How microcredit exacerbate nutrition challenges for families

Dar es Salaam. In the midst of Tanzania's battle against malnutrition and stunting among children, a new concern has emerged: the detrimental impact of stringent microcredit practices on family nutrition.

Families, particularly women, are facing financial strain and struggling to provide adequate nutrition for their households as they save to repay the loans from microfinance firms, which require daily repayment.

Low incomes have pushed some women to take loans with stringent conditions, popularly known as “Kausha Damu,” which in Swahili literally means blood-drying loans.

The stringent conditions are exacerbating challenges, especially in providing nutrition for the families, as some women prioritise repaying over daily meals.

Upendo Swai, a resident of Sabasaba Street in Temeke district, shared her ordeal with the loans, which she borrowed for Sh50,000 to boost her business of making soap and stain removers.

She said the loan came with a condition to repay Sh2,000 daily, failure of which incurred fines and, ultimately, the seizure of household assets.

"I couldn't afford to cook food for my children and husband. Most of the time, I'm left with Sh10,000, which I pay Sh2,000 for Kausha Damu, contribute to other social events, and finally, I find I have very little money left to prepare food," Ms Swai revealed.

Paying Sh2,000 daily means she would have repaid Sh62,000 by the end of the month.

Her husband is not aware of the loan and she has to make sure that the man remains unaware.

"Sometimes we pass the day without eating. Children go to school and eat cassava there, and then I prepare dinner with what I have. When my husband comes back at night, he finds good food, unaware that during the day, everyone fends for themselves regarding meals," she said.

Ms Fatuma Ally, another resident facing similar challenges, pointed out the necessity of borrowing due to life's hardships.

"When I borrowed, I used it to treat my father, and repayment is daily," said Ms Ally, who lives in the same area. The financial strain forces families to skip some meals, impacting the supply of children's nutrition.

According to her, the husband leaves Sh10,000 for daily subsistence, but she has to repay Sh2,000 for money she borrowed to treat her father.

According to her, schoolchildren take Sh3,000, which they need to spend for breakfast, lunch and other expenditures at school.

“The remaining money is not enough to provide food for the children when they return from school,” she said, adding that the focus shifts to dinner, in which the father, who is the breadwinner, takes part.

Standard five Edward John confirmed the unpredictable availability of food at home during the afternoon, leaving him and his siblings hungry until the evening.

"We normally eat cassava at school, and upon returning home, my mother tells us to wait for dinner. Sometimes we find food, and other times we don't eat until evening," said the student of Mtoni Sabasaba Primary School in Temeke district.

Mwanaisha Ally, a resident of Gongolamboto, highlighted the disruption caused by the culture of lending money within social groups.

The pressure to contribute daily to repay loans results in families diverting funds from essential expenses, affecting nutrition.

The local government representative in Sabasaba Ward, Mr Amani Mbutu, acknowledged the issue, attributing it to a lack of education on loans. Mbutu clarified the loan application process, stating that identification letters are issued by local governments.

He said the role of the local government in the loan application process is to issue introduction letters.

"What we know is that when someone borrows, the contract stipulates that if they fail to repay, the collateral will be seized for the lender to recover the debt. Even banks operate this way, if someone fails to repay, they look at collateral," he said.

Addressing complaints, George Mawala of Carvas Micro-Credit Company Ltd defended their practices, claiming low interest rates and adherence to Bank of Tanzania (BoT) procedures.

“Our interest rates are as low as 3.5 percent and decrease as the borrower repays," he said.

However, he said the challenge is that most women complain because they often fail to achieve their intended goals.

Regarding the seizure of assets, he said it's a measure to protect their funds.

The Bank of Tanzania governor, Mr Emmanuel Tutuba, acknowledged citizen complaints and stressed the importance of education for lenders and borrowers.

"We have been providing education, first for lenders to obtain licences and also to make their terms and conditions clear. These conditions shouldn't be too stringent for borrowers. Even though we're in a free market economy, they shouldn't cause panic," said Mr Tutuba.

Among the awareness efforts, he said, are sending text messages to citizens to help them understand the loan terms.

"Borrow from institutions licenced by the Bank of Tanzania to avoid trouble. Focus on the loan's purpose, understand the contract, and keep a signed copy," the message reads.

Efforts are underway to educate citizens on responsible borrowing, he said.