Successes and challenges of council loans for special groups

30Nov 2021
Gerald Kitabu
Morogoro
The Guardian
Successes and challenges of council loans for special groups

FOR decades, cultural practices at community levels and official government policies did not directly and practically seek to emancipate women, youth, and People with Disabilities (PWDs) economically.

Youth participating in an advocacy training session on economic rights and access to financial services recently. Photo/ Gerald Kitabu

However, this policy was changed over two decades ago when it was decided that all councils will set aside 10 per cent of their revenues as loans for the three groups.

Our correspondent Gerald Kitabu caught up with Lucas Kifyasi, UNA Tanzania programme officer for youth, economic rights and participation to assess the progress made so far.

Q: Tell us what this empowerment fund means.

A: The seed money for women, youth and PWDs was first introduced by Parliament resolution in 1993 with the aim of uplifting economically-disadvantaged groups with no access to loans issued by financial institutions due to lack of collateral. However, despite the resolution by the parliament, local council empowerment loans were allocated at 5 per cent for women and 5 per cent for youth, leaving out the PWDs. The loans were issued with interests of 1 per cent.

UNA Tanzania submitted to the President’s Office-Regional Administration and Local Government (PO-RALG) recommendations collected from 17 districts in Tanzania. These recommendations were gathered from women, youth and PWDs and duty bearers.

The recommendations informed the need to ensure effectiveness in the governance of local government, empowerment of own source revenue as loans to the groups. After the recommendations, in 2018, the Local Government financial Act of 1982, CAP 290, section 37A was amended to mandate local councils to set aside 10 per cent of own source revenue (OSR) as no interest empowerment loans to groups of 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% per cent of their own source revenue as follows: 4 per cent women, 4 per cent youth and 2 per cent PWDs as enabler to groups in carrying out gainful enterprises to lift their own households out of poverty.

Q: What were the challenges?

A: Among the challenges includes the failure of LGAs to allocate 10 per cent 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 reduces 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; short period of paying back the loans and lack of lenient mechanism in group formation particularly for people with disabilities.

Q. What recommendations did you put forward to the relevant authorities?

A: 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 enhance PWDs’ smooth access to empowerment loans. Also, we recommended building the capacity of community development departments to provide technical support as well as formulation of more lenient loan conditions for PWD groups.

Because some projects take time to start generating profits, we suggested that there is a need to extend time for the beneficiaries to pay back.

We also recommended allowing entrepreneurial IDs provided by the government to be used by groups when applying for loans if and when groups do not have business license.

We also suggested that where necessary, councils should consider providing tools instead of cash loans to avoid reallocation of the loans by beneficiaries. Also, bank accounts specified for the loans should be opened and integrate the systems so that the loans can be allocated automatically.

Furthermore, a certain amount of funds be set aside for training and monitoring of groups’ development and provide technical assistance on running and managing business.

Q: Any feedback from the recommendations?

A: There have been improvements made for effective governance of 10 per cent local council’s loans for empowerment of women, youth and PWDs.

For example, section 3 provides that loans will mean providing cash and tools required by groups to venture their enterprises. Previously LGAs were required to issue loans in terms of cash.

Also, the new amendments of section 6, article 1, reduce group members from 10 to five for women and youth.

Previously, groups of women and youth were required to have 10 members. Again, amendment of section 6 reduces PWDs group members from five to two for women and youth. Previously, groups of women and youth were required to have five members. Section 7 has also been amended to allow entrepreneurial IDs provided by the government to be used by groups when applying for loans.

Amendment of section 23 mandates LGAs to set an amount for monitoring groups’ development and provide technical assistance on running and managing business.