When you see a SELFINA entrepreneur whose business title is ‘restaurant’ or ‘café’, you may have to adjust your mental image of what that is. A local restaurant or café in Tanzania usually consists of a rough wooden table and some long, wooden benches, with the sky as a ceiling. Such places don’t even appear in the Lonely Planet’s budget guide, but if you’re looking for a cheap and tasty meal, and someone to have a chat with, this is the place to be. The food is all local; rice, ugali (a hot sticky dough, made from maize flour), plantain (a cooked savoury banana), all served with beans, vegetables, meat, and a variety of yummy sauces.
Josephiner, along with three employees, works long hours to earn monthly profits of US$ 170 from her business. This is her third loan with SELFINA. In the past, she has borrowed and successfully repaid loans of US$ 225 and US$ 425 each. This time, she is requesting a larger loan of US$ 625 to purchase additional cooking equipment and cooking supplies on a larger scale. In the future, Josephiner hopes to do well enough to open another business.
Josephiner is a perfect example of why microfinance works and why the large majority of clients repay their loans. A lot of people who hear about microfinance (or Kiva.org) for the first time, ask anxiously, “But how do you make sure people pay back? Won’t they just take the money?” The implication is that the clientele who access microfinance (usually 'the poor’) are less trustworthy, efficient or educated than ‘ordinary’ people.
Whether or not this is true is somewhat irrelevant, for a number of reasons. Firstly, most MFIs have due diligence processes in place to assess client risk, as well as measures such as collateral arrangements and group lending (where a defaulted loan is borne by the group as a whole) to address this risk. More important than any of these deterrents, however, is an incentive. The incentive clients have to start a business, build a business, and repay their loan so that they can get another and another and another…The incentive is having on-going access to financial services from which they had previously been excluded.
SELFINA has taken a lead role as a pioneer of micro-credit in Tanzania through Micro-Leasing. The organization is engaged in the economic empowerment of women in Tanzania through the provision of a leasing and leaseback microfinance facility as a practical way to achieve the economic and social emancipation of women.
Customs and traditions in Tanzania normally make it difficult for women to own land and assets, thus they are termed non-creditworthy by financial institutions as they lack tangible collateral assets. This leads to poor financial support hence the poor access to basic needs and services for women with low incomes.
When a client needs working capital to buy a specific item, SELFINA buys the equipment for said client and extends a loan to her. The same equipment is then leased back to the client so they can use it while in process of paying back their loan – a process called a sale and leaseback arrangement. Once the loan has been repaid, SELFINA transfers the ownership of the equipment to the client.
The advantage of microleasing over traditional microfinance loans is that it allows clients to use the equipment as collateral for future loans with SELFINA, thus enabling them to borrow larger sums in the future.
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Success!! The loan was 100% repaid