Today, I met with Iddi Ngandari, the Bustani Mtaa Chairperson here in the Temeke District of Dar-es-Salaam, Tanzania. I was surprised by how articulate this local leader was. A member of the opposition party in Tanzania, he spoke strong English and discussed what ails his people, including what he perceives to be exploitative microloan providers.
Poverty continues to be the main driver of problems in communities like Temeke. This leads to risky behavior such as prostitution that drives HIV/AIDS and other serious problems in the community. While microfinance has been proffered as a solution in many cases, prohibitive rates offered by for-profit organizations are causing more trouble than they are worth. Meanwhile, non-profits may have lengthy training or screening processes that preclude people on the margins like the ones in Temeke.
The chairman refused to name the banks, but indicated that a typical structure for a loan looks like this.
• 50,000 Tanzanian Schillings go to the loanee (about $45)
• 6,000 additional is taken as a bond
• 30,000 is taken as profit
This amount is collateralized with the family’s furniture and is quite frequent that repossessions occur. The loan is repaid over a period of approximately 3 months. Understandably, the chairperson feels this is exploitative and is not allowing this in his community. Bad loans are not good for the community. Instead, they cause stress among families, including divorce and domestic violence, and drain resources out of the community.
Furthermore, these banks are not providing much in the way of training or support for the enterprises that are being funded. Hence, many of the enterprises are not sustainable – sometimes before the loan is paid back, some times in the months after. As such, the benefits to the community are minimal.
We’ve been asked to structure a training and microfinance program here, but I’m not sure that there’s enough money flowing around in this somewhat isolated part of Dar-es-Salaam to support many profitable enterprises. I encouraged Mr. Ngandari to focus efforts on increasing access and awareness of jobs outside his impoverished district. There seems to be no easy spigot to get liquidity into this economy though. It seems that Tanzania is lacking in the way of remittances by nationals working abroad, and most residents of Temeke eat what little they earn almost immediately. Non-profit microfinance may help by making loan terms less onerous and injecting some capital, but this community needs a more comprehensive strategy to get the economic gears greased.
The project with MaDeA has gone fairly well so far – I’m certainly learning a lot here about the HIV/AIDS, domestic violence and poverty. I’ll provide more updates later.