Our microfinance programme began in 2003 and lends small amounts of money at a very low interest rate to enable borrowers to start or expand their own businesses. We lend in this way to residents of Changarawe village to promote income generation and to encourage increased participation in the local economy.
For various reasons, including illiteracy, many of these borrowers are excluded from formal banking services. With this programme we provide the most isolated and vulnerable members of the community with an important service, which has the potential to transform their lives.
Once a year, villagers in Changarawe can 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 75 loan recipients are selected each time - they then attend a seminar to learn about business development, financial management, bookkeeping and the terms of our lending system.
Loans start at TSh50,000 (approx. £20) for first-time borrowers and can rise to TSh300,000 (approx. £70) for established borrowers. Loans are generally paid back over six months with an interest rate of 10%. A typical interest rate on a small loan from a bank in Tanzania is 25-30%.
The interest paid on all our loans helps goes towards the CDO administration fund.