Savings and Credit Schemes in East and Southern Africa

The Kinondoni District Credit Scheme in Tanzania is operated by the Presidential Trust Fund for Self Reliance(PTF)and promotes grassroots economic development through the providing of credit, training and consultancy to poor people trying to establish income generating projects.

The target group is unemployed women and youth either individually or in groups. Credit is given only for production-oriented projects such as farming, animal husbandry and fishing done on a small scale and the target group must access feasible projects in order to apply for loans.

Loans are two types; short term loans for a maximum of 6 months and medium term loans for twelve months. The medium term loan amounts range from seven to three and a half times a short term loan. Urban squatter based loanees are required to start with short term loans due to the temporary nature of their activities.

Loans carry 20% simple interest on the principal amount. No collateral is required for the loans but the concept of collateral exists and is known as ’social collateral through group participation’ where the group is held jointly accountable with each individual loanee for every loan disbursed.

Every loan is disbursed upon a written application. Every loan application must indicate a maximum of two feasible income generating activities that the applicant is prepared to undertake.

As the majority of loanees are illiterate, the applications are handled entirely by project staff. The applicant need only sign the forms. The loan money and pass books for monitoring the loans are disbursed during meetings of the group and the time allowed between the filling of the application and loan disbursement is 7 days.

Loans must be put to use within 7 days and will be monitored by group members. However project staff visit all projects and in cases of inappropriate use, remedial measures are taken.

Repayments are done weekly and a loanee who repays a loan in full is given a repayment certificate and becomes entitled to a ne loan. A member, after paying 50% of the loan in weekly installments can repay the balance in a lumsum.

On every loan 5% of the principal amount is deducted for the loanee’s Group Development Fund which is the property of the group and is non refundable when and if a member leaves the group for whatever reason. A member can obtain an interest free loan for consumption or investment from this Fund.The group is responsible and manages the Fund but all decisions taken must be conveyed to the project staff.

5% of the principal amount together with the annual interest must be paid into the Emergency Fund and this amount can be withdrawn by the loanee after repaying in full the loan taken.

Another 5% of the principal amount together with the annual interest must be saved by every loanee. A member can withdraw up to 50% of this saving after repaying a previously taken loan in full. A full withdrawal can be done only if the member is leaving the credit scheme.