By Happiness Maruchu
THE agenda of financial inclusion is increasingly gaining momentum in various spaces as the issue of capital mobilisation and accumulation for business continues to be a challenge for the majority of Tanzanians.
The country is immensely endowed with resources both natural and skill yet the full exploitation is far from being realized because locals and the state are limited with financial resources to invest in order to achieve greater returns.
Although the challenge of business capital may be an issue for the majority in varied scales.
The higher the social economic status the more opportunities availed to access credit services in the country.
As a matter of fact, those on the lower edge have lesser opportunities to access not only cheaper credit but also reasonable sum of credit. It is sad though that the group that fall on the lower edge are the majority of the population.
Described as those living in rural areas, involved in farming as a major economic activities or doing small business in the informal sector like the matching guys a.k.a. machingas.
The large part of this population is definitely women and youths. Looking at the financial inclusion demographics in Tanzania released by FinScope in 2017.
More women (30.3 per cent) tend to be completely excluded from formal financial services compared to men (25.5 per cent).
In addition to women (9 per cent) compared to men (4.4 per cent) who don’t have or use formal services but use informal services.
The source showed that there is more formal financial exclusion in rural areas (34.9 percent) than in urban areas (14.8 percent) and in terms of main income generating activity, the most excluded group was those working in the welfare (41.8 percent) and farmers and fishers are (32.1percent) compared to the least excluded i.e the formal sector and salaried (1.4percent) followed by informal sector salaried (7.1percent).
This has made many women, youths and people with disabilities fail to graduate from poverty especially those within the said brackets.
And there are many known reasons for this and mostly are based on the criteria set by the financial institutions in the formal sector which due to the patriarchal nature of our societies women and youths especially girls will never meet.
Making it necessary for the government to intervene to support the marginalized groups. To actively participate in the developmental process through economic empowerment initiatives.
Government programs for economic empowerment of the marginalized are indeed important because unlike the folks in the private sector both formal and informal lenders, the government is in a position to offer better terms.
I must say that although the four (previously five) percent for women, four percent for youths and two PWDs is meant to support small scale non farming business activities of these groups, the credit is actually doing more than that.
As small as the fund is, more women are using the fund to meet both household needs and partly to invest in generation of more income for the family.
And somehow this is relieving the tension and pressure on men given the current financial difficulties.
I understand that the credit was not for those involved in farming but there is evidence of women groups who are primarily involved in farming. But disguised themselves as a business/entrepreneurship group and managed to access the credit.
Who collectively bought a piece of land, and the remaining amount was divided to group members to meet their personal needs.
While the land is being used jointly by the women group on farming activities. The point is, such initiatives are important to bridge the gap of gender income inequality.
Socially empower women to have a voice in development activities at the household level and reduce household poverty.
But it is crucial to ensure they are not exclusive in nature, farmers need to access without having to disguise what they do.
Farmers and fishers especially in rural areas need to be accorded the same opportunity. Indeed, the removal of interest on the loans will add value.
Because as said earlier, most of the beneficiaries don’t exclusively use the credit for business expansion but primarily to meet household needs which are not close to profit making.
And even those who keep in small business or farming aren’t really looking at the profit margins but just income generation to meet the daily basic needs of food, health and the like. Findings from FinScope study shows that 74 percent of Tanzanians borrow for cash flow smoothening, out of which to cover expenses such as medical (24 percent).
Living expenses (23 percent), non-medical emergencies (14 percent). School fees (7 percent), funeral expenses (4 percent) and others (2 percent).
While only 19 percent said they borrowed for productive investment and only 7 percent said they borrowed for asset building. If the credit is able to support these groups to meet their basic needs.
Probably it will give an opportunity for them to participate in other income generating activities without the stress of lack of basic needs.
It must be remembered that the fund has target groups which has a majority of people struggling to make ends meet. And the 10 percent must be treated as a relief fund, because that’s what it is.
Perhaps in the long term it could really help these groups to graduate from hand to mouth business activities to profit but it is going to take investing more than interest free loans on the target groups.
I mentioned in my earlier article a couple of things which need to be addressed if such funds are to meet the strategic financial needs.
First is low financial literacy and business development skills among the target groups. These groups need support in analyzing business types in order to choose which business to keep money into to reap a fair profit in the short term and how can they grow their business portfolio using the profit from the seed capital.
Community development officers can do a better job if they were trained to do so. Because they have direct contact and are wide spread.
Otherwise since the groups cannot likely afford to pay for such service which attract less the private entities to take the role, graduate volunteers can find for themselves a place to begin a career.
The second issue that needs to be addressed to add value to the fund is supporting the mobilisation and meaningful organisation of individuals with shared goals in terms of what they want to do or what they do.
Working directly with women at local level in various interventions.
There have been voices suggesting perhaps the funds need to be in the form of capital goods or assets such as an incubator, fruit drying panels, juice making machine etc.
which can help these groups add value to their products. The cost of maintenance of a small handy machine could be relatively lower.
Besides when the groups are more organized in this manner collection of the repayments will be simplified and more people will benefit from these funds.
The need for interest free loans is bigger than what is currently available. There is need for finding alternatives to support marginalised groups to build up capital especially if we want them to be proactive in the industrial era.
If Tamisemi is going to make some guidelines on how these funds will be administered. The process should be participatory as to include representatives from all caliber of grassroots target groups and other technical experts.
But most important is the need to share country wide the guidelines and encourage LGAs community officers to make them known to the beneficiaries.