The majority of the Tanzania’s poor live in rural areas with little access to financial services. Setting up village savings and lending associations has become an increasingly SAT intervention aimed at improving rural financial services. We find evidence of positive and significant intention-to-treat effects on several outcomes: households experienced improved food security and income.
The process of saving and lending as well as loans repayments is done visibly whereby money is handled to the appointed group treasurers during the meeting, no any transaction will be done out of the meeting time. Transparency is the fundamental principle in “Saving and lending”. For this reason, SAT (Sustainable Agriculture Tanzania) in its holistic approach, has already integrated the so-called “SAT Saving and Lending” model in more than 110 farmer groups.
Maendeleo is a farmer group formed on 12th August 2016 at Mikese Village in Morogoro District with 31 members, of which 11 are Male and 20 are female. Every week, they meet up at the demonstration poultry unity they have set up with SAT. Members are led by their leaders who have been elected democratically after being trained on group dynamics and leadership skills session who are; chairperson, secretary (book keeper), treasurer, key holders, money counters.
After saving, the money is provided to members as the loans. The remaining is kept in a large metal box, which is secured with three padlocks. “Social funds”: Every week, the 31 members pay TZS 500 into the social funds. This money is saved for eventualities incase but not limited to when a group member falls sick and requires medical assistance and other emergencies. Solidarity within the group is fundamental for this fund and helps to ensure the functioning and social cohesion of the group.
The “loan funds”; this is the members’ savings through buying shares, for Maendeleo, in the first circle; the member bought between one and five shares which cost TZS 1000 per each share, and in the second circle they increased the value of share to TZS 2000 per each share and currently they are in the third circle with TZS 3000 per each share. The money is provided to the members as loans for three months period before repayment with a small interest rate. Currently, cumulative savings for Maendeleo group is TZS 21,312,300 which provided as loans and all 31 members benefited while the group managed to generate about TZS 5,000,000 as the profit from interests.
This profit is distributed proportionally to the number of shares that every member purchased. Owning 5% of the total amount of shares leads to getting 5% of the total amount of saved money inclusive interests. This enables the group members once again to make new investments to improve their livelihoods.
Members have invested in income generating activities such as retail shops, food vending, agriculture and poultry keeping, they have also increased productivity on their fields and there is an increase in household income and these are just some of the many benefits that the small – scale farmers get out of this system. It also gives them independence and what better feeling than improving your livelihood through your own efforts, supported only by the community that you are working with and have trust in!
Commenting on how the group has helped him individually, Costa Regita (group member) says, “I took a loan of TZS 300,000 last month, I spent that money to buy 2 acres of land, which I soon expect to start preparing for cashew farming. I am confident to repay the loan because I have a small business which I also started after securing loan from our group”.