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TAMFI to govt: Intervene to reduce bank credit costs

7th February 2012
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The Tanzania Association of Microfinance Institutions (TAMFI) has called on the government to intervene in the high costs of credit from main stream banks saying they would retard development.

According to the association’s executive secretary Winnie Terry, at the moment the biggest challenge facing microfinance institutions in providing financial services is the high costs of credit issuance.

Most microfinance institutions borrow from the banks to on-lend to the poor and unbanked at a higher rate.

She said experience shows that it is sometimes easier to borrow from foreign finance facilities for both long term and short term loans, than to secure credit from local mainstream banking institutions.

“This situation makes efforts by financial institutions to increase access to credit difficult and expensive particularly in the rural,” she said.

However despite the challenge, the association has continued to dish out loans to its members countywide, she said.

In 2010, TAMFI’s 49 member organizations issued loans to the tune of 400bn/- to  721,149 customers. In 2011 the same organizations were borrowed 600bn/- which went to over 800,000 customers.

For his part, the association’s deputy board chairperson, Joel Mwakitalu said TAMFI will continue educating customers on the importance of financial services in the country.

Presenting the strategic plan for the body at its recently annual general meeting, he said the association this year prepared a programme to offer financial education to customers and the general public.

“This is a practical move geared at improving services to customers served by the microfinance sector, more so to our members.

Together with the measures to offer financial education programme for customers and the public at large, TAMFI has developed a method to enable member organisations to be transparent in working out the cost of their services, especially loan products.

The premise is that customers must understand those costs before making the decision to borrow, he added.

According to him, members of the association have also agreed to start preparing loan agreements in Kiswahili so as to enable customers understand the legal documents easily.

To increase openness, the association has also become signatory to agency that champions transparency and accountability of prices and costs of small loans - Microfinance Transparency.

Closing the meeting, Devota Likolola, who is a Member  of  the Parliamentary Committee on Trade and Industry, asked the government to ensure it involves the body in dialogue in making  microfinance policy capable of reforming the sector.

SOURCE: THE GUARDIAN
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