How poor rural households in four Tanzanian regions manage their finances

Je, unatumia taasisi yoyote ya kifedha iliyopo katika wilaya hii?
88%
12%
Hapana
Ndiyo
HOWPOORPEOPLEINMOROGORO,DODOMA,
SINGIDA,ANDSHINYANGAREGIONSOFTANZANIA
MANAGETHEIRFINANCES
A SURVEY ANDSTRATEGY FORGREATEROUTREACH, JULY/AUGUST2006
By Henry Oloo Oketch
Maarifa Consultants Limited,
Apartment B3, Lantana Gardens
Dennis Pritt/Maalim Juma Road
P.O. Box 45304 GPO 00100, NAIROBI Kenya
Rural Livelihoods Development Company
Limited, P.O Box 2978, Dodoma, Tanzania
Phone +255 26 232 1455
Fax +255 26 232 1457
E-mail: info@rldc.co.tz

Access to Finance
Contentspage
Summary of findings _____________________________________________________ 4
Chapter 1 _______________________________________________________________ 8
Background & Introduction ___________________________________________________ 8
1.1 Introduction___________________________________________________________________8
1.2 Survey objectives_____________________________________________________________10
1.3 Definitions and conceptual framework ________________________________________11
1.4 Data Collection and Sampling ________________________________________________13
1.5 Data type and analysis _______________________________________________________15
1.5.1 Household demand survey ________________________________________________15
1.5.2 Supply-side inventory study ________________________________________________17
1.6 Baseline Context of surveyed Areas____________________________________________20
1.6.1 Physical Infrastructure _____________________________________________________20
Morogoro Region ________________________________________________________________21
Dodoma Region_________________________________________________________________22
Singida Region __________________________________________________________________23
Shinyanga Region _______________________________________________________________23
Chapter 2 ______________________________________________________________ 25
General Baseline Results _____________________________________________________ 25
2.1 Residency and Age ________________________________________________________25
2.2 The People and Social capital_______________________________________________25
Chapter 3 ______________________________________________________________ 31
financial Access & Exclusion _________________________________________________ 31
3.1 Percentage with current access_______________________________________________31
3.1.1 Awareness of financial services ____________________________________________31
3.1.2 Financial Literacy _________________________________________________________32
3.1.3 From knowledge to use ___________________________________________________33
3.1.4 Proximity is no Guarantee of use ___________________________________________34
3.2 Patterns of Use of Available Services ___________________________________________36
3.2.1 Types of Accounts Held ___________________________________________________37
3.3 Perception of the intermediaries_______________________________________________38
3.4 Current methods of saving ____________________________________________________41
3.5 Current Access to Loans ______________________________________________________42
3.6 Conclusions __________________________________________________________________45
Chapter 4 ______________________________________________________________ 47
Barriers to Access ___________________________________________________________ 47
4.1 Financial services Infrastructure________________________________________________47
4.2 households’ perspective on barriers ___________________________________________48
4.3 provider’s perspective on Barriers______________________________________________50
4.4 a deeper understanding of Obstacles _________________________________________51
4.5 Opportunities for Greater Access ______________________________________________56
4.5.1 The Institutional side_______________________________________________________56
4.5.2 The consumer side ________________________________________________________57
4.6 Bridging the divide ___________________________________________________________58

Chapter 5 ______________________________________________________________ 59
A Strategy for Greater Access ________________________________________________ 59
5.1 Guiding principles ____________________________________________________________59
5.2 Collaboration with existing providers___________________________________________60
5.3 Possible interventions __________________________________________________________2
5.4 Internal capacity and strategy formulation______________________________________4
5.5 Conclusion____________________________________________________________________5
Appendices_____________________________________________________________ 7
Annex 1.1 ________________________________________________________________________8
Annex 1.2 Main survey questionnaire_______________________________________________1
Annex 1.4 Supply-side survey instrument ____________________________________________1
Appendix 2 Endnotes & References________________________________________________1

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Summaryoffindings
In almost every part of the world, limited access to finance is a seriously binding
constraint to private sector growth. This is especially true of the poor people in
Tanzania, many of whom both have the urge and ideas to improve their livelihood
but is financially excluded from reliable service.
In the case of present RLDC survey, accessibility was defined as the ease with
which an individual can get services and facilities if he or she needed or desired to
do so and it reflects the ability of that person whether directly or through his/her close
associates to reach and use such services affordably.
With greater and better access to finance, even poor people can create their
own jobs, build decent homes, and educate their children to their capacity, thereby
securing their lifetime labor market mobility. Thus, RLDC considers access to
appropriate financial services by the poor and low-income families in the four regions
where it currently has development activities as one of the critical success factors in
creating jobs, improving incomes, and helping the communities manage various
social 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 the
poor rural households’ access to financial services in the four regions of Morogoro,
Dodoma, Singida, and Shinyanga, as intended by RLDC, provides insight into defining
its priorities and strategies for widening and deepening access to financial services in
the said target areas.
The survey involved 2,568 randomly selected households and 14 local level
financial intermediaries. The results of the survey show that:
 About 13.3 percent of the households presently use at least one of
the existing financial service providers within their district. Another
4.1 percent had another member also using the existing
intermediaries, thereby increasing the overall percentage of
households currently using the existing intermediaries to 17.4
percent of the population.
 Of the households using the existing intermediaries within their
districts, 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

Bank (8.1 percent), groups (6.8 percent), and two major financial
NGOs (5.7 percent).
 In terms of services, less than nine percent of the households keep
an account with the intermediaries; with 57.4 percent of them
depending on various banks for services, 33.4 percent in SACCOS,
and a far smaller number (9.2 percent) with either non-bank
financial institutions or ROSCAS (Rotating Savings and Credit
Associations) groups.
 The majority of households currently having accounts maintain a
savings bank account (88.6 percent); only 8.5 percent have a
business or current account (through which some receive salaries
and loans), 1.3 percent maintain term deposit accounts, and 1.7
percent group accounts.
 Although a slightly higher number of the households have access
to credit; at 19 percent, this is largely accounted for by informal
credits (79.7 percent of all loans granted within 12 months prior to
the survey). Both SACCOS (six percent), financial NGOs (2.2
percent), and banks (2.1 percent), provide just about 10 percent
of the total credits granted to the poor rural households.
 This low access to both savings and loans by the poor rural
households is caused by a myriad of factors and not just by the
absence of many conveniently located financial intermediaries
close by the population; which is of course also a major constraint.
 Basically, the existing financial system is at odds with the
requirements of the poor and low income households; for
instance, despite the presence of some such institutions within the
districts where the households live, a whole 54.2 percent do not
know even of their presence.
 Based on analysis of the situation, financial exclusion of the poor
rural households is caused by at least three related factors. Last in
the list is the population’s ignorance about the existence of these
institutions right within their midst –or alternatively, their ignorance
about the benefits of effectively using the services provided by
these institutions to improving their livelihood. The second; but just

Access to Finance
as likely the first major cause of financial exclusion, however, is high
cost of service, inconvenience, and the unsuitability or poor quality
of services provided by most financial intermediaries operating in
the four regions. In this conclusion, the RLDC survey presents
evidence that is very similar to those established by the Bank of
Tanzania Survey of 1997§ and the Vice President’s Office study in
June 2000.
 In a process typical of a vicious cycle, this combination of greater
distances to nearest available financial institutions, high cost, poor
service, and poor information about potential benefits of using
various financial services, almost completely discourage formation
or use of appropriate and conveniently located financial
institutions in the concerned regions. Subsequently, without gaining
the necessary confidence of the local people in these institutions,
the much hoped for greater access is undermined by their lack of
credibility and intermediation capacity.
 If the analyses of the survey results are correct, the first and primary
solution to increasing greater outreach for RLDC would seem to be
a two-pronged strategy that works simultaneously. These include
providing better, more comprehensive, and more focused
financial education to the target population, while at the same
time enabling a few of the better focused and more deserving
financial intermediaries closest to the people build their institutional
capacity and acquire other resources necessary to deliver timely
and suitable products and services.
 The evidence from this baseline survey certainly shows a strong
local demand and capacity among the target population for
both using financial services effectively—if rightly and correctly
informed about their benefits—and contributing towards
establishing and further building the capacities of the institutions.
So, it is certainly a sound proposition for RLDC to pursue investing in
strategic alliances with carefully selected local level financial
intermediaries; mostly community-based savings and credit
cooperatives, providing detailed financial education on savings,

budgeting, managing credit, and their own responsibilities towards
building 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 support
to selected partners to undertake specific investments in building
financial services infrastructure, developing people’s capacity for
strong leadership and service delivery, and developing
appropriate management systems, undertaking relevant market
research, and even developing new and better products and
services. In this area, RLDC has much to learn from CRDB Bank
Limited, with which it has already made contacts and initiated
valuable discussions.
 Finally, given its previous successes in mobilizing various
communities in the central corridor to undertake many livelihoods-
enhancing activities and excellent reputation, RLDC has both the
mandate and self-interest in establishing diverse financial services
activities that would create the momentum and support towards a
greater access to finance for the target population.
 These might include facilitation of financial literacy training to the
public, formation of strategic alliances with financial institutions like
the CRDB Bank Limited; which seeks to increase poor households’
greater access to financial services through strategic linkages with
local financial intermediaries, funding of technical assistance and
appropriate management systems development for deserving
intermediaries, and even giving material support in badly needed
staff training, communication, and product development
challenges.
Copyright ©2006 Rural Livelihood Development Company
All rights reserved.

Access to Finance
Chapter1
BACKGROUND&INTRODUCTION
1.1 INTRODUCTION
This report presents the results of a baseline survey carried out in July and August
2006 by the Rural Livelihood Development Company (RLDC). The overall purpose of
this combined baseline survey was to measure poor rural households’ access to
financial 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 officially
recognized as the ‘Central Corridor’ area, evidently based on their location right at
the heartland of mainland Tanzania. It is a corridor that begins with the Dar es
Salaam-to-Kigoma railway network (some 1,254 km in length), which connects the
1RLDC is a not-for-profit enterprise based in Dodoma, Tanzania whose purpose is to improve the livelihood of
rural communities in the central corridor by helping and supporting the generation of greater income and
employment opportunities through various interventions, including:
Promotion of skills improvement
Promotion and direct provision of business development services
Promotion of greater access to financial services
promotion greater access to markets
Encouraging and enabling the development of market infrastructure
Encouraging and enabling the development of a more conducive policy and regulatory environment
The organization envisions a time and situation in which poor rural households and communities have open
access to all markets relevant to enhancing their livelihood.

country with Bujumbura, Burundi, by boats on Lake Tanganyika, and further on to
Rwanda 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 an
effective financial strategy, especially one with a focus on facilitating market
development for on-farm and off-farm livelihood activities within the corridor. Yet, to
intervene effectively in this market development process, RLDC needed to know the
demand for financial services, i.e. proportion of the target population that is in need
and able to pay for services if such service were made available, but are nonetheless
presently excluded.
Secondly, because RLDC prefers undertaking a facilitative rather than direct role
in development work itself; including the provision of financial services, it needed to
know a little more about the institutions or individuals with whom it could collaborate
in 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.

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1.2 SURVEY OBJECTIVES
RLDC considers the baseline survey as an important part of its 10-step process2
towards establishing viable, self-sustaining financial service organizations for
achieving greater access to finance, lack of which it currently considers a major
constraint to improving livelihoods in the four regions. Although considered a fully-
fledged intervention independent of the others by RLDC, the company sees greater
access to finance as a cross-cutting input that could make a critical difference in the
achievement of its other interventions. Partly because of this consideration—and
although presented and discussed separately in two parallel reports of equal depth,
the survey also explored the number of households currently engaged in micro- and
small-scale enterprise (SMEs) activities in the corridor, thereby specifically looking at
their present constraints that if properly harnessed could open up greater
opportunities for enhancing livelihoods in RLDC’s area of operation.
RLDC, along with many other development organizations of its kind, now
recognizes SMEs to have become an increasingly important source of income for
many poor Tanzanian families and therefore should neither be neglected nor left un-
nurtured. Hence, the need during the survey to explore whether current access to
finance by concerned households is an obstacle to the growth potential of these
enterprises. Also investigated by the survey, but results similarly presented and
2 These 10 steps starts with (1) demand stimulation (2) processing of requests/applications received for
various inputs (3) rapid appraisal of requests and applications (4) project planning and presentation for
discussion and approval (5) board approval (6) contracting/engagement (7) implementation (8)
monitoring (9) evaluation (10) release of inputs/capitalization.

discussed separately in a parallel report, is the number of households presently
accessing relevant business development services (BDS), which are themselves also
considered critical to successfully enhancing livelihoods in the corridor by RLDC.
Among the BDS explored by the survey included current access to information by
type, source and provider and also whether they have received business training,
technical support, and linkages to markets, etc. The two separate reports—one on
SME constraints and opportunities, and the other on poor households’ access to
BDS—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 that
enables an individual, household or firm to:
 Send or receive money,
 Store and retrieve any surplus income not immediately required for
consumption or investment,
 Receive or make payments for goods and services supplied to or
received from a third party,
 Sell or buy financial assets such as treasury bills, bonds, shares, and
insurance, etc
 Transform future income into current income by giving loans (or by
facilitating current consumption against future income), and;
 Exchange currencies.
Amongst the poor rural households studied, these services are provided by a very
diverse group, e.g., individuals or specialized institutions (such as commercial banks)
and non-bank financial institutions, financial cooperatives, financial NGOs, and
informal associations groups. Nonetheless, the survey recognized that each possible
provider has own unique attributes that could influence the range, quality, and
benefits provided to different segments of the target population. For this reason, the
survey sought to establish the share of households and small-scale firms presently
included or excluded by different providers.
Of these providers, the regulated and supervised group is known for taking
particularly nontrivial risks in intermediating third party deposits for a gain. Fortunately,
one category of the unregulated and unsupervised providers faced no such risks, as

Access to Finance
they deal almost exclusively with their shareholding customers only. Accordingly, the
survey treated commercial banks and non-bank financial institutions as a distinct
class under the ‘regulated service provider’ category. Yet, among the non-
regulated service providers, however, the survey created two sub-categories based
on their specialization, level of organization or formality of activities, as well as the
underlying motivation for business, which clearly have an influence on their conduct
and choices. In this regard, therefore, the survey distinguished between:
 Specialized, non-regulated providers as a cluster comprising
financial NGOs, financial cooperatives, welfare funds, and village
banks, which may be small but relatively formalized in approach
to service provision, and;
 Non-specialized, non-regulated providers, comprising Upatu-style
rotating savings and credit associations (ROSCAS).
Also in the category of non-specialized providers the survey included any
institution or person that provides supplier credit. Finally, the survey identified a large
group of individuals (precisely 1,711 or 70.1 percent of the households studied) that
were providing informal credits, but do not belong with either of the two categories
of providers discussed above. Finally, the survey also identified a few profit-motivated
moneylenders within the individuals that were giving credits in the corridor, but again
do 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 of
services or products provided and have, thus, distinguished the degree of
accessibility by households and firms in the central corridor area. This extent of access
is captured graphically by tracing the usage of a particular service or product as a
percentage of the eligible population across time and penetration (see following
illustration, a Market Map):

1.4 DATA COLLECTION AND SAMPLING
Three sets of data were collected using separate instruments: the first and primary
questionnaire was an all-open structured set of response items administered face to
face to a sample of 2,441 households (Appendices 1) randomly selected from 126
enumeration area clusters throughout the four survey regions (Table 1.1).
Region Districts Population
(2002
Census)
Number of
Households
(2002
Census)
Enumeration Areas Households
Urban Rural Total Urban Rural Total
Dodoma 5 1,698,996 376,530 3 23 26 87 563 650
Morogoro 6 1,759,809 385,260 7 19 26 173 477 650
Shinyanga 8 2,805,580 445,020 3 23 26 65 585 650
Singida 4 1,090,758 217,572 3 23 26 87 563 650
Total 23 7,355,143 1,424,382 16 88 104 412 2,188 2,600
TABLE 1.1: SURVEY SAMPLE DESIGN
These households were randomly selected from rural and urban cluster pools
established within the national sampling frame, which is based on the recent 2002
Tanzania Population and Housing Census. The optimal number of households to
interview per cluster was determined at 25 based on the minimum units established in
the national sampling frame, while the optimal number of enumeration sites was
determined at 26, also as determined in the said sampling frame.
Figure 1: Graphic Illustration of Market Penetration

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As planned, the households selected for interview from each cluster were picked
randomly at appropriate intervals representing a fixed proportion of its current
population size. Hence, the fact that Shinyanga region had slightly more households
did 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 all
enumeration areas in the national sampling frame into urban and rural categories,
this procedure ensured that each household’s probability for selection was
proportional to their population size (Table 1.2).
District Households Location Total SME
Rural Urban
1 Kondoa 162 162
2 Mpwapwa 84 25 109
3 Kongwa 115 115
4 Dodoma rural 96 96
5 Dodoma urban 31 31
6 Dodoma urban 22 69 91
Dodoma region 112
7 Bukombe urban 15 15
8 Bariadi 122 122
9 Maswa 19 19
10 Shinyanga urban 31 19 50
11 Kahama 77 77
12 Bukombe rural 98 98
13 Meatu 20 20
14 Shinyanga rural 79 16 95
15 Kishapu 39 39
16 Iramba 248 248
17 Manyoni rural 94 94
Shinyanga Region 193
18 Kilosa urban 25 25
19 Morogoro rural 113 113
20 Kilombero urban 25 25
21 Morogoro urban 1 75 76
22 Kilosa rural 100 1 101
23 Mvomero 174 174
24 Kilombero urban 26 26
25 Ulanga 50 50
26 Kilombero rural 61 61
Mororogo Region 136
27 Singida rural 176 176
28 Singida urban 26 82 108
29 Manyoni urban 25 25
Singida Region 126
Grand total 2038 403 2441 567

TABLE 1.2: GEOGRAPHICAL DISTRIBUTION OF SAMPLE BY SPATIAL LOCATION
The survey obtained all relevant EA maps for sampled clusters from the National
Bureau of Statistics. However, all household listings were updated on site during field
work 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 household
heads within the clusters were first listed by the field supervisors (Appendices 6), after
which a random sample of 25 were selected and interviewed.
While systematically drawing random samples for interview from the household
listings, there were a few instances where those randomly selected initially following
the appropriate interval did not included enough SME-households to meet the
desired 25 interviews per cluster; of which 20% were to be SME-involved. Nonetheless;
in such circumstances, the sampling interval was again systematically adjusted to
yield the desired number of households for interview (Table 1.2), hence the overall
results of this survey as presented here in this report are unbiased and representative
of the 1.4 million households in the areas studied.
1.5 DATA TYPE AND ANALYSIS
1.5.1 Household demand survey
On the demand side, respondents gave views on 20 different broad issues: from
reporting on their age, highest level of education attained, and possession of any
occupational skills. They also gave information on the size of their households and
composition, participation in development group activities, and their families’ current
assets portfolio. Various aspects of their financial wellbeing and current access were
also explored (Appendices 2). Of particular interest for the formulation of an effective
financial 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 their
satisfaction with the means chosen.
 Current stock of debt (if any), by amount, source, and purpose.
 Knowledge of financial service providers existing within their
district, regardless of their legal status, e.g. whether individuals,

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groups or institutions and their identity, location, and approximate
distance 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 and
suggestions on how to resolve hindrances.
 Ability and willingness to pay for various financial services if these
were somehow available; along with preferences for terms and
conditions for service.
Lastly, since RLDC intended using the survey to establish baseline indicators for
measuring its financial services interventions, the following additional information
were, hence, also collected:
 Current access to markets, advisory services, and inputs, e.g.,
market information through radio, TV, newspapers, or word of
mouth, etc.
 Current use of market information.
 Listening and reading habits.
 Ability to pay for information services.
 Media preferences, etc.
 Listening
While the primary questionnaire explored the overall participation of the entire
sample in micro/small-scale enterprises, a detailed secondary questionnaire which
was part of it, was administered to 567 of the households that were then involved in
SMEs (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

 Total paid workers in the enterprise
 Total number of workers at start of enterprise; and
 The major constraints to enterprise growth/expansion currently
Due to major oversight; undetected on the first three days of fieldwork, however,
the Kiswahili version of the instrument omitted very important items concerning the
annual inflow and outflow of enterprise income by source, periods when there is
excess income or shortage, and he specific needs or uses to which this income is
annually applied. Secondly, for each current source of income, the English version of
the questionnaire contained items on how the households were coping with income
shocks or emergencies and how these could be reduced or contained towards
improving livelihoods through SMEs that were again; regrettably, omitted during
translation. Consequently, there are many instances where a direct comparison of
the SME insights from this survey and a similar one conducted earlier by Swisscontact
East Africa in the Uhuru corridor is not possible. These shortcomings notwithstanding,
however, the current survey has produced some interesting facts about the growth
potential of SMEs in the areas studied –and particularly the negative consequences
of their financial exclusion.
1.5.2 Supply-side inventory study
The third survey instrument (Appendices 4) was administered to 14 randomly
selected financial intermediaries operating at the lowest level of intermediation in the
survey areas. This supply-side instrument collected information critical to RLDC’s
understanding of current obstacles faced by the local institutions in creating greater
access to finance for concerned population.
Thus, on the supply side, several intermediaries—actually numbering 110 –were
contacted on phone based on a 2005 Bank of Tanzania Directory of Microfinance
Institutions in Tanzania so that RLDC could get to know more about their activities and
if they would be interested in cooperating in widening and deepening access to the
poor rural households. Those successfully located from this directory were contacted
to provide information on the following aspects of their activities:
 Name and principal place of business (if any), together with all
necessary contact addressed not previously published by the Bank
of Tanzania, e.g., email, phone, and fax numbers.
 If organization was also providing services in other
regions/describe its geographical focus in greater detail

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 Legal status and sources of funding for the provision of financial
services
 Target customers eligibility criteria for access
 Measures taken (if any) by the organization to reach greater
numbers of the poor rural households in target areas of operation
 Service delivery processes and requirements
 Products and services provided, especially if institution is dealing
with poor rural households in particular
 The size of organization as measured by (a) number of staff, (b)
customers/shareholding-members, and (c) total assets/equity
base or savings
 Immediate long-term organizational plans
 Real and perceived opportunities and current obstacles in
expanding 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 each
provider

 The assessment of critical success factors that would definitely
facilitate the expansion of financial services to the presently
underserved or excluded population; and,
 Indicative areas for possible collaboration with RLDC towards
expanding services to the presently excluded/underserved
population.
Because a very high number of the sampled households were ignorant of the
financial institutions existing within their districts, the Bank of Tanzania Directory of
Microfinance published in November 2005 was an important reference for sampling
intermediaries for interview. However, despite contacting many intermediaries for
interview from this directory3; just published in October 2005, no more than 22 were
reachable and ready for interview: 14 were interviewed on phone while 17 insisted
on face to face interviews. These 14 provided enough information to support
3From the list under various districts in Dodoma, 21 were unreachable or wrong contacts for
any appointment to be made for interview. In Shinyanga, 28 were unreachable or had wrong
contacts 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 successfully
contacted but declined participation off site. Lastly, five of the intermediaries in the Bank of
Tanzania directory declined outright any interview; including Hembeti Rural SACCOS—one of the
most commonly featured in the survey with households.

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important conclusions, recommendations (Appendices 4) and insight into the current
scale of outreach and constraints.
1.6 BASELINE CONTEXT OF SURVEYED AREAS
For a better appreciation of the access to finance baseline situation of the four
regions surveyed, it is first necessary to highlight the existing social and physical
infrastructure, for instance, the availability and distribution of roads and various types
of financial intermediaries in the area of survey, which has a bearing on accessibility
and cost of service. Moreover, for certain financial services that have become highly
information-dependent, lack of access to electricity and telecommunication
required 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 the
four study regions that will help highlight the emerging pattern of access to finance
as well as potential challenges in trying to improve the situation. Secondly, the mode
of production and consumption can often dictate the presence or absence of
financial services, hence, access or exclusion of households. Accordingly, an
understanding 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 Infrastructure
The area covered by the survey was vast, measuring approximately 212, 232
square kilometers in size, and involved a population of nearly 8 million people (Table
1.3). Hence, the use of a two-stage random sampling process in identifying the 2,568
households interviewed was important in ensuring that both sample and baseline
indicators were robust and representative; as earlier discussed.
Region Land area
(Sq. km)
Population Households Districts Sample
sites
Sample
size
Morogoro 70 799 1 759 809 385 260 7 26 670
Dodoma 41 311 1 698 996 376 530 6 26 672
Singida 49 341 1 090 758 217 572 4 26 664
Shinyanga 50 781 2 805 580 445 020 8 26 562
Total 212 232 7 355 143 1 424 382 25 104 2 568
TABLE 1.3: SAMPLE SIZE AND DISTRIBUTION
In 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

could provide greater access to finance. Although a fully-fledged intervention and
independent of the others, yet an improved access to finance can catalyze many
other aspects of RLDC’s interventions.
A brief discussion of the survey areas should present a clearer picture of the
development challenge faced by RLDC:
MOROGORO REGION
Morogoro 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 Dodoma
or 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 trunk
road, there is similarly a single railway line running parallel to the said trunk road and
also connecting the region to the same adjacent areas (Figure 2).
Figure 2: Central Corridor’s Rail and
Road Network

Access to Finance
During the survey, there were four banks operating in Morogoro with 14
branches—most of them at district administrative centers. There were also four non-
government organizations providing financial services, mostly credit. The four
included World Vision International, FINCA Tanzania, PRIDE Tanzania, and SEDA (Small
Enterprise Development Agency). Unlike, the banks however, all the NGOs were
operating in Morogoro town only and, therefore, had no presence further a field in
the 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 the
time, compared to, for instance, Dodoma, which receives much less annual rainfall
and has poorer soils.
One community development organization (CBO), TASAF, although not
mandated or specialized in the provision of financial services, was widely treated as
a financial intermediary by the local communities throughout the 104 cluster areas
covered by survey. In addition, TASAF seems highly regarded as a financial
intermediary.
DODOMA REGION
The smallest of the four regions covered by the survey, Dodoma, has a total land
area of 41,311 square kilometers. Nonetheless, with a population of 376,530
households, it has nearly as many people as Morogoro, which is almost twice its size in
area. Much of the region is a plateau, with Bahi swamps found lying at 830 meters
above the sea level at the lowest points of region, and the highest point lying at
some 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 the
east by a single trunk road and railway line. And despite being the national capital
and lying almost at the center of Tanzania mainland, the region has no good road
connections 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 the
entire Dodoma region. Other financial institutions operating in the area included two
NGOs and a CBO, as well as 89 Savings and Credit Cooperatives; many of them
listed in the 2005 Bank of Tanzania Directory of Microfinance Institutions, but were
hard to locate on the ground. Unlike the SACCOS, however, both banks and NGOs
operating in Dodoma concentrate their services at just three of the major district
towns, i.e., Dodoma municipality itself and nearby Mpwapwa and Kondoa district
headquarters.

A random sampling and study of three of these 89 SACCOS during the baseline
survey shows that, except for a handful, most are moribund. More insight into the
capacity of the SACCOS in providing access to finance to poor rural households,
alongside their institutional constraints, is presented later in Chapter 3.
SINGIDA REGION
The entire Singida region with a surface area of 49,341 square kilometers has a
mere total road network of 3,238 kilometers and likewise a single railway line running
across 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 is
just about a kilometer of road in the entire region (Table 1.4).
District Main road Region road District road Rural road Total km
Singida
rural
21 0 270 0 291
Singida
urban
161 295 325 430 1211
Manyoni 343 279 104 123 849
Iramba 85 271 147 384 887
Total 610 845 846 937 3238
TABLE 1.4: EXAMPLE OF INFRASTRUCTURE NETWORK IN SURVEY AREAS
This scarcity of roads is most visible if one compares the total length of road
available by district and type of road, as in the table above. In addition to poor road
infrastructure, Singida region also lacks many financial intermediaries. Although the
region had four different banks and six branches, five of all six were located either in
Singida municipality itself or in Manyoni. The lone NBC branch in Kiomboi was the only
branch operating from a relatively remoter and smaller town. Secondly, all of the
only 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 in
the regional municipal town or Manyoni. In addition, there were 46 SACCOS
operating in the region. A random sample of three of these SACCOS studied during
the baseline survey also show the majority to be equally moribund as in Dodoma and
Morogoro.
SHINYANGA REGION
The last region studied, which is located at the extreme upper end of the central
corridor, is Shinyanga. With an area surface of nearly 51,000 square kilometers, it is
second largest amongst the regions of central corridor and the most populated;

Access to Finance
having nearly three times more people than Singida, about twice as many people as
Dodoma, and almost the same population as Morogoro (which has a much larger
area, see Table 1.3 above).

Figure 3: Je Chanzo kipi kikuu kinacho kuingizia kipato?
81%
4%
14%
1%
kilimo na ufugaji
ajira au vibarua
biashara
none / msaada au penseni
Chapter2
GENERALBASELINERESULTS
2.1 Residency and Age
The total age of respondents averaged 45.3 years, while residency tenure at their
current location ranged from 19.4 years in Shinyanga to 28.9 years in Singida (Table
7.5).
Kwa muda gani umeishi hapa?
Means
years of
residency
Age
Region N
Dodoma 605 24.7 42.5
Morogoro 644 28.4 44.5
Singida 643 28.9 51.9
Shinyanga 534 19.4 41.5
Total 2426 25.6 45.3
TABLE 2.1: AGE AND RESIDENCY TENURE BY DISTRICT
2.2 The People and Social capital
In all of the four surveyed areas, agriculture remains the major source of livelihood
for 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 in
micro and small-scale enterprise activities, which accounts for 14 percent of all

Access to Finance
Figure 4: Je, kuna biashara yoyote unayofanya kwa sasa?
0.0 20.0 40.0 60.0 80.0 100.0 120.0
buko mbe urban
manyo ni urban
do do ma urban
shingida urban
kishapu
kilo mbero urban
manyo ni rural
shinyanga rural
meatu
maswa
shinyanga urban
kilo sa urban
kilo mbero urban
singida rural
kahama
iramba
mo ro go ro urban
mpwapwa
buko mbe rural
do do ma urban
ko ngwa
ulanga
kilo mbero rural
bariadi
ko ndo a
do do ma rural
kilo sa rural
mvo mero
mo ro go ro rural
T o tal
Ndiyo Hapana
reported livelihood systems. Current participation in SMEs among the surveyed
households ranged from seven percent in Maswa district to 85 percent of the sample
in Iramba, which again underscores importance of small businesses as a source of
livelihood in the target area (Figure 4).
Apart from the head of household (the main respondent), 12.4 percent of other
household members were reportedly also self-employed in SMEs; hence bringing the
total current participation of entire sample in SME to nearly a half of surveyed
population. Yet another 8.2 percent of the households were previously self-employed
in an SME activity, but have since closed for some reason. The mean annual incomes
for the entire sample varied greatly by level of education; those with tertiary level of
education earned almost six times the annual income earned by households with no
education, 5.5 times of those with primary education, 0.6 times of those with
secondary education, and 4.7 times of the sample average (Table 8).
Education level Mean Median Maximum N
No education 491,103 220,000 1,510,000 220
Primary education 534,136 258,000 24,080,000 1247
Secondary
education
1,764,194 800,000 11,700,000 79
Tertiary 2,932,462 2,800,000 8,800,000 13
Adult education 3,765,000 4,500,000 8,000,000 5
Total 620,479 260,000 24,080,000 1,564
TABLE 2.2: HOUSEHOLDS ANNUAL INCOME BY EDUCATION
Similarly—and surprisingly, those with adult education level of education were
earning 6.1 times more the average annual sample income and 1.3 times more the
annual incomes earned by those with tertiary level of education.

0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
Meanincome(TZS)
rural urban total
Location
Figure 5: Mean income by Location
mean income
Figure 6: Current Asset Holdings by Item (Percent of Households)
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.1
0.3
0.3
0.3
0.3
0.5
0.6
1.0
1.2
1.4
2.9
3.0
4.6
4.6
9.4
9.6
14.0
20.8
24.8
0.0 5.0 10.0 15.0 20.0 25.0 30.0
tractor
Other
Solar
Motor vehicle
Poulty
Sheep
Nyumba
This seemingly odd phenomenon, in which adult education graduates were
earning more than the ones with tertiary level education, is likely the outcome of a
history where the elderly have continued to dominate corporate and public
leadership in Tanzania. Among the rural-based households, annual incomes were
also 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 and
SMEs—the gender of male- and female-headed households evidently had little
influence on their annual incomes; at Tshs 664,399 for female-headed households
and 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

Access to Finance
evidently slightly higher than for the female-headed households (Tshs 225,000).
Besides current sources of income, the majority of the households also had
accumulated 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 of
mentions).
The size and composition of surveyed households was also considered an
important factor in understanding their access to finance. Generally, the survey
shows 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 HOUSEHOLDS
In addition to their level of education, nearly 30 percent of the female-headed
and 34% of male-headed households had some valuable occupational skills in
various fields (Table 2.4). Secondly, besides the heads of household, almost 14% of
other members (13.7 percent) had various occupational skills.
Je, una ujuzi wowote wa kiufundi
Frequency Percent
Hapana 1697 69.5
Ndiyo 744 30.5
Indicator Total Shinyanga Singida Morogoro Dodoma
#av. household
members
6.4 8.2 6.3 5.3 5.9
#av. under 18 years 3 4 3 2 3
#av. Children out of
school
0.2 0.3 0.1 0.1 0.2
#av. Unemployed
adults
1 2 0.3 1 2
Av. Annual income 620,584 718,819 366,980 895,677 610,265
Av. Savings amount
Tshs
at home 44,061 73,758 45,528 36,386 24,812
in account 54,980 40,647 29,243 125,100 19,584

Total 2441 100
TABLE 2.4: POSSESSION OF OCCUPATIONAL SKILLS BY HOUSEHOLDS
Carpentry (21.2 percent), masonry (19 percent), and tailoring (15.8 percent) were
by far the most common occupational skills amongst the surveyed households (Table
2.5).
Occupation N Percent
Carpenter/wood worker 181 21.2
Mason 162 19.0
Tailor/tie-dye specialist 135 15.8
Arts and crafts/Photographer 76 8.9
Bicycle repair 60 7.0
Mechanic 46 5.4
Other 50 6.1
Blacksmith/welder 20 2.3
Technician 19 2.2
Electrician 19 2.2
Driver 19 2.2
Brick maker 19 2.2
Hair dresser/barber 18 2.1
Lumber jack 12 1.4
Shoe repair 10 1.2
Plumber 6 0.7
Total 852 100.0
TABLE 2.5: OCCUPATIONAL SKILLS AMONGST POOR HOUSEHOLDS
Moreover, an average 19 percent of surveyed households were involved in
various development group activities per district, a fact pointing towards good
prospects for RLCD in mobilizing the people to improve their access to finance (Table
2.6).
It is significant that amongst this group, the access needs for financial services
seems the single strongest force for self-help initiatives (at 33% percent) of current self-

Access to Finance
help activities, followed by the households’ interest in improving livelihoods generally
(44.2 percent).
Group activities
N Percent
1 Financial associations/groups 161 33
2 Agriculture and Livestock 129 26
3 Joint enterprise/association 88 18
4 Social action 56 11
5 Welfare 34 6.9
6 Other, e.g. village security 15 3.1
7 Craft, arts 8 1.6
Total 491 100
TABLE 2.6: PARTICIPATION IN DEVELOPMENT GROUP ACTIVITIES
It is significant that almost 90 percent of the households’ surveyed were already
organized for self-help in at least one such group activity, and another 10 percent
participating more than one such activity (Figure 7).

1470 218
658 88
0 500 1000 1500 2000
Households
Male
Female
UsingvsNot
using
Figure 8: Je, kwa sasa unatumia taasisi yoyote ya kifedha iliyopo
katika wilayani hii?
No
Yes
Chapter3
FINANCIALACCESS &EXCLUSION
A major finding of this survey, though, is that lack of access by the poor rural
households may be a choice; and not necessarily due to a lack of intermediaries or
their knowledge of their presence. This chapter looks more closely at the current
extent of access and present details on other factors that hinder the poor rural
households’ access to financial services.
3.1 PERCENTAGE WITH CURRENT ACCESS
Of the 2,670 households interviewed during the survey, 12.6% were using at least
one of the intermediaries existing within their district, in addition to another 4.1
percent of the other members who were similarly using these intermediaries.
Furthermore, both male and female-headed households were similarly inclined to
using the intermediaries; with 11.8% of the female-headed households reporting use
of 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 and
about 19 percent a current loan.
3.1.1 Awareness of financial services
More than a half of the population surveyed (54.2 percent) did not know of any
financial intermediary existing within their district (Table 3.1), yet they have lived here
long enough to know at least one or the nearest to their homes (Tables 3.2 to 3.5).

Access to Finance
Providers Known Closest Distance kms Overall Household Use
(mentions, Percent)(Mentions,
Percent)
(Mentions,
Percent)
(Average) (Furthest)
1 SACCOS 29.1 38.9 16 150 28.1
2 NMB 25.8 22.0 32.3 180 32.0
3 Public, TASAF 9.8 9.9 39 110 7.6
4 CRDB 7.3 2.4 22 80 8.1
5 NBC 7.2 4.6 32.5 500 4.1
6 PRIDE TZ 4.6 2.8 15.8 200 2.2
7 Post bank 5.0 2.0 27 85 1.7
8 SEDA/WVI 4.1 1.8 38.8 70 2.6
9 FINCA TZ 3.1 1.9 25.5 150 0.9
10 Public, other 0.9 0.4 39.5 78 0.2
11 Banks, other 1.3 1.2 18 37 1.1
12 NGOs, other 1.6 1.1 0 3.5
13 Group 0.2 0.4 3.2 5 1.1
Undisclosed 6.8
TOTAL 100.0 100.0 25.9 126.5 100.0
TABLE 3.1: AWARENESS, PROXIMITY, AND USE OF INTERMEDIARIES
3.1.2 Financial Literacy
The fact that slightly more than a half of surveyed households (54.1 percent) did
not know about any existing financial intermediaries within their district –despite
having lived there long enough (mean residency of 26 years), suggests several facts:
firstly, this could reflect the great distances between where the providers are located
and where the rural population lives. Secondly, it might reflect the low-levels of
operation at which these intermediaries currently interact with the public, hence their
low visibility and near-obscurity. Thirdly, this might reflect hopelessness among the
population for ever getting any access to services from sources other than their own
self-help initiatives, hence a widespread lack of interest about these institutions.
Incidentally, and not surprisingly; by extension from the third argument for little
knowledge of intermediaries within the districts surveyed, the most widely known
providers in the corridor were member-owned and member-managed SACCOS,

which was mentioned 29.1 percent of the time). Probably because of its relatively
extensive network; by December 2006 numbering 118 branches countrywide, NMB
was also widely known to surveyed households (25.8 percent of the mentions).
Providers Which intermediaries
do you know of in
your district?
Which ones is nearest
to your home
Distance kms
Mentions Percent Mentions Percent Average Furthest
SACCOS 654 29.1 439 38.9 16 150
NMB 580 25.8 248 22 32.3 180
Public, TASAF 221 9.8 112 9.9 39 110
CRDB 165 7.3 27 2.4 22 80
NBC 162 7.2 52 4.6 32.5 500
PRIDE TZ 104 4.6 32 2.8 15.8 200
Benki ya Posta 112 5 23 2 27 85
SEDA/WVI 92 4.1 20 1.8 38.8 70
FINCA TZ 69 3.1 21 1.9 25.5 150
Public, other 20 0.9 4 0.4 39.5 78
Benki zinginezo 30 1.3 13 1.2 18 37
CBOs/NGOs,
other
37 1.6 12 1.1 0
ROSCAS 5 0.2 4 0.4 3.2 5
TOTAL 2251 100 1128 100
TABLE 3.2: HOUSEHOLD’S KNOWLEDGE OF AVAILABLE SERVICE PROVIDERS AND PROXIMITY
Another widely known intermediary in survey areas is the Tanzania Postal Bank
(mentioned almost five percent of the time). And, among the financial NGOs, the
most widely known ones are PRIDE Tanzania (4.6 percent of mentions), SEDA/WVI (4.1
percent), and FINCA Tanzania (3.1 percent); all combined representing 11.8 percent
of the mentions (Table 3.2).
Surprisingly, the publicly-funded TASAF, which is really a social-action fund, seems
highly visible (mentioned 9.8 percent of the time) and is widely considered as one of
the many present financial intermediaries in all surveyed areas.
3.1.3 From knowledge to use
Regarding the use and choice of provider, it seems clear from this survey that not
knowing 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 financial
institutions were the second most well known intermediaries in surveyed areas after
SACCOS. Likewise, as a group, these formal institutions were also the most widely

Access to Finance
Figure 9: Which one of the providers in your district are you using
currently
0
10
20
30
40
50
60
bank SACCOS Financial NGOs Other
used intermediaries by the poor rural households; 52.4% amongst households using
various savings instruments (Figure 9), followed by financial cooperatives (30.5%), and
lastly NGOs (17.1%).
This observation notwithstanding, the survey also showed some significant
differences in the types of financial services offered on the one hand and overall
depth of access by the households from different providers on the other hand.
Typically, the survey show formal financial intermediaries leading in providing largely
banking 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 use
To be able to get services, about 51.4 percent of the households would have had
to walk for at least three hours to reach the nearest intermediary (Table 3.3), while
slightly over 40 percent would have had to walk a minimum five hours to the nearest
service provider.
Je ni umbali gani kwa kilometa?
Range (in kms) Range (in hrs walking
time)
N Percent Cumulative Percent
1 Within 5 1.3 452 39.3 39.3
2 5.01 -10.00 2.5 107 9.3 48.6
3 10.01 - 19.99 4.8 126 10.9 59.5
4 20.00- 24.99 6.3 66 5.7 65.2
5 25.00 - 50.00 12.5 233 20.2 85.5
6 50.01 - 99.99 25.0 123 10.7 96.2
7 beyond 100 25.0 44 3.8 100.0
#answering 1151 100.0
#not answering/do not know of the
distance
1290 52.8

TABLE 3.3: TYPICAL DISTANCES TO NEAREST FINANCIAL SERVICE PROVIDER
Clearly, the table above shows that lack of intermediaries closer to the
households 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 determining
the 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, and
yet are not necessarily the ones frequented.
Je, ni taasisi gani kati ya hizo ipo karibu na wewe?
Provider Mentions Percent
1 SACCOS 439 38.9
2 Benki ya NMB 248 22.0
3 Public, TASAF 112 9.9
4 Benki ya NBC 52 4.6
5 Benki ya CRDB 27 2.4
6 Benki ya Posta 23 2.0
7 Zote ziko Karibu 59 5.2
8 Zote ziko Wilayani/mbali 61 5.4
9 PRIDE TZ 33 2.9
10 FINCA TZ 21 1.9
11 SEDA/WVI 20 1.8
12 Other banks 13 1.2
13 Other NGOs 12 1.1
14 Public, other 4 0.4
15 ROSCA/Upatu group 4 0.4
Total 1128 100.0
TABLE 3.4: PROXIMITY OF VARIOUS INTERMEDIARIES TO HOUSEHOLDS
In fact, within every range of distance, there were half as many providers that
were not being used as there were being used by the population (Table 3.5). For
instance, about four percent of the providers that were then used by the population
were located beyond 100 kms, which was almost identical to the number unused by
the concerned population. Similarly, there were 10 percent more providers closer to
the population, but were not being used for one reason or another.
Distances in kms USED NOT USED
N Percent N Percent
beyond 100 12 4.4 32 4.1
51 – 100 32 11.8 100 13
21 – 49 30 11.1 179 23.2
11 to 20 57 21 143 18.5
6 to 10 16 5.9 42 5.4
Within 5 124 45.8 276 35.8
Total 271 100 772 100

Access to Finance
Figure 10: How Householdswith Current Accessare using
Providers
0
10
20
30
40
50
nahifadhi
fedhazangu
kupata/kupok
eana
marajeshoya
mikopo
kupokea
msharaau
penseni
kupokea
msaadaza
hudumaza
jamii
kusafirisha
helaaukulipia
bilimbalimbali
napatafaida
za
riba/ninatumia
kununuahisa
Use
PercentofHouseholds
withAccess
TABLE 3.5: DISTANCE VERSUS USE OR NON-USE OF PROVIDER
3.2 PATTERNS OF USE OF AVAILABLE SERVICES
In terms of specific services, 91 percent of surveyed households had no banking
accounts or receiving account-related services of any kind. Secondly, of the
households (12 percent) currently using existing intermediaries within their districts, just
nine percent have bank accounts.
But among these households, as shown in Figure 10 above, most were using the
bank accounts mainly to receive loans and make loan repayments (38.5 percent),

followed by the demand for safe and secure facility for storing personal savings. Yet
another 17.9 percent of the households were using their accounts to receive monthly
salaries and/or pensions. In addition to the heads of households, 4.1% of the surveyed
families also have one or more members holding an account, thereby increasing the
number of households with accounts to just 16.7 percent of studied population. This
number is very close indeed to the overall percentage of households holding bank
accounts nationally, as reported in the 2002 Household Budget Survey.
The significance of this point is that there has been no improvement in outreach
since then; despite the noticeable increase in number of financial institutions in
Tanzania. Furthermore, about four percent of the households currently not having
any bank account were previously banked, but have since become excluded for
some reasons (explored at length in later sections of this report). Yet it is significant
again that one percent of the households maintained bank accounts to earn some
decent returns on their deposits, and equally noteworthy is that a similar number
maintain bank accounts for making payments or money transfers regularly. In many
ways, therefore, the current widespread notion that poor people also have diverse
financial needs just like their wealthier counterparts is a fact to consider whenever
expanding or improving access to finance for this population. What is perhaps
unusual, as previously shown by Figure 10 above, is the relatively high number of the
poor rural households (7%) willing to hold bank account once the benefits of doing
so, e.g., automatic access to various individual or community-focused development
services—such as those offered conditionally by TASAF, are made clear and
understood by the households.
3.2.1 Types of Accounts Held
The most popular bank account among the surveyed households currently using
intermediaries existing in their districts (by 81.4 percent) is the ordinary savings
account (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 Percent
1 Akaunti ya akiba 192 81.4
2 Kuweka na kopa/akaunti ya mikopo 17 7.2
3 Akaunti ya kuweka na kuchukua/akaunti ya biashara 21 8.9
5 Akaunti ya vikundi 4 1.7
6 Akaunti ya muda maalumu 3 1.3
Total 236 100

Access to Finance
Figure 12: Katika taasisi za kifedha zinazofahamika wilayani,
zipi zina huduma bora?
170
132
39
28
19
21
24
5
11
SACCOS
NMB Bank
CRDB Bank
TASAF
NBC Bank
Other banks
NGOs
None
Other
Mentions
TABLE 3.6: ACCOUNTS HELD BY POOR RURAL HOUSEHOLDS
With nearly a half of the households (49.1 percent) reporting using their accounts
for at least once a month, there is a real demand for these services by the poor rural
households. 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) and
SACCOS (12.3 percent).
3.3 PERCEPTION OF THE INTERMEDIARIES
While a majority of the rural population currently with bank accounts are
maintaining these with the more formal providers; as clearly reflected in Figure 11
above, these intermediaries are not necessarily the most liked. In fact, the poor rural
households prefer banking with SACCOS (mentioned as the more liked in nearly 38
percent of mentions) due to many factors (explored in Figure 13), followed far behind
by NMB (mentioned as the more liked intermediary 29.4 percent of the time) and
CRDB (mentioned 8.7 percent of the time).
Figure 11: Je, akaunti yako/ zako zipo katika taasisi au benki gani?
0
5
10
15
20
25
30
35
40
saccos nmb tasaf crdb nbc NGOs finca Other
banks
upatu
hapa
mtaani
Provider
PercentageofHouseholdsusing

Figure 14: Mentionsof Poor Service Providers
0
10
20
30
40
50
60
NMB
SACCOS
FINCA
PRIDE
SEDA
CRDBBank
TASAF/other
government
NBC
Otherbank
OtherNGOs
Adversly Mentioned Provider
Percent
oftimeadverselymentioned
Figure 13: Attractivenessof Current Provider
0
10
20
30
40
50
Loanspeople
likeme
Safeandsecure
savingsfacility
Easyaccessto
one’ssavings:
Good/quick
service
Cares/contribut
esto
Reasonable/easy
loanterms
Low/reasonable
entry
Reasonably
pricedloans
Straightforward
process-“haina
Exceptionally
goodcustomer
Fastpayment
services/modest
Closertohome,
reliable,flexible,
Professionalism
/good
Clear
objectives/no
Most attractive attribute
PercentofMentions
Altogether, the financial NGOs, which as a group; at 42.7 percent of the
mentions, are the least liked providers due to poorly regarded products. In all the
regions surveyed, the intermediaries offering access to loans on suitable terms were
seemingly the most liked the households. Also liked by the poor rural households are
the intermediaries able to offer safe and secure storage for one’s savings, which is
mentioned 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 of
access to one’s funds on demand without any undue restriction (mentioned about
eight percent of the time), quick service (7.2 percent of mentions), and the level of
corporate citizenship demonstrated by a provider (6.7 percent of the mentions).

Access to Finance
In this regard, NMB with whom a relatively large number of the households bank
with is also the least liked, largely because of its congested banking halls, and
bureaucracy (Figure 13), while the NGOs in particular are least liked because of
poorly designed products. Among the leading defects of the NGOs’ products (Table
3.7) are what the poor households themselves deem unreasonable terms and
conditions (mentioned nearly 28 percent of the times), overly priced services
(mentioned nearly 14 percent of the times), and inordinate delays in loan
disbursement (mentioned 11 percent of the time).
Je, ni kwa nini haina huduma bora?
Major defect N Percent
1 Unsuitable terms and conditions 70 28
2 Interest on loans too high, while there too little or no interest at all on
deposits
35 14
3 Inefficient and delay disbursement of loans especially 28 11
4 Undependable and unresponsive to customers needs 25 9.8
5 Very high entry requirements 20 7.8
6 Poor service 14 5.5
7 corruption and intrigue 12 4.7
8 Charges are much too high and too many 10 3.9
9 Selectiveness of clientele 8 3.1
10 Secretiveness about rules, procedures, and (even) intent 7 2.7
11 Too aggressive in collecting loans/closing idle bank accounts 6 2.4
12 Has no ATM/access to account restricted to specific branch 6 2.4
13 Too far from home or has no local presence 5 2
14 organization is poorly managed or unsafe for storing savings 4 1.6
15 Does not give loans 3 1.2
16 Unreasonable delays in transmitting/credit accounts 2 0.8

Total 255 100
TABLE 3.7: HOUSEHOLD’S ASSESSMENT OF POOR SERVICE PROVIDERS
Due to all these factors combined, most poor rural households resort to many
primitive ways of saving, as discussed in the next section. But it was show earlier in the
report that just 13.1 percent of the households had bank accounts (about nine
percent of these through the head of household and 4.1 percent another member or
members of the household). So, how do these many people who are without access
to banking services managing their financial affairs?
3.4 CURRENT METHODS OF SAVING
The survey looked at this matter and found the majority of poor households
currently without bank account resort to storing their precious savings themselves at
home (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 beneath
the floor, these precious resources risk being lost, stolen, or altogether put to
unproductive and unplanned uses (Table 3.8). So much local liquidity is locked or
kept 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 Percent
1 Hide in an undisclosed place within home 729 35.6
2 Keep in locked suitcase or wooden box along with clothes 465 22.7
3 Keep inside shirt or trouser pocket or wrapped in a corner of
dress
163 8.0
4 Hide under mattress/pillow or bed 113 5.5
5 All spent on immediate needs 100 4.9
6 Hide in the cupboard or bed drawer 86 4.2
7 Dug up within or outside the house 83 4.1
8 Entrust with wife or another trusted person, mostly shop owner 72 3.5
9 Store in form of cereals grain 58 2.8
10 Place in tin, bottle, or inside a water pot 54 2.6
11 Reinvesting in business/farming activity 54 2.6
12 Store in form of cattle 40 2.0
13 Hide under the carpet/table top cloth 12 0.6
14 Hide in other place (cattle shed, inside granary, or holes dug
up in the farm)
11 0.5
15 Hide inside the pages of a book 5 0.2
Total 2045 100

Access to Finance
Figure 17: Je, kwa sasa, kuna mtu yoyote au taasisi unayoidai
ndio
25%
hapana
75%
TABLE 3.8: MEANS OF SAVING AMONG POOR HOUSEHOLDS WITHOUT CURRENT ACCESS
Clearly, with the exception of about five percent of the population studied that
lack adequate income for all their basic needs; there is a big segment of the poor
rural households with a strong demand for savings. The actual saving varies
significantly from household to household, but nearly half of the funds exceed Tshs
100,000, while the mean savings for all households surveyed was Tshs 54,980. The
different ways in which the surveyed households currently save their fortunes, instead
of the more efficient instruments from formal financial institutions, are next discussed
in Chapter 4.
3.5 CURRENT ACCESS TO LOANS
Compared to the number of households with bank accounts, there seems to be
slightly more families with access to credit, i.e., 19.3 percent (Figure 16) against 13.1
percent.
In reality, however, the fact is that much of the lending reported by the
households is by informal sources. For instance, nearly one in every four of the
surveyed heads of households (24.5%) was as at the time of survey owed or owing
some informal credit to another person or several persons (Figure 17).
Figure 16: Je, una dani kutoka kwa mtu au taasisi yoyote kwa sasa?
ndio
19%
hapana
81%

Similarly, nearly one in every five of the poor rural households (19.3 percent) had
a current loan. The fact that nearly 90 percent of the rural households have provided
credit 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 more
than one source (Table 3.9), shows just how widespread informal lending is amongst
the population group.
Je, ni watu au taasisi ngapi unazozidai?
# credits supplied
by households
1 279 47.4 47.4
2 127 21.6 69
3 71 12.1 81.1
4 34 5.8 86.9
5 26 4.4 91.3
6 13 2.2 93.5
7 8 1.4 94.9
8 3 0.5 95.4
9 1 0.2 95.6
10 14 2.4 98
> 10 12 2 100
Total 588 100
TABLE 3.9 (A): NUMBER OF CURRENT CREDITS TO POOR RURAL HOUSEHOLDS
Je, ni watu au taasisi ngapi zinazokudai?
# active loans
1 345 73.6 73.6
2 85 18.1 91.7
3 23 4.9 96.6
4 11 2.3 98.9
> 4 5 1.1 100
Total 469 100

Access to Finance
TABLE 3.9 (B): NUMBER OF CURRENT LOANS TO POOR RURAL HOUSEHOLDS
The fact that there are as many poor rural households providing as well as
receiving informal credit is clearly evident from the current sources of credits to the
households (Table 3.10).
Source of credit N Percent
Family and friends 372 80.2
SACCOS 28 6.0
Not disclosed 19 4.1
NMB Bank 9 1.9
NGOs 15 3.2
Supplier credit 7 1.5
Serikali ya mtaa 7 1.5
Upatu 4 0.9
Other 2 0.4
Employer 1 0.2
Total 464 100
TABLE 3.10: CURRENT SOURCES OF CREDIT TO POOR RURAL HOUSEHOLDS
Table 3.10 shows that 80.2 percent of the current loans to poor rural households in
surveyed areas are informal, from friends and relatives. It also shows a complete
reversal of roles whereby the banks, which were providing more access to banking
services to the poor rural households than SACCOS, are now almost the least
important in the provision of loans, i.e., the latter providing about six percent of the
current loans while the banks well under two percent. It is noteworthy that local
governments are also playing an active role in credit provision (accounting for 1.5
percent of the current loans held by the poor rural households), while employers play
the least role (providing 0.2 percent).
Furthermore, the fact that current loan amounts are generally small; with up to
nearly 70 percent of the amounts owing being within Tshs 50,000 (Figure 6), also
underscores the predominance of informal sources in lending to poor rural
households rather than the more established financial intermediaries. What is perhaps
more significant is that a fairly large number of the informal credits (nearly one in
every five or 20 percent) are also quite sizeable, above Tshs 100,000), with about as
high as 4.4 percent being above Tshs 400,000.

Figure 18: Size Distribution of Informal Credits
23%
30%
30%
13%
4%
Tshs below 10,000
Between Tshs 10,000 to
Tshs 50,000
Tshs 100,000
Tshs 400,000
Above Tshs 400,000
Figure 19: Obstaclesto Credit
0
5
10
15
20
25
30
35
complicated
application
process,too
highinterest,
nottrusted
enough
lacked
collateral/guara
ntor
loanstargeted
tospecific
individuals
nocash
nofeedbackon
applicationfrom
provider
unreasonable
terms/condition
stoo
demanding
Obstacle
PercentofMentionsby
Households
In addition to the nearly 20 percent of the households currently with loans as at
the time of survey, another 14.3 percent had tried to obtain credit within the last 12
months 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 too
demanding terms and conditions, which they find hard to fulfill (27 percent). Other
hindrances to access include not knowing the requirements or procedures to follow
to get what they want (22 percent), being perceived unfairly as not having the ability
to repay (19 percent), and being treated unfairly in assessment and demand for
collateral (13 percent).
3.6 CONCLUSIONS
This survey has shown low access to finance by the poor rural households in the
central corridor where RLDC is involved in development activities. Firstly, the number
of households currently with access to existing financial intermediaries in their districts
is approximately 170,926 out of the 1.4 million households. In terms of access to bank

Access to Finance
accounts and loans, the corresponding number of households in surveyed areas is
128,194 and 270,633, respectively. However, if access to informal credit is excluded
from this analysis, the number of poor rural households able to get loans they need
on 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 finance
situation for the poor rural households of central corridor; just as it has been in the rest
of Tanzania for the last five years (Table 3.11).
Overall
Access
Access status 1999/1992 2000/2001 RLDC Survey
1 Households with bank account 18 6.4 16.7
2 Households with bank loan 1.2 0.6 1.9
3 With an informal savings group 5.1 5.7 31.0
Rural
1 Has account 12.9 3.8
2 Has bank loan 0.5 0.4
3 Has Upatu/informal credits 3.6 4.1
Other urban
1 Has account 35 14.4
2 Has bank loan 2.6 1
3 Has Upatu/informal credits 10 10.3
Dar es Salaam
1 Has account 43.1 18.9 na
2 Has bank loan 6.7 1.1 na
3 Has Upatu/informal credits 12.4 13.1 na
TABLE 3.11: COMPARATIVE ACCESS DATA; 1991/1992, 2000/2001, AND 2006 SURVEYS
The fact that majority of poor rural households still depend on SACCOS, which are
typically undercapitalized, for as much as 30 percent of current access to banking
services and up to six percent of total access to credit, clearly indicates a kind of
market failure that cannot be self-correcting. In contrast, the regulated financial
institutions, which are the better capitalized and have greater organizational
capacity and resource base, were all presently serving just slightly more than a half of
the households with savings accounts, and well under two percent of current access
to credit.
Of all the rural financial intermediaries, the financial NGOs were the least liked
due to their unpopular product design.

Chapter4
BARRIERS TO ACCESS
4.1 FINANCIAL SERVICES INFRASTRUCTURE
Of the four regions studied, Shinyanga had the most number of financial
intermediaries (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 82
SACCOS. This is probably due to its having many natural resources, including
Diamonds, 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 Total
Total 99 81 54 101 335
SACCOS 82 75 46 89 262
NBC 5 7 3 3 18
NMB 4 5 1 3 13
Other 3 1 0 2 6
TASAF 1 1 2 1 5
CRDB 0 1 1 1 3
TPB 0 1 1 1 3
WVI 1 1 0 1 3
FINCA 1 1 0 0 2
PRIDE 1 0 0 0 1
SEDA 1 0 0 0 1
TABLE 4.1: FINANCIAL INSTITUTIONS MENTIONED BY HOUSEHOLDS
In fact, Shinyanga is also the only region in the central corridor where nearly all
major financial NGOs in Tanzania have a presence; for instance, FINCA Tanzania,
PRIDE Tanzania, and SEDA, etc. Moreover, unlike the other regions, the four banks
have more branches outside the regional town (and some in even smaller rural
towns, e.g., Kiomboi (Table 4.2).
Region Outreach Shareholding-member customers
Below 100 100-250 251-500 Over 500 Total
Dodoma 42 34 17 7 98
Morogoro 39 15 11 10 75
Singida 34 11 4 0 49
Shinyanga 26 10 4 2 42
Total 141 70 36 19 192

Access to Finance
TABLE 4.2: SIZE DISTRIBUTION OF SACCOS IN SURVEY AREAS
Besides their regional geographical distribution within the corridor, one first unique
aspect of the intermediaries is their rather limited outreach each individually.
Secondly, many of the intermediaries are also inactive. Thus, while the overall number
of intermediaries within the corridor looks numerous, very few are active in all of the
areas surveyed. Yet another unique aspect of intermediaries in the four regions is their
domination by savings and credit cooperatives, i.e., in absolute number, proximity to
the poor rural households, and the overall percentage of population currently using
the 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 in
the 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 percent
served more than 500 customers each).
Yet still another unique aspect of SACCOS in the regions in spite of their impressive
numbers is their selective targeting and marketing; majority target either teachers or
local government workers. Only a few trade or community-based intermediaries
have emerged in the recent past to cater for a more diverse clientele consistent with
the diversity of local communities’ livelihoods. In addition to their restriction of
common bond definition, majority of the SACCOS also operate strictly within specific
districts, thereby limiting access to finance within their own territory. The most severely
excluded population from access to finance by existing intermediaries are also the
more numerous, e.g., pastoralists, small-scale farmers, and the “wanabiashara”.
4.2 HOUSEHOLDS’ PERSPECTIVE ON BARRIERS
Widening and deepening access to the poor rural households is a Herculean
task, given the current narrow base of financial services infrastructure and the fact
that nearly 97 percent of the households have no bank accounts. However, the
greater constraint in expanding access is not just dearth of reliable and capable
service providers, but also a huge cultural gap between the providers on the one
hand and the target population itself on the other (Figure 20).
About 33% of the households explain their reason for currently or never using any
of the existing financial institutions within their district as their lack of adequate
income. Nonetheless, excluding the 1.1 percent of households who feel financially
adequate (and thus do not need any financial services), the number of poor rural

Figure 20: Je, ni sababu gani zinakufanya usitumie taasisi za kifedha
zilizopo katika wilaya hii?
other (e.g., I fear
defaulting, does not
have a need, I am
too old, etc)
5%
products/ services
are inappropriate
12%
I do not know the
benefits or available
services
28%
difficult
conditions/ requirem
ents
5%
non exists/ is close
enough
17%
my income is too
liitle
33%
households currently excluded but only because they do not know enough about
the benefits (28 percent), or providers being too far from their homes (17 percent), is
huge. Then there are also those among the excluded who simply lack access
because they do not have enough confidence in themselves ever being accepted
or considered eligible by the existing intermediaries (17 percent).
It seems therefore that the first option in improving greater access to finance for
this population is, not just increasing the number of service providers available, but
first eliminating the following inefficiencies of the existing financial system:
 Encouraging and supporting existing financial institutions to
improve or add products more suitable to the needs of the poor
households
 Educating the poor rural households about the existing financial
institutions, various products that exists, and the benefits/potential
benefits vis-à-vis costs of using these services
 Building the capacity of financial institutions within the rural
communities or with the potential to extend services to rural
communities with the technology and knowledge to serve poor
rural households
 Mobilizing and encouraging the poor rural households to establish
their own appropriate or effectively take advantage of the existing
financial institutions to meet their financial needs

Access to Finance
 Increasing and improving the quality of physical infrastructure
available within the rural communities
 Creating new means and enhancing the existing livelihood
systems of the poor rural households within the target areas
4.3 PROVIDER’S PERSPECTIVE ON BARRIERS
This section is based on interviews with a random sample of 14 financial service
providers concerning their own views on the current obstacles to poor rural
households’ 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 time
and ranked most frequently in the first three priority list), is the leading obstacle to
widening and deepening access to finance for the poor rural households.
Obstacle Number (%) of times ranked in order Total
times
% o
tota
men
Ranked
1
Ranked
2
Ranked
3
Ranked
4
Ranked
5
Ranked
6
Ranked
7
1 Lack of adequate
capital
4 6 4 4 0 0 0 18 43.9
2 Lack of adequate
communication
system/transport
problems
3 2 2 0 0 0 7 17.1
3 Low/poor
awareness or
limited knowledge
about financial
services, benefits,
and institutions
2 0 2 1 0 0 5 12.2
4 Delays in
remittance of loan
deductions
2 1 0 0 0 0 3 7.3
5 Lack of fulltime
staff/internal
capacity
1 2 0 0 0 0 0 3 7.3
6 Loan
arrears/delinquency
0 1 0 0 0 0 0 1 2.4
7 Limited
service/product
offerings
(undiversified
income base)
0 0 0 0 0 1 1 2 4.9
8 Low income
base/poor savings
by members
0 0 0 0 1 1 2 4.9
Total 12 12 8 4 1 2 2 41 100

TABLE 4.2: CURRENT LEADING OBSTACLES TO GREATER OUTREACH
Poor infrastructure and lack of basic communication equipment, including lack
of permanent office premises and fulltime staff, is also a major obstacle to expanding
access to the poor rural households (mentioned nearly 30 percent of the time).
Other obstacles are the low/poor awareness or limited knowledge about
financial services, related benefits, and how the financial institutions operate by the
households themselves (mentioned 12.2 percent of the time; and ranked as the third
overall constraint by providers). Another common and prominent constraint to
expanding access to poor households is unjustified and unnecessarily long delays in
remittance of monthly loan deductions and savings/share contributions by employers
to the SACCOS, a problem mentioned nearly eight percent of the times and which
also 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 rural
households is also perceived by the providers as a major constraint (mentioned
nearly five percent of the time). All the constraints mentioned above by service
providers 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 and
economic barriers, as well as perceived or real cultural barriers between the service
providers on the one hand and the poor rural households on the other as
constraining greater outreach. On the surface, these barriers would seem wide
ranging and unrelated, but on closer scrutiny simply fold into a handful of deeply
embedded underlying barriers, as discussed in the next section of report.
4.4 A DEEPER UNDERSTANDING OF OBSTACLES
To begin with, while low incomes is a reality for many poor rural households (with
the annual average from the survey at Tshs 465,563), this fact on its own is certainly
not the primary cause of poor savings, low-participation in savings activities, or the
general failure of financial intermediation at the local level. In this first regard, Oketch
(2006) presents convincing evidence that distance and low incomes are not the
primary obstacles either from the provider or consumer perspective. For instance, this
recent publication shows the workings of a vicious circle which combines low or lack
of confidence in the local financial intermediaries that is itself in turn primarily caused
by historical failure of these institutions to provide services on demand (see Table 4.2
above). Indeed, Oketch notes how…

Access to Finance
…”the local financial intermediaries technically and financially assisted by
CRDB Bank Limited to upgrade their capacity and meet members needs on
demand were reaching four times more customers than the non-assisted
intermediaries of same age and operating in similar environments”…In financial
intermediation, they also attracted 5.2 times more deposits than the non-bank
assisted intermediaries and disbursed 14.5 times more loans annually. More
remarkably, the bank-assisted intermediaries had 9.5 times more assets than the
non-bank assisted intermediaries, which definitely gives them a greater
outreach capacity…, p.28.
A more complete picture of this argument, also cited from the author, is based on
real-life case experiences of 200 once un-employed youth in one of the regions
covered by this RLDC survey (Shinyanga). Here, although once without income the
youth are transformed into active savers through mobilization, education, and
access to start-up capital by the then only local financial intermediary within
Bukombe district. He notes exactly, thus:
… Ushirombo SACCOS Limited is one of the fastest growing intermediaries in
the Shinyanga area and even nationally in Tanzania. The history of this
intermediary’s establishment in April 2006 goes back to the split of Kahama
District into two districts, namely: Kahama and Bukombe districts in the late
1990s. Following the split of the original district into two, the newly established
district emerged without any single financial institution left within its borders. But
upon establishment, the intermediary immediately launched two products: a
salary payment account into which the employees of a local government
authority could receive their monthly salaries-this account could also entitle
them 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 the
rider would collect and return his/her allocated bicycle to the intermediary
alongside a much better minimum daily take of Tshs 1,500 as part payment for
the eventual ownership of the asset. With the help of CRDB Bank, the subject of
Oketch’s 2006 publication, Ushirombo successfully mobilized the youth into
smaller groups of five to access this product, (evidently using the solidarity
group logic and process).

Starting with 20 groups of five each, the intermediary provided every one a
bicycle with a wholesale loan obtained from the bank. Each day, for six days a
week—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 the
future purchase and ownership of a bicycle. However, if any of the five group
members fail to raise the Tshs 1,000 expected of each one, the other members
help to raise the amount. If the same person does not raise the sum in three
consecutive days, he automatically loses the bicycle allotted, together with any
savings he may have accumulated towards its purchase. Each youth is able to
payoff the bicycle and in addition accumulate Tshs 80,000 within 90 days. At this
point, each youth not only owns an asset previously unavailable, but also would
have accumulated enough savings to purchase shares in the intermediary and
be able to access finance under the normal terms for shareholding customers...
p.24.
At once, this case example demonstrates how local financial intermediaries can
easily overcome lack of adequate capital by simply crafting more suitable products,
being able to provide services on demand, and especially that low-incomes need
not be an obstacle to financial intermediation if both the consumer and provider
share similar aspirations and decide to collaborate. An important point from this case
experience is that even households without regular incomes can gradually build
enough confidence to approach the closest providers for service, provided they get
financial education about the benefits and encouraged to participate. The SEEP

Access to Finance
Network4 argues about why this lack of confidence among the poor rural households
is not one to be underestimated:
… what sets the organizations that have succeeded in reaching extremely
poor households with access to finance apart from “mainstream” microfinance
providers is that they offer non-financial services in addition to financial products
… including education, skill training, and confidence building … p.3
Even when very poor people are not actively excluded from access to
finance by a particular intermediary, they often opt out because of felt
intimidation, wrongly believing that the services offered by such a provider is not
suited to their needs or for people of their kind …living in absolute poverty for a
prolonged time strongly affects people’s dignity and hope for the future, as well
as their ability to take initiative and overcome stigma… and being dependent
on highly unpredictable livelihood systems such as subsistence farming strongly
discourage the very poor people from taking the slightest risks towards
improving their current economic and social situation… p.3
In light of SEEP’s observation cited above, some of the households’ views on
obstacles to access; for instance, factor 13 and 16 presented in Table 3.7, seems
credible enough not to be ignored while designing a strategy for widening and
deepening financial services for this target group. Hence, by simply educating the
households more on how the various financial institutions actually operate, or about
4 The SEEP NETWORK, 2006, Microfinance and Non-Financial Services for Very Poor People: Digging
deeper to find Keys to Success, Preliminary research, Poverty Outreach Working Group, October.

available services and benefits, it is possible to encourage greater access without
undertaking major investments.
However, since lack of adequate capital is one of the primary constraints to
better and more reliable incomes in the four regions covered by the survey, it seems
that finding creative means of making access to finance possible to this poor rural
population is the first logical step towards building their confidence in these
institutions.
On a point of fact emerging from the survey, at Tshs 101,239 and Tshs 105, 712
respectively; mean annual savings for both male and female respondents in the rural
areas were considerable vis-à-vis Tanzania’s per capita incomes, while the urban
female and male respondents had even much higher accumulated savings, at Tshs
410,982 and Tshs 206,140. What this finding underscores is the underlying spirit of thrift
that could easily blossom once the right opportunity and encouragement is
introduced—as demonstrated in the case of intermediaries being assisted by CRDB
Bank.
Next we return to examine the scarcity of suitable financial intermediaries in the
four survey areas, as in the rest of Tanzania countrywide, as major obstacle to
expanding access to the poor rural households. There is no doubt that poor
infrastructure and lack of basic facilities and communication system is a factor in this
regard. As noted by Oketch (2006):
… Poor infrastructure: like many other parts of rural Tanzania, Bukombe
district does not have good infrastructure facilities despite the Isaka-Benaco
highway passing through the district. Besides the highway, there are no other
good roads. Similarly, access to telecommunications facilities is also very
problematic; in case of need to make a phone call, and if one has no mobile
phone handset, she/he has to go all the way to Geita, some 250 kilometers
away to do so, at very high cost.
Because of these three constraints, however, residents have had to travel all
the way to Kahama, the administrative center of adjacent district where there
are bank branches, to access financial services, obviously at a high cost in
terms of money, time, and their personal security... p.46.
The nature of economic activities: In the district, the vast majority of
residents are farmers engaged in cotton, paddy, potatoes, and maize
production. For this reason, business cycles are highly seasonal and involve few
small and medium-sized firms. This makes the district unattractive to the big
financial institutions to establish themselves there.

Access to Finance
Lack of power: up to now, Bukombe district is one of the few areas without
power, yet the technological advancements make access to power essential to
the business. Hence, lack of electricity is one of the hindrances for the financial
institutions, especially commercial banks, to open up business in the District.
Thus, a last re-examination of the true obstacles to greater outreach of the rural
population lies deeply neither with the reputedly high costs of delivering such services
nor with the risks of serving this group††. Again, the first evidence that undermines
these long-held and highly popular excuses for limited outreach of poor rural
households is well argued by SEEP (2006) and Oketch (2006).
Firstly, through many emerging microfinance methodologies; like the CRDB
wholesale model, the costs of serving very poor rural households can be greatly
reduced—as has indeed happened in the last decade (see Table 4.3 below). Even in
Africa where poor infrastructure, a widely dispersed population, and bad
communication systems or lack of basic facilities had made serving this group
prohibitive, there are powerful institutional and technological innovations that
increasing push the cost frontiers.
4.5 OPPORTUNITIES FOR GREATER ACCESS
4.5.1 The Institutional side
Although distance and poor infrastructure remains a formidable obstacle to
greater access to finance for poor rural households in the four central corridor regions
targeted by RLDC, many opportunities to improving the situation exists. The first of
these chances would seem to rest on the upgrading the capacity and supporting
deserving savings and credit cooperative societies to becoming more credible
intermediaries in the eyes of the general population. Banks such as CRDB Bank in
Tanzania (who have adopted a similar strategy for promoting greater outreach) are
demonstrating the kind of transformation and scale achievable by these more
numerous but modest institutions if assisted. As illustrated in the experiences of this
bank (Oketch, 2006; FAO, 2005), greater numbers of the poor rural households can
build the trust and gain their confidence in using these intermediaries, once they are
able to deliver services on demand and become adequately accountable. Yet, this
is a costly process that requires a committed facilitator (very much like RLDC) to start
off. Therefore, in the foreseeable feature, while the physical constraints remain
unchanged, it is the chance of transforming these smaller –but conveniently located
financial intermediaries that are likely to expand outreach in areas like the ones

targeted by RLDC. Accordingly, a primary conclusion of this survey is that
collaborating 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 a
huge financially excluded population desiring some urgent solution. The first
evidence for this conclusion is the large numbers of poor households seeking credit in
the last 12 months of survey but failing to get any access. A more direct evidence for
this conclusion is, however, the number of households that if given the chance would
readily borrow funds to realize one or another of their immediate financial needs; a
whole 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 investing
funds immediately if these were somehow available (Table 4.4).
Application of loan Mentions Percent
Expand/modernize farming 934 28.7
Start a new business 741 22.7
Build a house 435 13.3
Expand existing enterprise 406 12.5
Buy cattle 212 6.5
Capital investment 176 5.4
Invest in own/children's education 99 3.0
Purchase land 78 2.4
Meet basic needs 75 2.3
Save 28 0.9
Invest somehow 21 0.6
Purchase Household appliances and furniture 17 0.5
Buy bicycle or motorbike 12 0.4
Hire farm labour 8 0.2
Plant trees 5 0.2
Introduce irrigation farming 5 0.2
Buy iron sheet for roofing 3 0.1
Buy fishnet 2 0.1
Other 2 0.1
Total 3259 100
TABLE 4.4: IMMEDIATE AND LONG TERM HOUSEHOLDS INVESTMENT PLANS
But this critically needed access is lacking, thereby crippling innovation,
expansion, and growth in rural livelihoods.

Access to Finance
As shown in table, it is significant that the first three investment priorities of the
households if they had better access to finance would be investing in measures
enhancing their current livelihoods; nearly 29 percent to modernize or expand
current agricultural activities, about 23 percent to start up new micro/small-scale
enterprises in diversifying their current income bases, and a similar number to expand
their existing businesses. Another relatively significant number (13.4 percent) of the
poor households would build a better family house if they could successfully raise the
funds. Altogether, as shown in Table 4.4, well under four percent of the poor rural
households are so deprived that if they had a chance of getting borrowed funds
would instead first use it to meet their basic needs, or not know how to invest it wisely.
TABLE 14: LOAN AMOUNT FOR IMMEDIATE INVESTMENT BY HOUSEHOLDS
A closer look at Table 14 also reveals a greater diversity in the credit needs
among the rural households; these range from production to consumption and from
consumption to leisurely financial requirements. This diversity in financial needs is even
clearer by looking at the various amounts of loans that households would have liked
to borrow given the chance (Table 14).
4.6 BRIDGING THE DIVIDE
The next and last chapter of this report explores the exact measures that RLDC
can implement to help in improving the poor rural households’ access to finance.
These proposed strategies are premised on RLDC remaining a facilitator, rather than
a director provider of services, and also that the target population would be actively
involved in building the basic financial services infrastructure itself.
Kwa dhumuni hilo uliolitaja; je, ni kiasi gani cha pesa ungehitaji?
N 2,273
Mean 2,715,193
Sum 6,171,634,540
Std. Deviation 63,673,586
Median 400,000

How poor rural households in four Tanzanian regions manage their finances

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