Making 10% loans work for women, youth and people with disabilities

18Dec 2021
Gerald Kitabu
The Guardian
Making 10% loans work for women, youth and people with disabilities

For a long time, the cultural norm and prejudice towards women, youth and people with disability has been a limitation for them to achieve meaningful access to financial opportunities. These groups were neglected and even if they obtained loans, the process was very difficult hence made some-

-of them fail to bay back the loan. In this interview our correspondent GERALD KITABU caught up with UNA Tanzania program officer, youth, economic rights and participation Lucas Kifyasi who explains, read on:

 You have been working with youth, tell us what does this empowerment fund mean?

The seed money for women, youth and PWD’s was first introduced by a parliamentary resolution of 1993 that aimed at uplifting economically disadvantaged groups of women and youth with no access to loans issued by financial institutions due to lack of collateral. However, despite the resolution, local council empowerment loans were allocated at five percent for women and five percent for youth, leaving out the PWDs and was issued with interests of one percent.

UNA Tanzania submitted to TAMISEMI timely needed recommendations collected from 17 districts in the country. These recommendations were gathered from women, youth and people with disability and duty bearers. The recommendation informed the need for enhancement and ensure effectiveness in the governance of local government, empowerment of own source revenue as loans to groups of women, youth and people with disabilities.

Has any progress been made?

Post the recommendations, in 2018 the Local Government Financial Act of 1982, CAP 290, section 37A was amended to mandate local councils set aside 10 percent of own sources of revenue at no interest rate to empowerment loans for women, youth and people with disabilities. The loan was  designed as a revolving fund to which Local Government Authorities (LGAs) are supposed to allocate 10 percent of their own sourced revenue (four percent for women and youth groups each while two percent goes to PWDs) to empower these groups in carrying out gainful enterprises to lift their own households out of poverty. 

 How did the government work with UNA Tanzania to ensure effective governance of the loans?

From the beginning, UNA Tanzania had the interest to ensure women, youth and people with disabilities have access to lenient capital to support them start businesses. By working with women, youth and people with disabilities a number of issues were identified that impeded smooth access to the loans. One impediment was governance of the loans. We contributed our ideas to improve the operation for the benefit of intended beneficiaries and the nation at large.

What were the major challenges?

Among the challenges includes delay of some LGAs to allocate 10 percent of their own source revenue to groups of women, youth and PWDs, financial inequalities among LGAs, low repayment rates, low revenue collections by LGAs which reduced the overall allocation of the fund and, in some instances, LGA’s competing priorities. Furthermore, the current capacity of community development departments at LGA-level to process, manage and recover the loans and provide business development services to beneficiaries limits the women, youth and PWDs, effective operation as a revolving fund. Some LGA’s do not prioritize the most disadvantaged, short period of paying back the loans and lack of lenient mechanism in group formation particular for people with disabilities.

As UNA Tanzania what did you recommend?

We had several recommendations that were submitted to PO-RALG in October 2019 and these recommendations were taken up for the amendment of the regulation in 2021. We recommended that the size of the groups of women and youth should be reduced from 10 to five to help manage them.

We also recommended that PWDs be given priority to access the empowerment loans as well as build capacity of community development departments to provide technical support. Formulating more lenient loan conditions for PWD groups. Some projects take time to start generating profits and as such we recommended that there is need to extend time for the beneficiaries to pay back.

We also recommended that LGAs consider allowing entrepreneurial IDs provided by the government to be used by groups when applying for loans if and when groups do not have business licenses. The local councils should consider providing tools instead of cash-loans to avoid misuse by beneficiaries. Specific bank account should be opened and integrate into the system so that the loans can be allocated automatically as well as the process of repayment. Set a certain amount of funds for training and monitoring of groups development and provide technical assistance on running and managing business.

Any feedback from the recommendations?

There have been improvements made for effective governance of 10 percent local council loans for empowerment of women, youth and people with disabilities. For example, section 3 provides that loans will mean providing cash and tools required by groups to venture into businesses of their choice. Previously LGAs were required to issue loans in terms of cash only.

Section 6 Article 1, the new amendments reduced group members from 10 to five for women and youth. Previously groups of women and youth were required to have 10 members. Section 7 is amended to allow entrepreneurial IDs provided by the government, be used by groups when applying for loans. Section 23 of the new amendment mandates LGAs to set aside an amount for monitoring the groups development and provide technical assistance on running and managing businesses.