microfinance: creating sustainable livelihoods for poor women? lemara, arusha

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This report examines the provision of microfinance to poor women in Lemara and evaluates the impact of these services on their livelihoods. This process has informed a set of recommendations that will, when implemented, make microfinance more accessible, useful, better aligned with womens preferences and more able to improve their livelihoods.

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MICROFINANCECREATING SUSTAINABLE LIVELIHOODS FOR POOR WOMEN?

A STUDY OF MICROFINANCE IN LEMARA, ARUSHA

JUNE 2009

Report by: Rachel Aveyard Kundhavi Balachandran Rachael Freeth Magda Ortiz Kendra Ott

In part completion for the MSc in Social Development Practice at DPU,

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TABLE OF CONTENTS

ACKNOWLEDGEMENTS............................................................................................................ 4 ACRONYMS ................................................................................................................................ 5 LIST OF FIGURES ...................................................................................................................... 6 EXECUTIVE SUMMARY ............................................................................................................. 7 1.0 1.1 1.2 1.3 2.0. 2.1 2.2 2.3 2.4 3.0 3.1 3.2 INTRODUCTION ............................................................................................................. 8 Context and Background ............................................................................................. 8 Purpose and Objectives............................................................................................... 9 Definitions .................................................................................................................. 10 METHODOLOGY .......................................................................................................... 11 Secondary Research Prior to Departure ................................................................ 11 Analytical Approach The Sustainable Livelihoods Framework............................... 11 Primary Research Lemara Ward ............................................................................ 12 Constraints and Limitations of research .................................................................... 12 FINDINGS AND ANALYSIS .......................................................................................... 14 Poor women of Lemara ............................................................................................. 14 Access and Purpose.................................................................................................. 15 Service availability in Lemara ............................................................................ 15 Use and purpose of microfinance in Lemara..................................................... 15 Barriers to accessing microfinance.................................................................... 16

3.2.1 3.2.2 3.2.3 3.3 3.4

Womens identified preferences ................................................................................ 17 Impact on livelihoods ................................................................................................. 18 Livelihood Assets ............................................................................................... 20 Relationship to wider Structures and Processes ............................................... 21 Livelihood Strategies ......................................................................................... 22 Livelihood Outcomes ......................................................................................... 22

3.4.1 3.4.2 3.4.4 3.4.5 4.0 4.1

RECOMMENDATIONS ................................................................................................. 23 Create a comprehensive, objective and accessible microfinance data source to

facilitate knowledge ............................................................................................................... 24 4.2 4.3 4.4 4.5 4.6 5.0 Socially Sensitive Microcredit Conditions .................................................................. 24 Comprehensive microfinance services should include savings and insurance......... 25 Stronger focus on training and business planning support ....................................... 26 Socially Sensitive and Expanded Monitoring and Evaluation.................................... 26 Recommendation Climate ......................................................................................... 26 BIBLIOGRAPHY ............................................................................................................ 28

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6.0

APPENDICES................................................................................................................ 29

Appendix 1: Terms of reference............................................................................................ 29 Appendix 2: Analytical Approach: Sustainable livelihoods framework.................................. 34 Appendix 3a: Stakeholder Analysis....................................................................................... 35 Appendix 3b: Prioritising Stakeholders ................................................................................. 39 Appendix 4: List of research activities................................................................................... 40 Appendix 5: Transect Walk ................................................................................................... 43 Appendix 6a: Guide for interviews - Primary Stakeholders................................................... 46 Appendix 6b: Guide for interviews - Secondary Stakeholders.............................................. 47 Appendix 7: List of interviewees............................................................................................ 48 Appendix 8: Interview protocols ............................................................................................ 51 Appendix 9: Focus group protocols....................................................................................... 97 Appendic 10: Microfinance models ..................................................................................... 101 Appendic 11: Strengths and weaknesses of recommendations .103

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ACKNOWLEDGEMENTSOur group would like to acknowledge, in no particular order, the following individuals and organizations for their contribution to our research project:

Our Tanzanian counterparts at CDTI Tengeru, Mr. Mohandi, Harold and Primrose, for their time, energy, enthusiasm and input; The staff members of the Municipal government in Arusha for their time, information and insight; The staff members of various microfinance institutions around Arusha for opening their offices to our incessant requests for information and for taking the time to help answer our questions;

Patrice North, our Course Director, for her planning, coordination, information sharing and guidance throughout our project both in London and in Arusha.

Finally, we would like to express our sincere gratitude to all of the people in Lemara ward who opened their homes, businesses and schools to us while we were there. We were warmly welcomed and trusted with important personal information for the betterment of our project. It is our sincere hope that this report reflects their words and interests, and is taken into consideration by those able to positively influence microfinance practices in Lemara on their behalf.

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ACRONYMSBOT Bank of Tanzania BRAC Bangladesh Rural Advancement Committee CDTI Community Development Training Institute CGAP Consultative Group to Assist the Poor DPU Development Planning Unit MF Microfinance MFI Microfinance institutions NGO Non Governmental Organisation ROT Republic of Tanzania SACCOS Service and Credit Cooperatives SDP Social Development Practice SEDA Small Enterprise Development Agency SLF Sustainable Livelihoods Framework TOR Terms of Reference TPB Tanzania Postal Bank UCL University College London UN United Nations VICOBA Village Community Bank WDF Women Development Fund WIA Women in Action

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LIST OF FIGURESFigure 1: Continuum of microfinance sources by formality Figure 2: Womens preferred model elements against microfinance institutions providing them. Figure 3: The impacts of microfinance on the livelihoods of poor women in Lemara Figure 4: Building sustainable microfinance over time Figure 5: Recommendations within a wider climate

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EXECUTIVE SUMMARYThis report examines the provision of microfinance to poor women in Lemara and evaluates the impact of these services on their livelihoods. This process has informed a set of recommendations that will, when implemented, make microfinance more accessible, useful, better aligned with womens preferences and more able to improve their livelihoods.

Despite the large number of providers in Lemara, our research identifies many remaining barriers for women trying to access microfinance services. A key barrier is a lack of accurate knowledge about the providers and their conditions. This is important because we found many women in Lemara who are currently accessing microfinance through institutions that do not satisfy their basic preferences. Women who were using microfinance services were predominantly accessing microcredit rather than savings or insurance. Indeed, most women we talked to in Lemara assimilated microfinance with microcredit, which supports our finding that there is a lack of accurate knowledge regarding financial offerings in the ward.

Another key finding is that microfinance is often used for household and social expenditure, in addition to business creation and expansion. Both uses of microfinance can lead to more sustainable livelihood strategies either through smoothing household consumption by spreading large or unexpected costs over time, or through the running of a profitable business. At its core, microfinance aims to build individual assets, which can in turn inform livelihood strategies that are less vulnerable to risk

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