The Transparent Pricing Initiative in Tanzania has published standardized pricing data from 15 microfinance providers, representing an estimated 70% of Tanzania’s microloan borrowers. Launched in 2011 the Initiative is delivered in partnership with Planet Rating and TAMFI (the Tanzanian Association of Microfinance Institutions), and is funded by the MasterCard Foundation. Microfinance in Tanzania
Microfinance in Tanzania originated in the early 1990s when various NGOs and SACCOs started to provide microloan services to poor borrowers, mainly urban women. The sector has grown significantly since early 2000 as numerous banks and financial institutions provided increasing funding either directly to beneficiaries or through intermediary institutions. Despite this progress, it is estimated that microfinance service providers have a combined outreach of approximately 500,000 clients, which is only an estimated 5% of the total demand. The main microfinance service providers in Tanzania consist of downscaling commercial banks, rural and community banks, non-bank financial institutions, and SACCOs. Combined these institutions disburse around TZS 275 billion in gross loan portfolio. Truth-in-Lending Legislation
The Bank of Tanzania is responsible for regulating all microfinance service providers in the country except for NGOs, which are overseen by the Ministry of Finance. A number of policies and directives have been issued aiming to shape the regulatory and supervisory environment of the sector, including the National Microfinance Policy. Despite these reforms in the financial sector, legislation and guidelines concerning consumer protection are included neither in the national law nor the regulatory framework of Tanzania’s financial sector. The regulatory guidelines for microfinance also lack specific provisions targeting responsible lending practices and transparent disclosures when dealing with consumers of microfinance services. Tanzania Price Graph
The price graph presented below shows the prices of all the microloan products in the Tanzania dataset. Each data-point represents a real loan given to a real borrower, calculated using original loan documentation from the institution. The size of the data-point correlates with the number of borrowers that have a loan of that product at that loan amount. The color of the data-point correlates with the Transparency Index of the sample. The interactive legend beneath the graph can be used to change the graph axis and labels. Try the custom feature to see price correlations with attributes such as loan purpose, institution type, loan term and percent of gross national income.
The Price Graph for Tanzania shows the prices of 30 products, offered by 14 microfinance institutions. More than half of the institutions analyzed are privately-owned for profit institutions, followed by NGO microfinance institutions. Owning a business is one of the most frequently cited eligibility criteria for accessing a microloan, followed by ownership of property. Products targeted exclusively to women form 10% of all the products in the survey. Almost all loan prices in Tanzania are quoted using the flat interest rate calculation method, with just 4% of the loans surveyed quoted using the declining balance interest rate method. Extra charges in a form of fees and insurance are observed in all of the products surveyed. The average market rate in Tanzania represented by the pricing curve reveals that the smaller the loan size, the higher the cost incurred by the borrower. This trend is true for all types of microfinance provider and all types of loan purpose included in the dataset. When calculated using a standardized APR formula which includes the impact of the interest rate, fees and insurance, but excludes the impact of compulsory savings, the highest priced product were delivered to rural areas as opposed to urban areas.