MICROCAPITAL STORY: Tanzania’s Promotion of Rural Initiatives and Development Enterprises Ltd. (PRIDE) Anticipates Deposit-Taking Banking License By End of 2009

Promotion of Rural Initiatives and Development Enterprises Limited (PRIDE), a Tanzanian microfinance institution, anticipates securing a microfinance banking license from the Bank of Tanzania (BOT) by the end of 2009. This is according to PRIDE Director General, Rashid Malima, at a training workshop in Dar es Salaam created by Norwegian School of Economics (NHH) and the University of Dar es Salaam Entrepreneurship Centre (UDEC). This license will mark the transformation of the organization into two separate institutions, one being a non-governmental organization (NGO) and one a licensed financial instutition. The preliminary requirements and processes for the BOT have been met. Tanzania’s Minister for Trade, Industries and Marketing, Dr Mary Nagu, praised PRIDE as a “true government partner in bringing about development to people” working in both in urban and rural settings.

The split of PRIDE Tanzania was announced at World Savings Banks Institute (WSBI) meeting in Zanzibar in June 2008, saying that the split would enable PRIDE to provide diversified services to “enhance value of social objectives and transform its microfinance company into a deposit taking Microfinance company”. The PRIDE NGO will be responsible for the provision of social services to Tanzanian communities, including the initiation of a Microfinance Development Center, as well as providing financial services to assist rural people with issues such as health, safe water and residential improvements. The ownership of the NGO and MFI were not discussed, nor how the continued funding from Swedish and Norwegian governments, as PRIDE’s major source of funding, would be divided.

At that time it was estimated that the demand for microfinance services was between nine and 12 million people and that only five percent had access to these services. Dr Nagu stated that over 2.4 million Tanzanians join micro businesses every year, which is 22 times more than the 6.7 percent who join formal employment. Dr. Nagu spoke about the provision of education to entrepreneurs was vital as they needed skills to manage their micro businesses, stating that almost 440,000 Tanzanians join the informal sector every year.

The training workshop through the NHH and UDEC was part of a research project entitled Teaching Entrepreneurship To Microfinance Clients in Tanzania: Financial and Human Capital for Development and was led by NHH professors Kjetil Bjorvatn and Bertil Tungodden. Simultaneously in Dar es Salaam, an entrepreneurial training course was held as a part of completion of Phase II of a training workshop entitled Believe Become Begin (BBB), where 158 entrepreneurs were in attendance and of those 80 were awarded with business development vouchers worth over USD 400,000. The 158 entrepreneurs had been selected from an initial pool of over 300 who had attended the Phase I training workshops and from the over 550 entrepreneurs who had submitted their business concepts to the initial workshop. Additionally, the top 20 entrepreneurs were selected to proceed to the final round of the business competition. Whether the two workshops were connected with each other was not reported.

PRIDE was established in 1994 as an NGO using a “modified Grameen” methodology to provide microfinance to clients. Its operations began as a two-year pilot project involving three branches and after this was completed it expanded into its second phase which was to “expand the programme to a network of 25 branches serving 30,000 clients and attain operational sustainability in its fifth year”. Its main funding comes from the Norwegian Agency for Development Cooperation (NORAD) and the Swedish International Development Cooperation Agency (SIDA). As of the end of 2007 there were over 82 thousand active borrowers, 65 percent of which were women and the average loan balance per person was USD 307. The total assets stood at USD 34.1 million, with a debt to equity ratio of 705.44 percent and a return on assets of 0.41 percent.

By Lori Curtis, Research Assistant

Additional Resources:

Daily News: “PRIDE to secure microfinance bank licence

Forskning: “Fjernundervisning in microcredit

IPP Media: “PRIDE Tanzania turns into microfinance bank” “Tanzania has vast untapped potential of microfinance opportunities

IPS News: “Economy Tanzania: Investing The Money Under The Mattress

MIX Market: “PRIDE Profile

The Citizen: “Entrepreneurs challenged on business sustainability

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