Dar es Salaam. Women entrepreneurs across Tanzania continue to explore alternative lending schemes as they report distress and dissatisfaction from the predatory and ‘blood-sucking’ loans that do them more harm than good.
A recent survey by this publication in major cities across the country revealed that most women entrepreneurs rely on self-help groups operating as Savings and Credit Cooperative Societies (SACCOS) and michezo, or games, where participants contribute and rotate funds to raise capital for their small businesses.
The survey’s results coincide with those of the latest Finscope study, indicating that a majority of Tanzanians access loans from individuals (67 per cent), followed by savings groups (17 per cent), mobile money (six per cent), microfinance institutions (four per cent), banks (three per cent), employers (three per cent), and other sources (three per cent).
Both findings – from the Finscope study and The Chanzo’s random survey – show that most financing occurs within the informal sector rather than through official channels. Women entrepreneurs shirk banks and other formal financial institutions as their terms and conditions make many women unqualified for their loans.
But women’s dependence on informal lending schemes exposes them to a more dangerous situation as they fall prey to predatory lending schemes whose high-interest rates, exorbitant penalties, and exceptionally short repayment duration not only threaten women-owned businesses but also their marriages and families.
No other options
Mama Chambua, a food vendor at the Kilombero Market, one of the largest markets that serves Arusha town with an estimated 2,000 traders, describes the predatory loans as necessary to several women.
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She told The Chanzo in an interview that she and her colleagues would not like to take the loans, but they find themselves relying on them as there are no other viable options for informal traders like them.
“If you go to banks, you must provide several identifications, title deeds, and many more,” Mama Chambua told The Chanzo. “But in these other places, you can apply for a loan today and tomorrow morning, you have it.”
Latifa Laswai, another food vendor at the market, echoes this sentiment, sharing her experience of a quick-earned loan informally, which she believes would not have been possible if she went to the formal institutions.
“I needed about Sh200,000 from the bank, and they told me to bring a title deed,” Latifa shared her experience. “Where will I get it? I have rented a single room with my husband. Where will I get a title deed?”
Strained marriages
The quickness notwithstanding, many of these transactions end in tears. The Vice Chairperson of the Kilombero Market, Mr Rajab Hassan, for instance, told The Chanzo that his office receives many cases of women struggling to pay for these expensive loans, with others facing hefty fines or losing their possessions.
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But the predatory loans do not just affect women-owned businesses but also their marriages as some women take these loans secretly without their partners’ knowledge, straining the relations, which sometimes end in disaster.
Nuru Saruti, a resident of Dodoma, had his marriage with his wife, a 50-year-old Hasina Bakari, strained by these loans. It followed from Hasina’s decision to take these loans, and when she was unable to repay them, she ran from her home on October 04, 2023.
Her husband learned later that his wife had several loans amounting to Sh1.6 million from a local creditor. The Chanzo found Mr Nuru at his house, frustrated with how he would repay the loans his wife took.
“I’m looking for her to return and repay these loans,” he told The Chanzo. “Her creditors come here, harass me, asking me to pay the loans. But how can I? Was I involved in the process? I ask the creditors these questions, and they cannot answer.”
Long-term solutions
Women entrepreneurs know how to get out of this predicament, and the solutions that many women that The Chanzo spoke with mentioned the local council loans, the government-revolving loans that offer loans to women, youth, and persons with disabilities.
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The government suspended the scheme in April this year following a revelation by the Tanzania Controller and Auditor General (CAG) that local government authorities failed to recover Sh88 billion of the loans distributed to respective groups, among many other irregularities.
The Bank of Tanzania (BoT) reports that between 2018 and 2022, about Sh224 billion were released to special groups, with about Sh118 billion reaching 322,858 people who organised in 47,614 groups.
Women traders, including Mama Chambua, believe these loans can be a lifesaver for many people like him. But graft and political interference threaten the scheme’s sustainability, which makes beneficiaries suggest that measures should be taken to address the challenges.
Mr Hassan, the leader at the Kilombero market in Arusha, who has successfully resolved several loan-related cases, also believes that banks should establish mechanisms to cater to small traders without imposing excessive requirements.
“These traders are now utilising expensive loans, and they return them to the fullest,” he observed during an interview with The Chanzo. “So, if affordable loans are availed to them, they will pay back. Banks have to set up facilities for us small traders.”
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Authorities have insisted on the need for more awareness to be created among women entrepreneurs on the importance of putting the loans to their intended goals lest they get in trouble with creditors and their husbands.
Besides awareness creation, authorities are also working to formalise the sector as the government believes doing so would prevent many women traders from being harmed by creditors.
Against this background, on October 22, 2023, BoT announced that Community Microfinance Groups and Microfinance Business Promoters must now register themselves electronically in a new system.
The new system will be used for the disbursement of the 10 per cent local council loans that Mama Chambua, like many other women like her, believe that if proper supervision is done, they stand a chance of preventing them from falling prey to predatory and ‘blood-sucking’ lenders.
