The role of informal microfinance institutions in saving

small farmers are most likely to save if and only if these institutions will offer alternative
products for low income earners and small farmers.
Credit Performance and Credit Portfolio
One of the prime functions of micro financial institutions is to issue loans to customers.
The size of loans and repayment rates are therefore critical factors to consider in
analyzing the performance and understanding the types of customers served. Most of
financial institutions in Tanzania have been facing the problem of non-performing
loans. Non-performing loans are loans which their customers have yet started to pay
back their loans or have a major proportional of arrears.
Table 14: Provides average loans size per borrower in given institutions in the period
1994-1996.
Table 14: Average Loan Size per Borrower (Tanzania Shillings)
Institution
Category
1996 1995 1994
CRDB 20,107,409 6,433,887 5,227,406
NBC 6,044,365 1,905,510 1,042,570
TPB 25,000,000 50,000,000 50,000
NGO’s 29,664 31,887 37,832
KCB NA NA NA
SACCOs 37,603 42,281 31,388
Source: Oketch et al (1997, p.23)
Table 14 above suggests that NGO’s and SACCOs serve most of low income earners and
small farmers than banks. This fact is derived from the average loan size. Average
loans size per borrower in banks ranges into millions while in SACCOs and NGO’s the
average loans per borrower ranges into thousands. Based on this analysis banks need
to change this trend and issue more loans to small farmers and micro-enterprises.
Without deliberate measures to rectify this trend Tanzania’s desire to alleviate
poverty through increased lending and availability of credit to small farmers and
micro-enterprises will never be achieved.
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