During my ten weeks with Akiba, I’d like to believe that my understanding of urban and peri-urban microfinance in Africa has increased greatly. Though I’m left with more questions than answers, I’d like to wrap up my Ambassadorship by explicating for my loyal readers my more relevant observations and thoughts.
Some of these aren’t strictly related to microfinance, but rather to Tanzanian economic development in general. This list isn’t meant to be exhaustive, and leaves off major development topics which I don’t have the space or the credentials to comment on, but which nonetheless are extremely relevant, including HIV, malaria, education, inflation, gender discrimination, and corruption. Rather, I speak only of areas I feel were frequently and unnecessarily making the bank’s operations more of a hassle than they needed to be.
Bryson took his first loan from Akiba while I was taking pre-algebra.
The year was 1997. Akiba Commercial Bank operated just a single branch in downtown Dar es Salaam. Along with his wife, Bryson ran a hardware supply store near city center. He took out a loan to help purchase more inventory for his small shop. The loan was for 500,000 Tanzanian Shillings (Tsh), or about $350.
Thirteen years and a number of loan cycles since, Bryson is a happy man. His hardware business has grown tremendously. He now operates two separate stores selling timber, carved wood, metals, chain-link fencing, and basic construction amenities such as glue, tools, and nails. He employs eleven people.
So why is the bank rightfully worried about losing him?
I’ve spent the last week visiting Akiba’s “Upcountry” branches in Arusha and Moshi, two mid-sized cities in Northern Tanzania, less than an hour from the Kenyan border.
Most American visitors to these towns pass through on their way to climb Mount Kilimanjaro or on safari to the Serengeti plains. Land Cruisers packed with mzungus (Westerners) crawl through the traffic snarled streets.
Tourism is big business here, but as I’ve learned in the past week, it’s not the only business. Plenty of small entrepreneurs scrape together a living at small markets, off the main roads, and depend on access to credit.
Microfinance tends to function more effectively in areas with high population density. In urban areas, loan officers tend to manage larger portfolios with lower default rates. Over the past week, I’ve witnessed firsthand many of the symptoms that make it so expensive and difficult to provide financial services to the rural poor.
I was almost about to think that Akiba’s corporate clients were all men until Agnes walked in on one of my focus group discussions with Akiba’s clients: “ I’m Agnes Chelangwa, of Tanzanian origin and most people in Dar es Salaam know me as Annabel’s mother or as the manager of Rosas Farm’. At Akiba Commercial Bank clients in the corporate category have a loan of 50 million TSH (Tanzanian Shilling; ~32,000 USD) or more, the type of loan size that is far beyond what you would associate with microfinance. Yet Agnes’ captivating story reveals how microfinance worked for her. Her big smile during most of the interview, her passion and focus when sharing business advice and her serious and honest look when she recalls more difficult moments work inspiring.
“Life out here is tough.”
This was the explanation given by Captain Peter of the Tanzania National Parks’ Air Force, when I asked him, on a recent weekend trip, why the number of poachers in Tanzania’s parks was increasing.
I think about the Captain’s honest, simple answer each day. Life in Tanzania is challenging, especially so when you’re sitting on the dirt floor of your home, broke, crying in front of your loan officer while your seven kids play outside.
Francis, my manager, recounted his recovery visit from this morning to me, which I found too compelling not to share with the blog.
As African microfinance grows, migrating naturally away from dense urban centers into Peri-Urban environments, the distance between a bank’s branch and its customers grows as well.
In Dar es Salaam, as in most Western cities, the suburbs are a hassle to navigate without a car. Very few loan officers can afford cars, so they deal with this hassle each day.
I documented my travels on Tuesday with Victor, a solidarity group loan officer at Akiba’s Ukonga Branch, as we visited five of his clients prior to renewal of their group loan.
We departed the branch on foot and walked to the nearby bus stop. At about 9 am, we boarded our first Daladala of the day. We stood for the 15-minute ride on the bus.
Daladalas are a local Tanzanian institution, an iconic experience of life in Dar that most tourists never endure. The bus is usually a converted Korean church van, donated or sold cheaply to the Tanzanian government, meant for 12 but usually holding about 30 passengers.
“God will help me through this.”
The tired, withered woman was probably in her fifties, but she looked seventy.
Antony, a loan officer at Akiba’s Tegeta Branch, and I sat in red plastic chairs across from her, under a large tree in the compound outside her home.
Our recovery visit was routine, meant to check in on a borrower who was just three days late on her monthly installment. She owned a large hardware shop adjacent to her property. She had never been late on a payment before.
“They took everything.”
My loyal readership will remember my most recent post, in which a borrower misspent a bank loan on a clunky old car, rather than on purchases of inventory for his business, causing him to eventually default.
What was left unstated, but worth exploration, is the importance of the loan officer’s role in avoiding this unfortunate outcome. Loan officers are trained to perform a thorough analysis of a client’s cash flow, expenses, and willingness to repay their loan to the bank.
What distinguishes the great loan officers from the good is their ability to sniff out very subtle context clues during loan appraisals. Utterly forgettable to a mere gumshoe, these hitches matter far more to trained sleuths than do any self-reported profit margins.
Imagine having to carry all your money in your pocket or having to hide it in a sock under your pillow to keep it safe…
If you hold a bank account with Akiba that is past: as of next month banking services will be available 24/7 through mobile phone banking. That’s why we are currently sitting in a training room, our mobile phones in pole position. We are experimenting with how to top up airtime, transfer funds, check account balances, to mention only some of the 9 different services displaced on our phone screens. Initially mobile banking will require some extra explanation to the customer but the advantages in the long run outnumber that initial effort by far, as well for the bank as for the customers: lower transaction costs, no waiting queues, no time lost in traffic, no longer walking around with big stacks of money…The number of phone transactions is believed to take over the real banking transactions in no time.
And the mobile banking bustle has advantages that go beyond our top of mind… Read More…