Enhancing the Capacity of EARDP-Community Initiatives To
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SOUTHERN NEW HAMPSHIRE UNIVERSIT Y & THE OPEN UNIVERSITY OF TANZANIA MASTER OF SCIENCE I N COMMUNITY ECONOMIC DEVELOPMENT (2007) ENHANCING TH E CAPACIT Y O F EARDP-COMMUNIT Y INITIATIVE S T O PROVIDE SUSTAINABL E AN D RESPONSIV E QUALIT Y MICRO-LENDIN G SERVICES I N PATAND I VILLAGE , ARUMER U DISTRIC T - ARUSH A REGION. "SUBMITTED I N PARTIA L FULFILLMENT OF REQUIREMENTS FO R THE MASTER OF SCIENCE I N COMMUNITY ECONOMIC DEVELOPMENT" Mshinwa Edith Banzi ii SUPERVISOR CERTIFICATIO N I, Verhan Bakari has read the project, and found it to be in a form acceptable for review. Signature. Date iii COPYRIGHT "No part of this project ma y be reproduced, store d in any retrieval system, o r transmitte d in an y form , o r b y an y means , o r otherwis e electronic , mechanical , photocopying , recording withou t prio r writte n permissio n o f th e autho r o r th e Ope n Universit y of Tanzania and Southern New Hampshire University on that behalf. " DECLARATION BY THE CANDIDATE I, Mshinw a Edit h Banzi , d o hereb y declar e t o th e senat e o f th e Ope n Universit y o f Tanzania an d Souther n New Hampshir e University tha t th e wor k submitted her e is m y original wor k an d tha t i t ha s no t bee n submitte d fo r th e simila r degre e awar d i n an y other University. Signature Date. ABSTRACT Rural Micr o financin g remain s ver y challengin g an d i n developin g countrie s i t i s generally weak, despit e th e effort s o f differen t donors , Government s an d Privat e investors t o improv e it . However , importan t lesson s ar e emergin g from thes e experiences tha t provide useful guideline s on how t o expan d an d make mor e effectiv e the provision of rural financial services. Globally th e evidence s an d argument s sugges t tha t microfmanc e intervention s ma y increase incomes, contribute to individual and household livelihood security, and chang e social relations for the better EARDP - Communit y Initiatives in Patand i villag e Arumeru District Arush a Region implements micr o credi t an d povert y alleviatio n programs tha t suppor t smal l scal e entrepreneurs. Th e organization has highlighte d the importanc e of considering capacity strengthening o f rural micro - financ e se t up . Majo r outcome s o f the projec t involve d establishment o f jo b functions , procedure s fo r loa n tracking , grant s contrac t from McKnight, reviewed loan portfolio, book of accounts an d financial procedure s a s well a s launching of VICOBA groups . ACKNOWLEDGEMENT It would no t hav e bee n possibl e t o write this project pape r withou t th e hel p of several people. I take this opportunity to thank all who made this possible. I would like to than k FLORESTA fo r the permission to join CED program, for provision of tuition fee , moral support an d prayers throughou t my course. Sincere and special thanks ar e due to all staff from CED Progra m in Tanzania fo r their tireles s suppor t an d instructions . I appreciat e the clos e supervision from my supervisor Mr Verhani Bakari fo r perusal of the projec t paper, guidanc e and all supporting materials he provided to me. It won't b e fai r no t t o recognize th e assistanc e provide d by Mr Nyansambo, Kajimbw a of M S - TCDC , an d Jack y a Voluntee r fro m CC S who wa s attache d a t EARDP-C I during the final stage s of my project . Lastly bu t n o leas t m y heartfel t appreciatio n ar e du e t o m y entir e family , tha t is , my husband, children, parents, brothers an d sisters. vu LIST OF ABBREVIATIONS: BEST Business Environment Strengthening fo r Tanzania Program BOT Bank of Tanzania BRAC Bangladesh Rural Advancement Committee BRI Bank Rakyat Indonesia CMS Credit Management Syste m in Zambia DALDO District Agriculture and Livestock Development Office r EARDP-CI Enterprise and Rural Development - Communit y Initiatives FGM Female Genital Mutilation FSRP Financial Sector Reform Program IGAs Income Generating Activities MRCSW Monduli Rural Credit Scheme fo r Women MFI Micro Finance Institution OCA Organizational Capacity assessment NMB National Micro finance Bank NSGRP National Strategy for Growth and reduction of Poverty NGOs Non Governmental Organizations PRA Participatory Rural Appraisal SACCOS Savings and Credit Cooperative Societies SEDA Small enterprise Development Agency SWOT Strengths, Weaknesses, Opportunitie s and Threats VICOBA Village Community Bank viii EXECUTIVE SUMMARY : This projec t pape r i s abou t enhancin g th e capacit y of a smal l an d ne w micr o lending scheme i n Patandi Village , Arumer u District in Arusha Region. EARDP - Community Initiatives i s a n organizatio n which operates in Arumeru District since it s inceptio n in 2003, mai n activitie s bein g trainin g an d accessin g smal l loan s t o entrepreneur s i n Patandi village and neighbourhoods. T o date more than 50 0 loans have been delivered to community members . The targe t communit y include s women , me n an d yout h residin g a t Patand i Villag e in Arumeru District , Arush a Region . Mos t o f thes e resident s depen d o n agr o base d businesses and resides in remote areas where many services are limited . Community needs assessment done within the project are a highlighted the main problem associated t o thi s communit y bein g inadequat e micr o lendin g service s provide d b y EARDP - C I an d othe r institutions . I n Arumer u District, most o f th e Micr o financ e institutions ar e small , ne w an d lac k enoug h capacit y t o operat e effectivel y an d efficiently. A grea t dea l o f capacity building is require d t o brin g them t o th e leve l a t which the y ca n operate with large outreach , qualit y services an d profitabl e operations . Although effort s toward s establishmen t o f rural lendin g scheme s hav e bee n take n b y EARDP - Communit y Initiatives yet it ha s not been able to adequately satisf y the needs of its clients. IX The mai n goa l of th e projec t i s t o contribut e toward s organizationa l developmen t o f EARDP - Community Initiatives a s a rural micro lending program. Specifi c objective s were t o hav e institutionall y strengthened capacity of the organizatio n in micro lending programs a s well a s increasing access of poor in micro lending services. Most o f th e activitie s planne d t o mak e sur e th e abov e objective s ar e achieve d wer e accomplished. In the cas e of institutional capacity strengthening a training program wa s instituted t o mak e sur e that staff an d board member s ar e wel l equippe d with necessar y skills for better performance . Detailed analysi s o f th e organizatio n performanc e wa s don e an d client s wer e interviewed t o ge t clarification s o n differen t issue s tha t wer e observed . Despit e othe r problems, EARD P - C I progra m ha s prove d t o b e a successfu l rura l micr o lendin g scheme i n the pas t thre e years . Ther e i s a grea t potential fo r becomin g a reliabl e an d among the best micro-lending programs in future . Recommendations fo r portfoli o management , financial management an d fun d raising, were give n an d capacit y strengthenin g pla n wa s develope d tha t wil l b e use d b y organization to improve its performance . TABLE OF CONTENTS Supervisor' certification Copyright ™ Declaration Abstract v Acknowledgement v i List of Abbreviations v u Executive Summary vi n Chapter 1 1 0 Communit y Profile 1 1.1 Geographica l Locatio n 1 1 1. 1 Administrativ e Uni t 2 1.1.2 Climat e and Altitude 3 1.1.3 Populatio n Dynamics 3 114 Ethni c and religious group 4 1.1.5 Economi c activitie s 4 1.1.6 Market s 5 1.1.7 Basi c infrastructure and communications 6 1.1.8 Socia l Services 7 1.1.9 Acces s to Education 7 1.1.10 Acces s to Health Services 7 1.1.11 Acces s t o Wate r 8 1.1.12 Acces s to Food 8 1.1.13 Beliefs , customs and habits 9 1.2 Organizatio n Profile 1 0 1.2.1 Profil e ofhost Organization 1 0 1.2.2 EARDP-C I Vision Statement 1 0 1.2.3 Missio n Statemen t 1 0 1.2.4 Goal s and Objectives 1 1 1.2.5 Structur e of the Organization 1 1 1.2.6 Locatio n 1 2 1.2.7 Fundin g 1 2 1.3 Communit y Needs Assessment 1 3 1.3.1 Communit y Needs Assessment 1 3 1.3.2 SWO T analysi s 1 3 1.3.3 Organizatio n capacity assessment 1 6 1.4 Researc h Method s 2 1 1.4.1 Introductio n 2 1 1.4.2 Researc h instruments 2 1 1.4.2.1 Intervie w with key informants 2 1 1.4.2.2 Revie w of official records and documents 2 2 1.4.2.3 Focu s group discussion and other RPAmethods 2 2 1.4.2.4 Th e questionnaire 2 2 1.4.2.5 Direc t observation 2 3 14.3 Sampl e selection 2 3 1.4.4 Reliabilit y and validity of research instruments 2 3 1.4.5 Surve y administration 2 4 XI I 5 Dat a analysis Findings and Discussion 2 4 1 5.1 Finding s from the Respondents 2 5 1.5.1.1 Se x of the respondent s 2 5 1 5.1.2 Marita l statu s of the respondent s 2 5 1.5.1.3 Educatio n 2 6 1 5.1.4 Typ e of businesses of respondents 2 6 1.5.1.5 Duratio n of clients in business 2 7 1 5.1.6 Source s of information about EARDP-CI loan 2 7 1.5.1.7 Frequenc y of loan accessed 2 8 1.5.1.8 Typ e of load accesse d 2 8 1.5.1.9 Amoun t of loan acquired per person 2 9 1.5.1.10 Repayments trend 2 9 1.5.1.11 Follow-up training needs 2 9 1.5.1.12 Readiness to contribute savings 3 0 1.5.1.13 The unique characteristics of EARDP-CI 3 0 1.5.1.14 Clients visited by Credit Officer 3 1 Chapter 2 2.