Comparative analysis of the solidarity delivery model as used by the microfinancing institutions in Tanzania: the case of Morogoro Municipality and Mvomero district

Currently in Tanzania, a good number of Micro-Financing institutions (MFIs) are using the principles of the solidarity group-lending to deliver their loans. It involves the organization of groups into larger ones (syndicates) that are complexly managed. The groups’ set-up forms the collateral for the loans of the peers. Weekly meetings are usually conducted for screening and monitoring the peers, and loan repayment purposes; loans are usually repaid weekly for specified durations (in terms of weeks). This study was done to compare solidarity delivery model used by PRIDE, FINCA and PTF in Morogoro municipality and Mvomero district. It aimed to compare the procedures used by the MFIs in order to obtain a loan under the scheme, the screening and monitoring activities performed by members in the group, problems facing the customers in those scheme and the customers’ institutional preferences. Questionnaires and interviews were administered to loaners and officials from the three institutions. It was found that solidarity schemes of all the three MFIs were significantly different from each other at a = 0.05 in terms of beginning loan size, interest rate, repayment durations, meeting durations and customers transport costs to and from the meetings. There was also a difference in the type of borrowers the IFIs were dealing with in terms of age distribution, sex, level of education, customers’ household responsibilities and customers’ interest rate knowledge. It was concluded that solidarity group delivery model varies across the institutions depending on MFI principles and practices and customers’ specific social settings. From the findings it is suggested that enough information should be given to borrowers especially on the effective interest rate and the overall cost of borrowing is recommended in order to find out if it is worth borrowing under the circumstances.