Microfinance policy, Law is timely

Abstract

The government’s decision to launch the microfinance policy, 2017 has come at the right time. The policy, together with the planned microfinance law, will give the country the required legal framework to effectively regulate the subsector. According to a recent report by the Business and Assets Formalization Programme -commonly known in Swahili as Mkurabita- millions of Tanzanians are still sitting on $29.3 billion (about Tsh65 trillion) worth of dead capital. These people who own various properties in informal settings are the major beneficiaries of loans from microfinance institutions (MFIs), ending up being victims of high interest rates paying up to 50% interest rate charged by MFIs. The policy is also coming at a time when levels of non-performing loans (NPLs) have increased to reach about 10% of total gross loans against the acceptable threshold rate of 5%.