ASSESSMENT OF AVAILABILITY OF FINANCIAL SERVICES AT KIMARA WARD

1.0 Introduction

The purpose of this paper is to examine the availability of financial services in Kimara Ward. And to propose different ways that will ensure Kimara Community have access to reliable financial services as it is understood that financial services are crucial in investment growth hence poverty alleviation. The paper is divided in eight parts trying to come up with different issues in relation to financial services. Establishment of financial institutions, capacity building and strengthening of capital formation are the priority area that proposed for intervention.

2.0 Definition of Terms

Financial services are particular types of work that are provided by financial intermediaries/instruments to customers ranging from. Savings, Credit, payment of transfers, leasing and insurance just to mention few (Wangwe, S, et al, (2004),

Investment is defined also as the expenditure of wealth to enable future production or other advantageous economic yield which depend on economic agent. For an individual or household, investment might comprise mainly the purchase of financial assets (stock or bonds) or durable goods like buildings, machinery, and vehicles and such like (Dixons, 1994)

3. Experiences of Micro finance and Tanzania
In Tanzania, Microfinance began with NGOs (Non-Government Organizations) and SACCOS (Savings and Loans Cooperatives) in 1995. However during this time microfinance was mainly linked to women and poverty alleviation. In 2001 the government formulated new policy in Microfinance institutions in 2001. New microfinance policy contributes recognize them as a tool for poverty eradication and with its increased use and exposure to the country. Therefore National Micro Finance banks took an interest in offering microfinance services to the bank such as The National Microfinance Bank, AKIBA Commercial Bank and Tanzania Postal Bank. as well as CRDB bank are also among the big supporters of microfinance. Also there are Non Governmental Organizations involving in microfinance services in Tanzania, including FINCA, PRIDE and SEDA (MOF, 2005).

Never the less there are cooperative financial institutions developed as alternative to other commercial banking systems which again are the source of loans to cooperative members such Kilimanjaro Cooperative Bank (KBC) and Kagera Farmers Cooperative Bank(KFCB). These two banks are still small and still struggling to meet demands of their clients. Moreover Savings and Credit Cooperative Societies (SACCOS) and Agricultural and Marketing Cooperative Societies (AMCOS) are grass root based financial institutions aimed to build the financial sustainability to cooperative members and community at large (MCM, 2001).

4.0 Situation Analysis at Kimara Ward
Kimara ward is one of the 27 wards which make Kinondoni Municipal Council in Dar es salaam City. The Ward has 5 Mitaa including Baruti, Kimara Baruti, Kimara Mtangini, Mavurunza and Kimara B.According to 2002 national census, Kimara was estimated to have 66,288 people and now it is expected to have more than 80,000 people with an increase of 4.1%. The ward covers the area of 42.05 square kilometers.

People living in this word are engaged in both formal and informal sector. There are small and medium enterprises such as garages, small household shops, genges pubs poultry, gardening, cattle keeping and brick factories. There are 7 Community Based Organization (see the table below) and eleven registered SACCOS. According to Opportunities and Obstacles to Development (O & OD) of Kinondoni Municipal, the income of the people of low class in Kimara ward is less than one US dollar per day.

5.0 Financial Services Available at Kimara Ward

Besides the information mentioned under historical back ground above, this ward has no any other financial institution apart from existing 4 SACCOS out of eleven. Majority of the community members complains that, it costs them too much in terms of time and fare to reach the financial services located in City centre or near by City center. Kimara ward seems to be a completely forgotten area. It is true that in urban areas there is an opportunity of getting investors, however for the case of Kimara it has been different in the sense that, although the ward is located in municipal Council still there is no big investment, no banks neither financial institutions. This has contributed to the limited of capital formation and income generating activities.

Existing financial service available in Kimara Ward is SACCO’s services. Out of eleven registered SACCOS only four are active with deceasing members. Very few members of community declared to benefit from SACCOS where by different needs have been fulfilled such as paying school fees, health services and poultry and cattle keeping.

6.0 Obstacles to Financial Services
Majority of the community fails to join SACCOS because they are over ambitious and they fail to have a clearly articulated business plans and objectives as a standard of performance measures hence fail to match between member’s expectations and cooperatives. Moreover lack of skills and knowledge (ignorance) on loan payment, unsustainable interest rate, and financial management. Hence results to small membership and small penetration to the community.

Level of shares in the existing SACCOS have weak capital base due to the size of share to be paid and partial share payment by majority members. Still the SACCOS have weak loan base for members due to heavy dependence in member’s deposits for issuance of loans.

Another factor that contributes to hinder community to access financial services is lack of collaterals. This is due to fact that, the area of Kimara Ward is not surveyed hence community have no license of houses which act as bond/collaterals during borrowing from banks and other financial institutions

Moreover there are high interest rates charged by the existing financial services located at city centre. Again, rate of interest charged does not match with the level of income generated by community (See the table below). Based on that table, most of small entrepreneurs fail to manage the borrowing from financial institutions. This system is not enabling good environment of borrowing particularly vulnerable in the community.

Institution
Interest rate charged
Period of loan
SACCOS
15%
Within a year
NMB
9%
Short term, medium and long term
CRDB
17%
Short term, medium and long term
PRIDE Tanzania
15%
Within a year
Postal Bank
18%
Within a year
President Funds
6%
Within a year

Never the less, community lack the general understanding of the potentials and other forms of microfinance and micro credit that are reliable and accessible to financial services.

7.0 Proposals to Ensure Reliable Access to Financial Services at Kimara Ward

Capacity building is a necessary area to speed up and effect the envisaged transformation at Kimara Ward. Priority areas for capacity building include. human resources development, strengthening training on book keeping, strategic planning, management and supervision of members projects as well as training leaders and management in skills and ethics of contracts. Moreover awareness creation and sensitization about SACCOS is very important and will contribute to increase members and attract external capital to strengthen loan base, also members will be able to distinguish fees and share deposits and savings.

Furthermore, we have seen that, income generated is very low that constrain saving capacity as well as capital generation. Due to that reason, there is a need to strengthen capital formation through sensitization to community on the necessary entrepreneurial skills. Income generating activities and other economic programs if well managed will enable communities access more loans and savings to generate income, improve their lives and reduce poverty.

Regarding the situation of Kimara community I propose that there is a need establish the microfinance institutional and banking services to Kimara Ward to to facilitate the access of financial services to the majority of the community. Regarding the population size (more than 80,000) in relation to the Local Government Act of 1980, the Kimara Ward is supposed to be a District. This is to emphasize that, financial institutions and banks are urgently needed to enable community access the financial services to meet community needs.


8. Conclusion
To conclude I can say that, although there has been some initiatives which have resulted in an increased number of banks and non-bank financial institutions and increased efficiency of the financial system, there has not been a corresponding increase in access of financial services by the rural population that make up the majority of the Tanzanians. Thus, a need to enhance accessibility of financial services to the rural poor in Tanzania is, therefore, a priority item on the agenda of the on-going financial sector reforms.




Reference:
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