REPORT__Evaluating_the_potential_of_microfinance_for_sanitation_in_Tanzania_May_2013

Few commercial banks extend financial services to the low end market (i.e. unsalaried selfemployed
market segment) either in urban or rural areas. The leading commercial banks
active in the low end market segment include National Microfinance Bank (NMB) and Akiba
Commercial Bank.
The most commonly mentioned MFIs in Tanzania include BRAC Tanzania (NGO/MFI),
PRIDE Tanzania (NGO/MFI), FINCA Tanzania (NGO/MFI), SELFINA and Tujijenge
Tanzania (Company Limited by shares).
The Tanzania Association of Microfinance Institutions (TAMFI) is the network organisation
for microfinance organisations. TAMFI reportedly comprises of 42 microfinance
organisations, most of which are relatively new and small. Data presented to Mix Market 5
show that in 2010, reporting financial institutions had a gross loan portfolio of USD 591
million. Other sector performance indicators are presented in Table 2 below.
Table 2: Microfinance sector performance, as of end 2009
Loans 591.3 million (USD)
Active Borrowers 233,451
Deposits 1.2 billion (USD)
Depositors 357,105
Source: http://www.mixmarket.org
The MFIs in Tanzania generally use the joint liability group lending methodology, though
individual lending is also practiced for larger secured loans. In the joint liability lending
model, clients are trained for a period of 6-8 weeks on group leadership and credit
management. Upon completion of the training, the clients open accounts with the MFI and
deposit cash collateral – usually referred to as compulsory savings. A few members of the
group then access initial loans co-guaranteed by the fellow group members and the cash
collateral deposited with the MFI. Group members may access part or all of the deposits
upon exiting. Some of the MFIs may offer interest on the deposits referred to as bonus.
Unlike commercial banks, MFIs have a limited range of financial products. MFIs in particular
provide enterprise working capital loans with short maturity periods, usually 6 to 12 months.
The joint liability model also hinders the development of diversified loan products since
fellow group members need to be guaranteed that the borrower will make the repayments
from the proceeds of the income generating activity. As such, consumption loans are
implicitly discouraged especially, for the first loans.
5 The Microfinance Information Exchange (MIX) is a non-profit organisation that provides data and analysis on
microfinance providers and manages the Mix Market website (www.mixmarket.org), which gathers self-reported
information on financial and social performance information.
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