|
True, even the poor can save - but how?
2008-04-03 08:37:24
By Editor
National Economic Empowerment Council executive Prof Lucian Msambichaka last week called on the Tanzanian public to place a premium on mobilising savings and direct them into investment schemes.
He described the culture of saving and investing as the surest way to tackle poverty.
Statistics
The distinguished academic said only 9 out of every 100 Tanzanians have savings with banks and other financial institutions and only two out of every 100 with saving and credit cooperative societies (Saccos).
That is, by all accounts, a terrible scenario. But even more mind-boggling is his revelation that an estimated 85 per cent of farmers in Tanzania probably stash their money in or under mattresses, seeing that as more convenient and secure.
In the last two decades or so, efforts to popularise the culture of saving in the form of making monetary deposits in banks and other financial institutions were constrained by three major factors.
The first was that there were very few state-run financial institutions in the country then, and not many of them that efficient.
Secondly, the few financial institutions were mainly urban-based and even the reasons for their existence were not that well defined.
Additionally, disposable or surplus incomes were not substantial enough to warrant sizable savings because the early 1980s witnessed the national economy registering negative growth.
The picture is much brighter today because the financial sector has grown from strength to strength following reforms partly due to external pressures and far-reaching changes in social and economic conditions in the country.
The first two factors are no longer much of impediments to efforts to mobilise savings although most private banks and other financial institutions, including Saccos, remain urban-based.
Doubtless, most Tanzanians still do not have enough disposable income balances to save with banks or Saccos.
Particularly in the rural areas, many people are so income poor that their livelihoods seldom go through the monetary system.
That explains why most banks, including those going all the way down to the district level, prefer urban settings where they can capture workers’ salaries and businesspersons’ surplus incomes.
But the meagre interest rates many of our financial institutions offer on deposits discourage even the few people with bank savings from saving more and potential clients from opening savings accounts.
This is part of what makes the existence of Prof Msambichaka’s NEEC more important today than in the past.
The council can help the country’s huge informal financial sector tap more surplus incomes.
It matters because the sector constitutes about 35 per cent of the workforce whose wealth generation does not go through formal financial institutions, while another 54 per cent of the country’s population does not have any income-generating activity worth the name.
The professor has underlined a very valid point but he should consider existing social and economic conditions more seriously for his call to appeal to wananchi.
Learning more from the experience of initiatives like the National Strategy for Growth and Poverty Reduction and the Property and Business Formalisation Programme could help.
|
