Micro-finance scheme for women

The Loan Scheme in Changarawe is based on the idea pioneered by and for women in Bangladesh. It is a ‘soft’ or ‘micro’ loan scheme in which very small amounts of money are lent to women at a low interest rate to enable them to start their own small businesses or expand an existing small business. In Changarawe, we lend in this way to women and youth to promote income generation and encourage increased participation in the local economy.

Three times a year, (in January, May, and September), villagers in Changarawe are able to apply for a loan. The Loan Review Committee comprised of staff members and a representative from the village government reviews applications, which include details of business plans and guarantors. Approximately 50 loan recipients are selected each time, and they attend a seminar to teach them about business development, financial management, bookkeeping, and the terms of our lending system.

As of January 2009, we began to offer three types of loans. The first is the Start Up Loan of 50,000/= Tanzanian Shillings, available to first-time borrowers. Villagers pay this back over three months with a 5% interest rate. The second loan is a Business Development Loan in the amount of 100,000/= shillings, repayable over six months with a 10% interest rate. This loan is only available to those that have successfully utilized and repaid a Start Up Loan.

On rare occasions when villagers can demonstrate dramatic business expansion and job creation and have already successfully borrowed twice, they may be eligible for our third type of loan, an Expanded Business Development Loan in the amount of 200,000/= shillings, repayable over nine months with a 10% interest rate. (A typical interest rate on a small loan from a bank in Tanzania is 25-30%) The interest paid on all of our loans goes into the Zawadi School fund towards the administration of the school.

In May 2009, borrowers were also given the option to participate in our Savings program. This new element allows loan recipients to deposit a small sum, (about 3,000/= shillings), to our Treasurer with their monthly payments. Upon submission of their final payment, the ‘saved’ money is returned to borrowers. In a village where most are unable to access more formal banking and financial services, this option provides villagers with a safe and secure method of saving that will allow them to plan for the future. (In our most recent training, only four of our 54 loan recipients had bank accounts. This is fairly representative of the village population.)

Note: At time of writing, 1 UK Pound = 2,062.75 Tanzania Shillings