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A critical look at the role of micro finance banks in poverty reduction in Tanzania: A case of Akiba Commercial Bank Limited

Are micro - finance banks in Tanzania pro poor?

Authors: P.J. Dimoso; Z.S. Masanyiwa; Institute of Rural Development Planning, Tanzania
Publisher: Eldis Poverty Resource Guide, 2008

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This paper examines the effectiveness of micro-finance banks in poverty reduction in Tanzania; using Akiba Commercial Bank, Dar Es Salaam, as a case study. The paper attempts to answer the following key questions:

  • who has access to credit?
  • do borrowers become successful in their undertakings?
  • and what are improvements achieved in the reduction of poverty in the fields of income, employment, education and housing?
The study has used both qualitative and quantitative tools for getting data. Simple random and purposive sampling techniques were used to get a total of 120 study respondents. Data were collected through questionnaires, semi structured interviews, observations and documentary reviews. Data analysis was based on descriptive statistics and presented in tables, charts, and percentages. Study findings show that the majority of the poor do not access bank loans because they lack guarantors, assets, businesses, salaried employment, savings account in banks, and the ability to make pre-loan weekly deposit on Special Savings Account which are required as collaterals. The majority of respondents have indicated that credits do not make them successful in their undertakings as they make them more dependant on them.

The paper concludes that the effectiveness of Micro-finance banks in poverty reduction is minimum, because the banks are not pro-poor. Banks should encourage poor to borrow by revisiting the collateral conditions and reducing interest rates. Also government should consider of establishing independent funds to help poor.