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INTEGRATING FINANCIAL SERVICES INTO POVERTY REDUCTION STRATEGIES IN TANZANIA. By E .P. Mkwawa CEO Dar es Salaam Community Bank Limited. PRESENTATION OUTLINE. Introduction An overview of poverty reduction strategies in Tanzania Policy and legal framework for financial services
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E .P. Mkwawa
Dar es Salaam Community Bank Limited
-Tanzania remains one of the poorest countries in the World.
-GDP per capita is US$ 267 which is far less than the average for Sub-Saharan Africa and East Asia of US$ 500 and US$ 970 respectively.
Per capita income (2004): $300
- Strengthening the policy environment for the financial sector to grow; and be able to extend its services to more people
-SACCOS offers the most wide spread source of financial services for low income people in both rural and urban areas
-Saving and Credit Associations ‘SACAs’
Informal financial system continue to dominate the financial sector particularly among the poor. This includes
- Developed money transfer product for their clients to address the problem of network and loss of money through highway robberies.
- For microfinance to grow the country needs highly qualified staff with articulated skills and experience in microfinance best practices.
- Tanzania has no institution training in various fields of microfinance.
- Banks and MFIs resort to training abroad which is costly and un-sustainable strategy for developing an industry so important for addressing poverty and economic growth in the country.
- Short and long term HR development strategy is needed. Govt initiatives and intervention is needed in this respect.
- Commercial contracts to a minimum value of Tshs 30 million admissible at newly established commercial court in Tanzania.
- MFIs do not benefit because their loans are far below the stipulated minimum value of contract.
- Commercial court or legal mechanism need to be established to handle contracts and disputes between microfinance clients and providers.
- the regulation requires banks to lend not more than 5% of core capital to unsecured loans to single brower including SACCOS, SACAS, NGOs MFIs.
- this could be a limiting factor for greater outreach as linkage between banks with SACCOS, SACAS or NGOs MFIs which can reach the poor in a cost effective manner is restricted.
- the 20% limit on investment on fixed assets is a challenge for small banks to be properly and adequately quipped for efficient banking operations.
- The current Tax regime does not permit provision for possible loan loss to be an allowable expense
- the BOT prudential requirements procedures requires to comply with the asset classification and provisioning of delinquent loans.
- the inconsistent between tax treatment poses a great constrains to financial institutions