The available Financial Services and concrete proposals on what should be done to ensure community members accesses reliable financial services: A

1.0 Introduction:
The Government has been implementing financial sector reforms in order to create an effective and efficient financial system. Although the reforms have resulted in an increased number of banks and non-bank financial institutions and increased efficiency of the financial system, there has not been a corresponding increase in access of financial services by the most of population especially the poor and the rural people that make up 80% of population which the is majority of the Tanzanians. There is a need to enhance accessibility of financial services to the poor and the rural population in Tanzania so that the financial institution can serve them. It is the intention of this paper to examine the availability of Financial Services and give concrete proposals on what should be done to ensure community members accesses reliable financial services: A case of Kinondoni Municipal in Tanzania is taken for the discussion.
1.1 Background:
Legislation passed in August 1991 led to a fundamental restructuring of the Financial Institution in Tanzania. Prior to the legislation, the government exercised a complete monopoly over the banking sector. Under the old system, the Bank of Tanzania acted as the central bank, while the government-run National Bank of Commerce (NBC) accounted for over 75 percent of the country's financial transactions. Although the Bank of Tanzania has retained its functions, which include the administration of the exchange control, the NBC has been subdivided with the creation of a separate National Micro-finance Bank (NMB). Both the NBC and the NMB have been privatized. Since the financial institution legislation was passed, several private Financial Institution and banks have registered with the Bank of Tanzania. In addition to some domestic financial institutions, numerous foreign banks have established operations, including Citibank of New York, Stanbic Bank of South Africa, Standard Charter Bank , EuroAfrican Bank, Akiba Commercial Bank, Exim Bank
1.2 Definition of Financial Services:
Bank of Tanzania define financial institution as an institution licensed by Bank of Tanzania and authorized to engage in banking business not involving the receipt of money on current account subject to withdrawal by cheque.
Financial services is the products and services offered by institutions like banks of various kinds for the facilitation of various financial transactions and other related activities in the world of finance like loans, insurance, credit cards, investment opportunities and money management as well as providing information on the stock market and other issues like market trends
A bank is an institution authorized to receive money on current account subject to withdrawal by cheque. A bank is a financial institution where people can deposit money. Banks provide a system for easily transferring money from one person or business to another. Using banks and the many services they offer saves an incredible amount of time, and ensures that funds "pass hands" in a legal and structured manner. There are also other types of financial institutions that operate just like banks.
Microfinance
According to wikipedia Dictionary, microfinance refers to the provision of financial services to low-income clients, including the self-employed. The term also refers to the practice of sustainably delivering those services. More broadly, it refers to a movement that envisions “a world in which as many poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers. Microfinance institutions exist in many forms — credit unions, commercial banks and, most often, non-governmental organizations (NGOs). Many microfinance institutions (MFIs) use social collateral in the form of peer groups to ensure loan repayment. Borrowers take out loans in groups of five to eight individuals. If a borrower defaults on her loan, the entire group typically is penalized and sometimes barred altogether from taking further loans
2.0 Kinondoni Community Profile:
Kinondoni Municipal is within the city of Dar Es Salaam. The Municipality is bordered by the Indian Ocean to the North East, Ilala Municipal to the South, Bagamoyo District to the North, Kibaha District to the West and Kisarawe District to the South West. The municipality is well linked by roads and other communication networks to the rest of the city and other parts of the country. Major road links are:- Morogoro Road, Bagamoyo Road, Kawawa Road, Mandela Road and, Sam Nujoma Road. Kinondoni Municipal has four (4) divisions namely: Magomeni, Kinondoni, Kibamba and Kawe. These divisions are then divided into twenty seven (27) wards, which in turn are sub divided into sub wards commonly known as Mtaa (singular) or Mitaa (plural). There are 127 Mitaa. According to the 2002 Census, the Kinondoni Municipality has a population of 1,088,867 people with a growth rate of 4.1%. The rapid population increase is influenced by both natural causes and immigration (birth rates and net immigration rates respectively). The Municipality has an area of 531KM2 and the population density is estimated at 2051 persons per square kilometer.
2.1 Employment and Economic Activities
It is estimated that 360,000 residents of Kinondoni Municipality are employed in both private and public sectors. Out of these, 95% are employed in the private sector while the rest 5% are employed in the public sector. A working force of 200,000 people is self-employed. The majority of the residents are involved in petty business, fisheries, livestock keeping and agriculture including horticulture. Only 3% of the working force is engaged in subsistence agriculture in the peri-urban areas. There are no big farms but small plots ranging from 2.5 to 6 acres. Others make small gardens around their houses in which various vegetables and root crops like cassava and sweet potatoes are grown for family food and the surplus for generating income.
2.2 Financial Services in Kinondoni:
The major financial services available in the Municipality includes National Bank of Commerce located in Magomeni, Kawe, Mbezi beach and recently opened in Mikocheni popularly Victoria bus stop and Mlimani City and one agency at University of Dar Es salaam. Others includes National Micro Finance Bank (NMB), CRDB at Mlimani City, Kijitonyama Millennium Towers and in Mbezi. Kinondoni Municipal council operates some credit facilities targeted toi women and Youth. These includes Kinondoni women and Youth Development Funds ( KWYDF), Women Development Funds ( WDF) and Village Community Bank (VICOBA) through Youth Employment Network for Urban Renewal ( K- YEN-UR) In addition to that there is FINCA nad PRIDE Africa with their offices at Magomeni and Savings and Credit Cooperative Organizations’ (SACCOS) which are being established from the level of mtaa to ward level
In summary is as in figure 1 below:

Figure 1; Banks and financial institution in Kinondoni Municipal
Na Institution Location Ward
1 NBC Ubungo Ubungo
2 NBC Mlimani Ubungo
3 NBC Mbezi Beach Kawe
4 NBC Kawe Kawe
5 NMB Magomeni Mzimuni
6 NMB Mwenge Kijitonyama
7 Postal Bank Manzese Manzese
8 Postal Bank Millenium Tower Mikocheni
9 CRDB Millenium Tower Mikocheni
10 CRDB Mlimani Ubungo
11 Akiba Commercial Bank Makumbusho Kijitonyama
12 Stanbic Bank Mikocheni Mikocheni
13 Dar es Salaam City Bank Travertine Mzimuni

2;Other financial institutions
Na Institution Location Ward
1 FINCA Magomeni Mzimuni
2 PRIDE Magomeni Magomeni
SACCOS
122 (active) 27 ( dormant) 149
(Source Kinondoni profile 2007)


3.0 Why community need financial institution services:
Community need to access financial institution for various reasons these includes keeping or depositing money; banks provide a system for easily transferring money from one person or business to another. While on the other hand financial institutions provide service for loans and credit facilities for communities to invest in business, building, farming, education for their children etc.
4.0 Shortcomings and constraints on accessibility of the financial Institution:
Although the reforms that took place in August 1991 on Financial Institution in Tanzania have resulted in an increased number of banks and non-bank financial institutions and increased efficiency of the financial system, there has not been a corresponding increase in access of financial services by the poor population that make up the majority of the population in Tanzania as well as in Kinondoni. Some of the shortcoming/ weakness includes:-
Firstly, problems in accessing loans and credits due to stringent requirements of lending institutions including collateral requirements and high interest rates as well as corrupt officials. The traditional banking system requires that a borrower have collateral to receive a loan. The majority of Kinondoni Municipal population (95%) is employed in the private sector and non formal sector that are poorer people who have no such collateral. Like land property title deeds. Most of the community members in Kinondoni leave in un surveyed area i.e. Manzese, Tandale, Mwananyamala, Kimara etc. that have no title deed such that community members can use as collateral for loan access. Furthermore, traditional banks are not generally interested in issuing small loans as the interest benefits do not exceed the transaction costs that most of the poor would have applied and be able to repay.
Secondly, With the Tanzanian banking sector undergoing significant reform, a consequence has been that almost all financial Institutions have stopped providing long-term loans and equity finance in favors of short-term lending. This has led to a shortage of funds available to small- and medium-sized enterprises that employ the majority of the community members (SMEs).
Thirdly, there is low level of business skills amongst the members that can translate to markets and lack of premises, which are always demolished by city council authorities in city cleaning operations and other resources required for growth. The result of such situation has made the members failing to extensively benefit through the loans they get and investment they launch fail for their economic growth.
Fourthly, it is clear, that poor households are not familiar with formal credits, which deliver funds through formal financial institutions, such as commercial banks. Not only that the majority of community members lack knowledge of what savings and credit co-operative societies (SACCOS) are and what the societies can do to make uses of SACCOS and do not know the benefit they can get from the SACCOS.
Fifthly, operationally, most of the SACCOS are having problem of charging high interest rate to about 2% per month, equals to 24% per year. This rate is considerably high to most of the poor community members to raise through their petty business and be able to repay the loans.
Sixthly, most SACCOS who can have served the poor community members also lack qualified co-operative officers, auditors, inspectors and consultants as a result many SACCOS in Kinondoni encountered operational problems such that most of them are dormant .It is reported that more than 27 SACCOS are dormant in Kinondoni ( Kinindoni profile 2007)
Seventhly, poor financial discipline and credit repayment culture among of the community members. Instead of using the loan in the activities aimed for the loan they utilize the loan to meet other needs that were not the part of the loan purpose. These includes buying commodities like TV, jewel especially for women etc as a result they fail to repay the loan.
5.0 Recommendation:
Firstly, the Government need to facilitate the appropriate design of linkage options, improve pro-poor financial policies and develop sustainable financial services tailored for the poor sector in the country. The Government to focus and support the formation of alternative financial intermediaries from the traditional banks such as Savings and Credit Cooperative Organizations’ (SACCOs). SACCOs are the most prevalent for poor and rural financial intermediary and a revised legislation in 1991 that re-established the voluntary nature of co-operative association, thus enabling poor and the rural communities to set up their own SACCOs. Such financial intermediaries are able to circumvent the large operating costs that fully fledged banks face operating in poor and rural areas.
Secondly, Government should implement the SME loan guarantee programs proposed in the SME Development Policy: The Government should set up government-backed pro-poor credit guarantee programs for individuals growing beyond the micro level; A loan guarantee fund would serve to reduce the risk to banks in cases of limited collateral, often facing informal entrepreneurs
Thirdly the government should undertake dialogue with lending institutions on informal entrepreneurs’ access to credit with a view to making more credit available to this part of the MSE market and improving the infrastructure for entrepreneurs. In addition to that government need to negotiate with banks to contribute a certain percentage of their loan funds for small business financing in the local community and formalization of property rights to allow more assets of the poor and rural population to be recognized as collateral, and formalize the informal business e.g. MKURABITA).
Fourthly, strengthening the overall legal and regulatory framework with a view to increasing the financial discipline and improving the credit repayment culture among the community members hence sustain the financial Institution especially the SACCOS and encourage community members especially the poor and women who are the majority in any economic activity at micro- level to become members of SACCOS wherever these financial institutions exist so that they are empowered to become better entrepreneurs.
Fifthly Financial Institutions (FINCA, PRIDE etc) to raise ceilings on micro-finance lending limits. The low lending limits currently in place tend to undercapitalize Micro Small Enterprises (MSEs) at the startup level, thus fostering low or no growth-potential venture creation. At present, most key microfinance institution serving the poor population women being the majority when requiring loans in excess of Tshs 5 million are referred to financial institutions (Commercial banks) having lending conditions, which in most cases cannot be met by poor/ women borrowers.
Sixthly, provide pro-poor and gender sensitivity training to credit officers serving the poor and women community members. Poor and women are different – they don’t think as “big” as their rich class counterparts and often are more cautious. Credit officers need to understand how to work with these clients, identify client needs, and coach the community members in the lending approach process. Pro poor and Gender mainstreaming workshops will help them recognize any gender bias they may have in their policies, procedures, perceptions or approaches.
Seventhly, improve the level of information among poor and women entrepreneurs regarding financing programmes and services. Produce a Guide to Financing for community members Entrepreneurs, designed to impart basic information to community-owned Micro Small Enterprises on sources of financing, terms and conditions, preparing financing proposals, and negotiating for credit. The aim is not only on lending institutions; community members also have to be oriented in the art of dealing with banks and packaging their loan requests for financing. They need to learn how to approach and negotiate with financial institutions, know the lender’s information requirements and how to prepare financing project proposals. The guide should be distributed widely throughout the community members, in both English and Swahili, and supported by information sessions, perhaps delivered in partnership with community member associations. The purpose is to get the message out to community-owned MSEs in order to improve their ability to source financing
5.0 Conclusion:
Financial Institutions are key for the economic growth for the community members. Therefore there is a need for the government to support the Micro-financial Institutions and SACCOS outreach to poor who are the majority of the population in Tanzania. Proper policy and training concerning access to financial institutions and micro entrepreneurship hence enhance accessibility of financial services to the poor and be a priority item on the agenda of the on-going financial sector reforms.
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