9 3.82 Has bank loan 0.5 0.43 Has Upatu/informal credits 3.6 4.1Other urban1 Has account 35 14.42 Has bank loan 2.6 13 Has Upatu/informal credits 10 10.3Dar es Salaam1 Has account 43.1 18.9 na2 Has bank loan 6.7 1.1 na3 Has Upatu/informal credits 12.4 13.1 naTABLE 3.11: COMPARATIVE ACCESS DATA; 1991/1992, 2000/2001, AND 2006 SURVEYSThe fact that majority of poor rural households still depend on SACCOS, which aretypically undercapitalized, for as much as 30 percent of current access to bankingservices and up to six percent of total access to credit, clearly indicates a kind ofmarket failure that cannot be self-correcting. In contrast, the regulated financialinstitutions, which are the better capitalized and have greater organizationalcapacity and resource base, were all presently serving just slightly more than a half ofthe households with savings accounts, and well under two percent of current accessto credit.Of all the rural financial intermediaries, the financial NGOs were the least likeddue to their unpopular product design.
  47. 47. Page 47Chapter4BARRIERS TO ACCESS4.1 FINANCIAL SERVICES INFRASTRUCTUREOf the four regions studied, Shinyanga had the most number of financialintermediaries (Table 4.1); instead of the usual number, it had all the four major banks(NBC, NMB, CRDB, and Tanzania Postal Bank) operating there –and as many as 82SACCOS. This is probably due to its having many natural resources, includingDiamonds, Gold, and also growing other major cash crops like Tobacco, and Cotton.Shinyanga also has more livestock than any other region of Tanzania.Provider Shinyanga Morogoro Singida Dodoma TotalTotal 99 81 54 101 335SACCOS 82 75 46 89 262NBC 5 7 3 3 18NMB 4 5 1 3 13Other 3 1 0 2 6TASAF 1 1 2 1 5CRDB 0 1 1 1 3TPB 0 1 1 1 3WVI 1 1 0 1 3FINCA 1 1 0 0 2PRIDE 1 0 0 0 1SEDA 1 0 0 0 1TABLE 4.1: FINANCIAL INSTITUTIONS MENTIONED BY HOUSEHOLDSIn fact, Shinyanga is also the only region in the central corridor where nearly allmajor financial NGOs in Tanzania have a presence; for instance, FINCA Tanzania,PRIDE Tanzania, and SEDA, etc. Moreover, unlike the other regions, the four bankshave more branches outside the regional town (and some in even smaller ruraltowns, e.g., Kiomboi (Table 4.2).Region Outreach Shareholding-member customersBelow 100 100-250 251-500 Over 500 TotalDodoma 42 34 17 7 98Morogoro 39 15 11 10 75Singida 34 11 4 0 49Shinyanga 26 10 4 2 42Total 141 70 36 19 192
  48. 48. Page 48Access to FinanceTABLE 4.2: SIZE DISTRIBUTION OF SACCOS IN SURVEY AREASBesides their regional geographical distribution within the corridor, one first uniqueaspect of the intermediaries is their rather limited outreach each individually.Secondly, many of the intermediaries are also inactive. Thus, while the overall numberof intermediaries within the corridor looks numerous, very few are active in all of theareas surveyed. Yet another unique aspect of intermediaries in the four regions is theirdomination by savings and credit cooperatives, i.e., in absolute number, proximity tothe poor rural households, and the overall percentage of population currently usingthe SACCOS vis-à-vis financial NGOs, banks, and non-bank financial institutions. In all,the SACCOS represent slightly more than 83 percent of all financial intermediaries inthe regions (Table 4.1).Nonetheless, as already mentioned, many of the SACCOS are very small (53.4%served less than 100 customers, as of 31 December 2005, while under 10 percentserved more than 500 customers each).Yet still another unique aspect of SACCOS in the regions in spite of their impressivenumbers is their selective targeting and marketing; majority target either teachers orlocal government workers. Only a few trade or community-based intermediarieshave emerged in the recent past to cater for a more diverse clientele consistent withthe diversity of local communities’ livelihoods. In addition to their restriction ofcommon bond definition, majority of the SACCOS also operate strictly within specificdistricts, thereby limiting access to finance within their own territory. The most severelyexcluded population from access to finance by existing intermediaries are also themore numerous, e.g., pastoralists, small-scale farmers, and the “wanabiashara”.4.2 HOUSEHOLDS’ PERSPECTIVE ON BARRIERSWidening and deepening access to the poor rural households is a Herculeantask, given the current narrow base of financial services infrastructure and the factthat nearly 97 percent of the households have no bank accounts. However, thegreater constraint in expanding access is not just dearth of reliable and capableservice providers, but also a huge cultural gap between the providers on the onehand and the target population itself on the other (Figure 20).About 33% of the households explain their reason for currently or never using anyof the existing financial institutions within their district as their lack of adequateincome. Nonetheless, excluding the 1.1 percent of households who feel financiallyadequate (and thus do not need any financial services), the number of poor rural
  49. 49. Page 49Figure 20: Je, ni sababu gani zinakufanya usitumie taasisi za kifedhazilizopo katika wilaya hii?other (e.g., I feardefaulting, does nothave a need, I amtoo old, etc)5%products/ servicesare inappropriate12%I do not know thebenefits or availableservices28%difficultconditions/ requirements5%non exists/ is closeenough17%my income is tooliitle33%households currently excluded but only because they do not know enough aboutthe benefits (28 percent), or providers being too far from their homes (17 percent), ishuge. Then there are also those among the excluded who simply lack accessbecause they do not have enough confidence in themselves ever being acceptedor considered eligible by the existing intermediaries (17 percent).It seems therefore that the first option in improving greater access to finance forthis population is, not just increasing the number of service providers available, butfirst eliminating the following inefficiencies of the existing financial system: Encouraging and supporting existing financial institutions toimprove or add products more suitable to the needs of the poorhouseholds Educating the poor rural households about the existing financialinstitutions, various products that exists, and the benefits/potentialbenefits vis-à-vis costs of using these services Building the capacity of financial institutions within the ruralcommunities or with the potential to extend services to ruralcommunities with the technology and knowledge to serve poorrural households Mobilizing and encouraging the poor rural households to establishtheir own appropriate or effectively take advantage of the existingfinancial institutions to meet their financial needs
  50. 50. Page 50Access to Finance Increasing and improving the quality of physical infrastructureavailable within the rural communities Creating new means and enhancing the existing livelihoodsystems of the poor rural households within the target areas4.3 PROVIDER’S PERSPECTIVE ON BARRIERSThis section is based on interviews with a random sample of 14 financial serviceproviders concerning their own views on the current obstacles to poor ruralhouseholds’ access to finance. From the providers’ own list of their current constraints(Table 4.2), lack of adequate capitalization (mentioned nearly 44 percent of the timeand ranked most frequently in the first three priority list), is the leading obstacle towidening and deepening access to finance for the poor rural households.Obstacle Number (%) of times ranked in order Totaltimes% ototamenRanked1Ranked2Ranked3Ranked4Ranked5Ranked6Ranked71 Lack of adequatecapital4 6 4 4 0 0 0 18 43.92 Lack of adequatecommunicationsystem/transportproblems3 2 2 0 0 0 7 17.13 Low/poorawareness orlimited knowledgeabout financialservices, benefits,and institutions2 0 2 1 0 0 5 12.24 Delays inremittance of loandeductions2 1 0 0 0 0 3 7.35 Lack of fulltimestaff/internalcapacity1 2 0 0 0 0 0 3 7.36 Loanarrears/delinquency0 1 0 0 0 0 0 1 2.47 Limitedservice/productofferings(undiversifiedincome base)0 0 0 0 0 1 1 2 4.98 Low incomebase/poor savingsby members0 0 0 0 1 1 2 4.9Total 12 12 8 4 1 2 2 41 100
  51. 51. Page 51TABLE 4.2: CURRENT LEADING OBSTACLES TO GREATER OUTREACHPoor infrastructure and lack of basic communication equipment, including lackof permanent office premises and fulltime staff, is also a major obstacle to expandingaccess to the poor rural households (mentioned nearly 30 percent of the time).Other obstacles are the low/poor awareness or limited knowledge aboutfinancial services, related benefits, and how the financial institutions operate by thehouseholds themselves (mentioned 12.2 percent of the time; and ranked as the thirdoverall constraint by providers). Another common and prominent constraint toexpanding access to poor households is unjustified and unnecessarily long delays inremittance of monthly loan deductions and savings/share contributions by employersto the SACCOS, a problem mentioned nearly eight percent of the times and whichalso contributes significantly to the lack of adequate capital among the employee-based SACCOS especially.Understandably, the low-income base and poor savings habits of poor ruralhouseholds is also perceived by the providers as a major constraint (mentionednearly five percent of the time). All the constraints mentioned above by serviceproviders are, in fact, almost identical to the ones identified in other surveys (Oketch,2006; SEEP Network, 2006; and FINMARK, 2006), which also cite physical barriers andeconomic barriers, as well as perceived or real cultural barriers between the serviceproviders on the one hand and the poor rural households on the other asconstraining greater outreach. On the surface, these barriers would seem wideranging and unrelated, but on closer scrutiny simply fold into a handful of deeplyembedded underlying barriers, as discussed in the next section of report.4.4 A DEEPER UNDERSTANDING OF OBSTACLESTo begin with, while low incomes is a reality for many poor rural households (withthe annual average from the survey at Tshs 465,563), this fact on its own is certainlynot the primary cause of poor savings, low-participation in savings activities, or thegeneral failure of financial intermediation at the local level. In this first regard, Oketch(2006) presents convincing evidence that distance and low incomes are not theprimary obstacles either from the provider or consumer perspective. For instance, thisrecent publication shows the workings of a vicious circle which combines low or lackof confidence in the local financial intermediaries that is itself in turn primarily causedby historical failure of these institutions to provide services on demand (see Table 4.2above). Indeed, Oketch notes how…
  52. 52. Page 52Access to Finance…”the local financial intermediaries technically and financially assisted byCRDB Bank Limited to upgrade their capacity and meet members needs ondemand were reaching four times more customers than the non-assistedintermediaries of same age and operating in similar environments”…In financialintermediation, they also attracted 5.2 times more deposits than the non-bankassisted intermediaries and disbursed 14.5 times more loans annually. Moreremarkably, the bank-assisted intermediaries had 9.5 times more assets than thenon-bank assisted intermediaries, which definitely gives them a greateroutreach capacity…, p.28.A more complete picture of this argument, also cited from the author, is based onreal-life case experiences of 200 once un-employed youth in one of the regionscovered by this RLDC survey (Shinyanga). Here, although once without income theyouth are transformed into active savers through mobilization, education, andaccess to start-up capital by the then only local financial intermediary withinBukombe district. He notes exactly, thus:… Ushirombo SACCOS Limited is one of the fastest growing intermediaries inthe Shinyanga area and even nationally in Tanzania. The history of thisintermediary’s establishment in April 2006 goes back to the split of KahamaDistrict into two districts, namely: Kahama and Bukombe districts in the late1990s. Following the split of the original district into two, the newly establisheddistrict emerged without any single financial institution left within its borders. Butupon establishment, the intermediary immediately launched two products: asalary payment account into which the employees of a local governmentauthority could receive their monthly salaries-this account could also entitlethem to a personal consumer loan.The second loan product, which is of more direct interest for this publication,was one targeting poor young men without any assets of their own whatsoever,and were actually working for low-wages by riding bicycle taxis. Each day therider would collect and return his/her allocated bicycle to the intermediaryalongside a much better minimum daily take of Tshs 1,500 as part payment forthe eventual ownership of the asset. With the help of CRDB Bank, the subject ofOketch’s 2006 publication, Ushirombo successfully mobilized the youth intosmaller groups of five to access this product, (evidently using the solidaritygroup logic and process).
  53. 53. Page 53Starting with 20 groups of five each, the intermediary provided every one abicycle with a wholesale loan obtained from the bank. Each day, for six days aweek—with the exception of Sundays when they retained all amount earned,each group pays in a minimum of Tshs 5,000 to the intermediary towards thefuture purchase and ownership of a bicycle. However, if any of the five groupmembers fail to raise the Tshs 1,000 expected of each one, the other membershelp to raise the amount. If the same person does not raise the sum in threeconsecutive days, he automatically loses the bicycle allotted, together with anysavings he may have accumulated towards its purchase. Each youth is able topayoff the bicycle and in addition accumulate Tshs 80,000 within 90 days. At thispoint, each youth not only owns an asset previously unavailable, but also wouldhave accumulated enough savings to purchase shares in the intermediary andbe able to access finance under the normal terms for shareholding customers...p.24.At once, this case example demonstrates how local financial intermediaries caneasily overcome lack of adequate capital by simply crafting more suitable products,being able to provide services on demand, and especially that low-incomes neednot be an obstacle to financial intermediation if both the consumer and providershare similar aspirations and decide to collaborate. An important point from this caseexperience is that even households without regular incomes can gradually buildenough confidence to approach the closest providers for service, provided they getfinancial education about the benefits and encouraged to participate. The SEEP
  54. 54. Page 54Access to FinanceNetwork4 argues about why this lack of confidence among the poor rural householdsis not one to be underestimated:… what sets the organizations that have succeeded in reaching extremelypoor households with access to finance apart from “mainstream” microfinanceproviders is that they offer non-financial services in addition to financial products… including education, skill training, and confidence building … p.3Even when very poor people are not actively excluded from access tofinance by a particular intermediary, they often opt out because of feltintimidation, wrongly believing that the services offered by such a provider is notsuited to their needs or for people of their kind …living in absolute poverty for aprolonged time strongly affects people’s dignity and hope for the future, as wellas their ability to take initiative and overcome stigma… and being dependenton highly unpredictable livelihood systems such as subsistence farming stronglydiscourage the very poor people from taking the slightest risks towardsimproving their current economic and social situation… p.3In light of SEEP’s observation cited above, some of the households’ views onobstacles to access; for instance, factor 13 and 16 presented in Table 3.7, seemscredible enough not to be ignored while designing a strategy for widening anddeepening financial services for this target group. Hence, by simply educating thehouseholds more on how the various financial institutions actually operate, or about4 The SEEP NETWORK, 2006, Microfinance and Non-Financial Services for Very Poor People: Diggingdeeper to find Keys to Success, Preliminary research, Poverty Outreach Working Group, October.
  55. 55. Page 55available services and benefits, it is possible to encourage greater access withoutundertaking major investments.However, since lack of adequate capital is one of the primary constraints tobetter and more reliable incomes in the four regions covered by the survey, it seemsthat finding creative means of making access to finance possible to this poor ruralpopulation is the first logical step towards building their confidence in theseinstitutions.On a point of fact emerging from the survey, at Tshs 101,239 and Tshs 105, 712respectively; mean annual savings for both male and female respondents in the ruralareas were considerable vis-à-vis Tanzania’s per capita incomes, while the urbanfemale and male respondents had even much higher accumulated savings, at Tshs410,982 and Tshs 206,140. What this finding underscores is the underlying spirit of thriftthat could easily blossom once the right opportunity and encouragement isintroduced—as demonstrated in the case of intermediaries being assisted by CRDBBank.Next we return to examine the scarcity of suitable financial intermediaries in thefour survey areas, as in the rest of Tanzania countrywide, as major obstacle toexpanding access to the poor rural households. There is no doubt that poorinfrastructure and lack of basic facilities and communication system is a factor in thisregard. As noted by Oketch (2006):… Poor infrastructure: like many other parts of rural Tanzania, Bukombedistrict does not have good infrastructure facilities despite the Isaka-Benacohighway passing through the district. Besides the highway, there are no othergood roads. Similarly, access to telecommunications facilities is also veryproblematic; in case of need to make a phone call, and if one has no mobilephone handset, she/he has to go all the way to Geita, some 250 kilometersaway to do so, at very high cost.Because of these three constraints, however, residents have had to travel allthe way to Kahama, the administrative center of adjacent district where thereare bank branches, to access financial services, obviously at a high cost interms of money, time, and their personal security... p.46.The nature of economic activities: In the district, the vast majority ofresidents are farmers engaged in cotton, paddy, potatoes, and maizeproduction. For this reason, business cycles are highly seasonal and involve fewsmall and medium-sized firms. This makes the district unattractive to the bigfinancial institutions to establish themselves there.
  56. 56. Page 56Access to FinanceLack of power: up to now, Bukombe district is one of the few areas withoutpower, yet the technological advancements make access to power essential tothe business. Hence, lack of electricity is one of the hindrances for the financialinstitutions, especially commercial banks, to open up business in the District.Thus, a last re-examination of the true obstacles to greater outreach of the ruralpopulation lies deeply neither with the reputedly high costs of delivering such servicesnor with the risks of serving this group††. Again, the first evidence that underminesthese long-held and highly popular excuses for limited outreach of poor ruralhouseholds is well argued by SEEP (2006) and Oketch (2006).Firstly, through many emerging microfinance methodologies; like the CRDBwholesale model, the costs of serving very poor rural households can be greatlyreduced—as has indeed happened in the last decade (see Table 4.3 below). Even inAfrica where poor infrastructure, a widely dispersed population, and badcommunication systems or lack of basic facilities had made serving this groupprohibitive, there are powerful institutional and technological innovations thatincreasing push the cost frontiers.4.5 OPPORTUNITIES FOR GREATER ACCESS4.5.1 The Institutional sideAlthough distance and poor infrastructure remains a formidable obstacle togreater access to finance for poor rural households in the four central corridor regionstargeted by RLDC, many opportunities to improving the situation exists. The first ofthese chances would seem to rest on the upgrading the capacity and supportingdeserving savings and credit cooperative societies to becoming more credibleintermediaries in the eyes of the general population. Banks such as CRDB Bank inTanzania (who have adopted a similar strategy for promoting greater outreach) aredemonstrating the kind of transformation and scale achievable by these morenumerous but modest institutions if assisted. As illustrated in the experiences of thisbank (Oketch, 2006; FAO, 2005), greater numbers of the poor rural households canbuild the trust and gain their confidence in using these intermediaries, once they areable to deliver services on demand and become adequately accountable. Yet, thisis a costly process that requires a committed facilitator (very much like RLDC) to startoff. Therefore, in the foreseeable feature, while the physical constraints remainunchanged, it is the chance of transforming these smaller –but conveniently locatedfinancial intermediaries that are likely to expand outreach in areas like the ones
  57. 57. Page 57targeted by RLDC. Accordingly, a primary conclusion of this survey is thatcollaborating with these SACCOS that RLDC should adopt and promote.4.5.2 The consumer side‡‡On the demand side, there is not only a gap in the supply of services, but also ahuge financially excluded population desiring some urgent solution. The firstevidence for this conclusion is the large numbers of poor households seeking credit inthe last 12 months of survey but failing to get any access. A more direct evidence forthis conclusion is, however, the number of households that if given the chance wouldreadily borrow funds to realize one or another of their immediate financial needs; awhole 98 percent of surveyed households. For instance, with the exception of a few,most of the households participating in the RLDC survey has exact ideas of investingfunds immediately if these were somehow available (Table 4.4).Application of loan Mentions PercentExpand/modernize farming 934 28.7Start a new business 741 22.7Build a house 435 13.3Expand existing enterprise 406 12.5Buy cattle 212 6.5Capital investment 176 5.4Invest in own/childrens education 99 3.0Purchase land 78 2.4Meet basic needs 75 2.3Save 28 0.9Invest somehow 21 0.6Purchase Household appliances and furniture 17 0.5Buy bicycle or motorbike 12 0.4Hire farm labour 8 0.2Plant trees 5 0.2Introduce irrigation farming 5 0.2Buy iron sheet for roofing 3 0.1Buy fishnet 2 0.1Other 2 0.1Total 3259 100TABLE 4.4: IMMEDIATE AND LONG TERM HOUSEHOLDS INVESTMENT PLANSBut this critically needed access is lacking, thereby crippling innovation,expansion, and growth in rural livelihoods.

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