Morogoro. Microfinance Institutions (MFIs) have been urged to extend their services to rural areas in order to help people in those areas fully engage in the war against poverty.The advice was given recently by a board member of the Tanzania Association of Microfinance Institutions (Tamfi), Mr Altemius Millinga, at a two-day seminar for leaders from various MFIs.

It follows research findings showing that only three per cent of rural dwellers access finance services.
Mr Millinga said for Tanzania to realise national goals in rural development, including agriculture, it was important to reach the big rural population in providing financial services.

“It is very important for MFIs to find ways of reaching the rural population. At Tamfi we are looking at how we can build the capacity of MFIs and spread micro finance services to people in rural areas,” he explained.

He said available research shows that only three per cent of the people in rural areas have access to financial services.The facilitator of the workshop, Mr Peter Mukwana of SkyMark Consulting Ltd based in Kampala, told participants that one of the most important elements of agri-finance was the granting of loans and provision of savings mechanism for agricultural production.

He said despite the agricultural sector employing about 80 per cent of the active labour force in Tanzania and its relative importance, it has never reached its economic potential.

One of the reasons for the failure has been the model used to finance agriculture whereby agri-loans had inappropriately structured variations or were a replica of ordinary business loans.

He said MFIs should offer agri-loan products subdivided into four categories- specific enterprise agricultural loans, agricultural input loans, general agriculture loans and agricultural asset loans. According to Mr Mukwana, farmers have to be organised in such a way as to attract agri-finance. “The producers, most of whom get loans through groups, are choked with uneconomic loans as they lack the relevant support to make informed choices,” he said.

To change the trend, MFIs must develop relevant agri-finance products that will steer the agriculture sector to new heights, he said.The Tamfi executive secretary, Ms Winnie Terry, disclosed that Tanzania has over 300 MFIs, but most provide services to people in urban centres.

SOURCE: The Citizen