Policy Implications of Credit Schemes for the Poor in Tanzania

A variety of efforts have been embarked upon by the government of Tanzania, Non-Governmental Organizations and individuals to combat poverty which is a plight to many Tanzanians. These actors have devised programmes and strategies to ensure that this goal is achieved. Credit schemes that can provide loans to poor borrowers are viewed as one of the most vital means to tackle the incidence of poverty' in Tanzania. However, there are some allegations that credit schemes have not been instrumental in helping the poor to get loans and consequently raise their incomes. Thus, the purpose of this study was to investigate the policies, conditions and operational mechanisms of credit schemes in Tanzania and assess their effectiveness in poverty' alleviation. Likewise, the study was interested to see whether the policy of poverty alleviation has helped to regulate the operations and conditions of the schemes with regard to poor borrowers. The study applied three methods of data collection. These were questionnaire, interviews and documentary review. The basic issues discussed in literature review include: The general overview of poverty, poverty alleviation, the issue of poverty in Tanzania, policies and strategies of poverty alleviation in Tanzania and the rationale of credit in poverty alleviation. Three credit schemes: PRIDE Tanzania, Poverty Africa and WYDF were studied. The focus was on the objectives, lending policies, conditions of borrowing and extension of their services. Furthermore, the study examines the impact of credit schemes in poverty alleviation. Various views were collected from interviewees on the access to credit and effectiveness of loans received in raising incomes and living standards of borrowers. It was revealed that the impact of credit schemes of poverty alleviation amongst the poor is still low. Lastly, the study points out some emerging issues, policy implications and recommendations. The basic recommendation made is that the government should collaborate with credit schemes in designing new rules of lending and borrowing for the purpose of helping the poor. The government should adopt the strategy whereby it may pay some costs or act as a guarantee to borrowers who do not have collaterals. In addition, there is a need to review some of the collaterals that are imposed by credit schemes. The study suggests that poor borrowers should be exempted from paying property collaterals.