The Citizen (Dar es Salaam)
14 December 2011
editorial
Oikocredit, an international co-operative financial institution, disbursed Sh10 billion to 12 Savings and Credit Co-operative Societies (Saccos) in Tanzania this week.
The micro-finance institutions would subsequently loan out the money to small entrepreneurs to help them expand, formalise and modernise their businesses. About 90 per cent of small businesses operate informally. They cannot access capital from formal financing channels such as commercial banks and financial markets due to some limiting factors, including the high cost of lending.
The cost of financing is also exorbitant with lending rates reaching as high as 17 per cent, making credit unaffordable to small businesses.The expansion of the private sector has also not been paralleled by the increase in financial institutions, which are concentrated in urban areas, leaving rural-based businesses cash-strapped.
Oikocredit’s initiative has, therefore, come at the right time. We urge it to sustain its support, as it augurs well for the development of Tanzania’s entrepreneurs.We are aware that since it started operations in the country in 2006, it has provided about Sh36 billion to microfinance institutions in the country.
We call upon entrepreneurs to cultivate a culture of repaying loans to enable others also access credit. The creation of Saccos was instrumental in cultivating the loan repayment habit but poor management of the system is still a challenge that has to be overcome to increase access to finance by small businesses.
We urge other financial institutions, the private sector and the government to work together to increase financing to the small businesses.One way is through helping the creation of more Saccoss, especially in rural areas, and helping these organisations improve management.
Official statistics indicate that there are about 5,042 registered Saccos, with a membership of 822,685. Only about half of the Saccos are based in the rural areas, where they serve about one per cent of the rural population.
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