Considering the enabling goal of microfinance services in alleviating poverty in Tanzania, what are the poor people doing to make it work for them? The case of Ilala municipality, Dar es Salaam Region

Abstract

Tanzania is one of the poorest countries which have implemented microfinance services as one of the most effective methods of alleviating poverty. As a result several microfinance institutions have been established and people are involving themselves in these schemes to make use of this enabling goal. So, this study had a general objective of exploring people’s actions as they make use of the available microfinance services so as to alleviate poverty. The specific objectives were to explore how people form and remain in their groups; to examine how people organize themselves to access and repay the loans, and to identify challenges encountered by loan takers in the process of accessing and repaying loans. Data collection was through focus group discussions, which involved four groups with the total number of 25 respondents. The findings were analyzed in the framework of agency theory as a determinant of people’s actions in relation to the situation at hand. The findings showed information sharing, geographical and functional consideration and tracing an individual’s background were primary in creating groups. In making groups work and stay together, they coordinate repayment activities, create group norms and peer pressure, create and strengthen social capital and educate each other. In dealing with their challenges, they discipline non-conforming members, confiscate belongings of defaulters, and repay for the defaulters. On women borrowers, their participation in group loans was observed to be influenced by the nature of lending schemes, collateral demands, modernization, and cultural gender roles. As a result they have poor or no control of the loans they receive, while others have made a remarkable change in their lives. The study was concluded by summarizing the findings and suggesting for further research. These were conducting studies in different contexts to enrich the body of knowledge on the subject matter, also in relation to time changes. Lastly, it is suggested to study upon the challenges brought by group lending mechanisms, so as to make it friendlier to the loan takers.