Being a saver pays off in Tanzania
July 13 2007
Handbags
imported from London line up alongside shoes bought in China and dresses from
Dubai at PHP Collection, a small shop in the back streets of Tanzania’s capital,
Dar es Salaam. This is a retail company run by Anna Lupanga, a hair salon owner
turned international clothes and accessories importer.
Trade is good, with a consistent turnover and monthly profits reaching up to
Tanzanian shillings (Tsh) 400,000, which is a significant improvement on the Tsh
20,000 profit Anna used to make at the hair salon. But building the business was
not easy. "I had a good idea, I knew there was a demand for good quality women’s
clothes," explains Anna, "but I needed a loan to really get off the ground."
Many small entrepreneurs in Tanzania face the same problems as Anna: they know
they need money to invest in a business idea but don't know how to access it.
Anna’s break came in 2003 when she was introduced to a savings and credit
cooperative, or SACCO, called the
Women’s
Advancement Trust (WAT). She was told to open a savings account to
accumulate enough money to qualify for a loan. “I had always wanted to save
money to provide for my family,” she says. “I used to keep it in a small cash
box at home, but on occasions it was stolen and it was tempting to spend the
money rather than save it.”
Allowing the poor to borrow and save
WAT encouraged Anna to save on a regular basis and within eight months she was
in a position to secure her first loan of Tsh 400,000 to open the hair salon.
Recently she took out her fourth loan, worth Tsh 5 million, to develop the
clothing business. “It wouldn’t have been possible without WAT SACCO,” she
explains. “A bank loan was too complicated and I wasn’t able to borrow enough
from family and friends.”
Anna Lupanga is just one of around 5,000 women and men who save and borrow at
WAT. At its office in Kinondoni, people queue at the counters while clerks
process customers’ deposits and withdrawals with the aid of a computerised
accounting system. It looks just like a bank, but this organisation focuses on
providing financial services to low income earners who may be paying in as
little as a few hundred shillings into a savings account each month.
“There is a demand for our services,” says the SACCO’s manager, Paulina Shayo,
“but first we need to educate people about how to save money and the benefits of
doing so. If our members are having problems saving or repaying a loan, they can
turn to us for advice. This know-how is very important to our customers.”
Filling bank-shaped gaps
Increasingly,
SACCOs are seen as playing a key role in providing financial services to people
who otherwise would not be able to access them, which is currently around half
of all adults in Tanzania. In the past two years, the number of SACCOs in the
country has grown from 1,800 to around 3,500. Their development is being
supported in part by the
Financial
Sector Deepening Trust (FSDT), an organisation which, co-funded by DFID,
aims to make financial services available to more people.
“SACCOs are important,” says FSDT’s Technical Director, Ian Robinson, “not least
because they provide a means to link those with limited access to finance with
formal banking and related financial services. People are more likely to
graduate from informal financial services, for example borrowing from a kiosk,
to a semi-formal SACCO, than they are to going directly to a bank.”
The lack of bank branches in Tanzania and the cost of trying to open them in
thinly populated areas is another reason why more people are turning to SACCOs.
Even the biggest banks will never be able to open enough branches to reach all
their potential customers. In those areas where it wouldn’t be cost-effective to
operate a branch, the presence of SACCOs is especially valuable.
Enabling business to thrive
“It doesn’t matter how good the business environment is if people who want to
start or expand businesses can’t access the right financial services,” says the
Head of DFID Tanzania, David Stanton. “Those services include everything from
bank accounts to loans, insurance, remittances and money transfers. And the
expansion of banking services can benefit all Tanzanian people.”
Anna Lupanga, who has built a thriving local business with a series of loans and
her own hard work, would certainly agree. Anna is now planning her next buying
trip to China in search of the latest fashions. And like any successful
entrepreneur, she’s working on expanding her business. The next step will be to
become a wholesale rather than retail supplier - a move she will, of course, be
financing with a loan from the WAT SACCO.
Key facts
- FSDT, through
- DFID is a major funder of FSDT, contributing £7 million to the project for the period 2005 to 2010. DFID's partners
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