Small Tanzanian lenders see drop in earnings

Tanzania’s micro-lenders, the Village Community Banks (Vicoba), are feeling the impact of the coronavirus pandemic, as share sales, borrowing and repaying of loans fall drastically.

“We doubt we will post any profit this year. Last year we made a profit of about Tsh6 million ($2,605.55) from loan repayments alone. But this year things are different. Since the end of March, buying of shares, borrowing and repaying of debt has fallen drastically,” Ritha Mbimbi, an official of the Amani and Hekima Vicoba in Iringa, in the Southern highlands told The EastAfrican. 

Vicoba, which mostly serve women, are the most lucrative micro lenders as they offer loans at between five and 10 per cent interest rates with repayments of between three to 10 months.

“Members are afraid because of the current situation and wonder how they will repay their debts,” said Ms Mbimbi.

Many of the members join and run Vicoba to boost their businesses, or borrow money for basic expenses such as paying school fees, rent, or start-up capital for their businesses. Ms Mbimbi said that before the Covid-19, members were buying 10 to 20 shares at sh3,000 ($1.3) per share. But, since the end of March members have been unable to buy the maximum seven shares.

“We are now providing loans at twice one’s total shares instead of thrice to make it easier to repay and also make sure that we do not make losses from unpaid debts. We are trying to accommodate members as the situation is affecting all of us,” said Ms Mbimbi

Happy Julius, one of the members of Achievers Vicoba in Dar es Salaam said they are in discussion to stop loans of above Tsh500,000 ($217.12) as a precautionary measure.

“We want to still make a profit, but we are also cautious about the amount of money loaned out during this pandemic,” she said.

Achievers Vicoba has 24 all-female members, each having bought one share for Tsh10,000 ($4.32). Members are required to buy at least five shares per month each.

According to Ms Julius, the measures taken to minimise the spread of the virus have posed several challenges, including members being forced to conduct all their activities and transactions online.