Microfinance sector faces mounting challenges
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THE country’s microfinance market stability and continued expansion is under threat due to poor loan repayment despite expanding robustly.

The microfinance stakeholders workshop held in Arusha that brought together about 40 microfinance institutions was told. Arusha Community Initiatives Support Trust (ACIST) Microfinance Coordinator, Mr Hamisi Shekulamba, said that microfinance provides basic financial services to the poor and or the low income people.

“The importance of having a stable microfinance sub-sector cannot be gainsaid. “Their role in enabling the common man and woman to self-develop has been proved. A better business environment for microfinance, will bring more development in our country,” he said.

Mr Shekulamba said at the convention organized by Tanzania Association of Microfinance Institutions (TAMFI). The stakeholders were told to moot use of credit reference check as way to combat loans default rates.

The stakeholders at the convention which was supported by Marketing Infrastructure Value Addition and Rural Finance Support Programme (MIVARF), were of the view that while the demand for microfinance services has been expanding robustly, the down side has been the rise of non-performing loans in the recent years.

TAMFI Chief Executive Officers (CEO), Winnie Terry, said the opportunities for the microfinance sector growth and expansion are overwhelmingly huge.

“The biggest challenge lies in the failure of borrowers to repay their loans on time and without pressure,” Ms Terry said.

She added that many microfinance institutions (MFIs) were reporting increased defaulters rates, which are forcing some actors to reconsider their business model to deal with the menace. “Group lending used to get over 90 per cent repayments on timely basis, but things have changed, it’s no longer a guarantee,” she noted.

The meeting explored what could be done to ensure timely repayments. “Some stakeholders felt it was high time MFIs started using credit reference bureaus to help wind out borrowers who never repay back their loans and roam from one MFI to the other,” Ms Terry suggested.

The stakeholders are banking their hopes on the promise by the government to introduce a negotiated microfinance law, which will protect both the lender and the borrower.

In his presentation Mr Barakael Laseko highlighted unfriendly regulatory framework for MFI’s, stiff competition from banks, high transaction costs, exclusion of rural communities to be among many challenges facing the sector.

“Poverty in the country is still prevalent and a significant number of people are still financially excluded. “Overall the market is still grossly underserved especially in the peri-urban and rural areas,” Mr Laseko said. Better regulations, product innovation and building of sustainable MFIs was paramount, he said.

Mr Laseko, also, urged the Northern Zone microfinance practitioners to form market facilitation clinics, a method that brings together market practitioners to help each other overcome practical and urgent challenges.

The workshop brought together microfinance practitioners to networking and looking for ways to help them collectively overcome practical and urgent challenges facing the sub sector.

Mr Laseko and Ms Beatrice Laizer were elected as leaders for the Northern zone chapter to act as a link between the zone and main TAMFI office in Dar es Salaam. TAMF is the umbrella organization for microfinance organizations operating in Tanzania, with a membership of over 128 microfinance firms.

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