Escape the low-growth trap? Microfinance in Tanzania

Marr, Ana and Tubaro, Paola (2011) Escape the low-growth trap? Microfinance in Tanzania. Project Report. University of Greenwich, Greenwich Academic Literature Archive (GALA).

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Abstract

Tanzania is a small-sized economy, with a large portion of the population below the poverty line of $2 a day, particularly in rural areas. Finscope 2009, a national survey, provides evidence that 56% of the population has no access to financial services, a proportion that has slightly grown over the last few years. The main reasons given by respondents for not having loans, bank accounts or savings are practical obstacles (especially geographical distance), costs and lack of information – thereby suggesting that there is a large unmet demand for “accessible” financial services.
Microfinance has endeavoured to address these needs, devising solutions to provide the poorer segments of the population with credit and – to a lesser extent – insurance, leasing and transfers. However, the Tanzanian microfinance market is still tiny, young, and dominated by a small number of major organisations; it is mostly active in Dar es Salaam and Arusha, with limited penetration in rural areas. What are, then, the barriers to its growth, and what steps can be taken to overcome them?
Our study of microfinance in Tanzania, now at the end of its second year, addresses these concerns by widening its perspective, from case studies of individual microfinance institutions (MFIs) to the whole set of actors and stakeholders that operate in the field. More precisely, we adopt a network approach that places emphasis on the structure of inter-organisational partnerships that relate MFIs to relevant stakeholders, funders, and regulators; by so doing, we aim to bring to light systemic issues and to identify suitable policy responses.

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