Microfinance institutions have trust in new law

Dar es Salaam. The Tanzania Association of Microfinance Institutions (Tamfi) is upbeat that the new law – currently being enacted by the government – will help the sector to grow and help an increased population to get access to financial services.

The Tamfi vice chairman, Mr Altemius Millinga, told Business Week last week that though the business of microfinance started in Tanzania since 1990s, their adoption has had little impact in bridging the gap between the population that has access to financial services and the one that does not have.

“Currently according to the Finscope study of 2013, out of 100 Tanzanians only 14 people have accounts in banks, while 4.3 per cent access microfinance which include institutions like Rotating Savings and Credit Associations, Accumulated Savings and Credit Associations, among others excluding Vicoba which is still semi-formal,” Mr Millinga said.

He said the situation has been that way largely due to lack a law to govern the business in Tanzania.

In Kenya, Uganda and Burundi, such laws are available.

There is also a challenge of a lack of financial literacy – including financial services and how to utilise them - among Tanzanians.

Things have been so despite the fact that microfinance practices are also found within the traditional banking systems.

Banks which offer loans to small businesses include Akiba Bank and Mkombozi Commercial Bank among others as well as Community Banks like Mufindi and Mwanga amongst the many.

The practices are also found in microfinance institutions including Yetu Microfinance, Vision Fund Hakika and EFC.

In view of such a scenario, Tamfi is working with similar institutions within East Africa for the sake of sharing experiences on the subject.

“Such institutions as ours also operate in other East African Community (EAC) countries who face similar challenges like Tanzania where financial inclusion is still low and therefore it was decided that the EAC countries come up with the East Africa Microfinance Networks whose objective is to coordinate, share and harmonize microfinance interests in partner’s states,” said Mr Millinga.

Currently, the institutions are in the process of preparing a single policy whose draft has been finalized.

The aim is to of harmonize policies and regulations that will enable member states do business in either of the countries and therefore grow.

In that regard, Tamfi will be hosting the second summit for partnership with East Africa Microfinance Networks next month.

With the theme of “Accelerating financial inclusion for economic development”, the summit – which comes after the one which was held in Kenya - is expected to attract 200 people from all EAC member countries.

The three-day conference will be a catalyst for debate, best practice, knowledge exchange and partnerships among practitioners, policy-makers and other stakeholders seeking to achieve significantly greater financial inclusion in the region.

It will include a broad range of discussions and debates by top speakers from across East Africa and some invited experts from other parts of the world bringing practical experiences on how various sectors can work together to promote financial inclusion and inclusive economic growth.