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Small Scale Farmers Manage their Rural Bank that Collects Savings and Disburse Loans for a Wide Range of Local Economic Actors

Tchenzema Rural Bank in Tanzania


01 / 1999


In 1991, government encouraged co-operative societies to enhance the formation of credit and savings groups in rural areas. In Tchenzema village, villagers responded positively by sending two youths to be rained in credit and savings studies in order for them to be able to run administrative functions. This course was carried out by the Cooperative Department in Morogoro Rural District. Villagers were also educated on the importance of credit and savings activities in the context of farming business. Unfortunately, poor government follow-up of the trained people and lack of serious cooperative education to members resulted in a dead end situation. Although some members and many farmer’ groups of the area put their savings in the group, nobody really knew what to do with them and how to start a loan scheme. Vey rapidly, big problems in financial management occured. Trained officers and then secretary of the group, decided on his own to use the money for private business. His plans went bad and all the money were lost though he always claimed he wanted to reimburse it. This affected a lot the people in the area who lost confidence in their own ability to manage such scheme without being stolen. In the beginning there were 38 members, but due to these internal theft problems, the number declined to 21. These wanted to continue credit and savings activities.

In 1994, in Mgeta division to which Tchenzema belongs, a new spirit of handling credit and savings activities among the rural community started at the initiative of the newly introduced farmers’ group network known as "mtandao". Before starting financial activities, the network discussed with the Tchenzema remaining group to see how the stolen funds would be recovered. The case was not easy to handdle. New leaders were appointed to follow up with the support of the network. They went to the police to report the case but it appeared that they could not do anything in a collective way since most of the money belonged to unregistered groups who cannot stand legally in a court. Only individual could sue, one by one, the secretary for the tiny amount of money that was their. This was practically not possible and very costly. Later on, the network and the new leadership decided to set the case themselves through social pressure. A large part of the secretary farm was seized and sold, he managed to pay back 95% of the remaining money by 1999. In total the money owed to the group was 272,000/= Tanzanian shillings (360 Euros). The fact that the new leadership managed to get back all the money was highly appreciated and the members started to trust this new group.

In 1997, during farmers’ network meeting, the leaders discussed and agreed that they could resume financial activities as requested by their members who entrusted them again. The group was known as a rural bank and not anymore as a saving and credit co-operative because this appelation was disliked by the people. 11 members has been elected to officially constitute the new leadership. Members had to comply with new membership conditions : entrance fee be 1000Tshillings (1.33 Euro), and share value be 15,000 Tshillings (20 Euros). It was emphasized to avoid unnecessary expenses from the group account. The new credit and savings group started its activities on 6th November, 1997 with 76 members.


Apart from involving all members in decisions of important policy matters during annual general meetings, there are three committees to execute different functions like Executive Committee, Loan Administration Committee and Administration and Control Committee. In addition to the above committees, two bank clerks work at the reception to deliver financial services to customers.

In co-ordination with the other rural banks of the division, by-laws and policy documents were developed by the rural bank members. Unfortunately it is not yet officially operative, because the government has not yet registered the rural banks as legal entities, It is a pity because it does not secure the activities of the bank if things go wrong. Their approach is very administrative and very long. It is as if they were reluctant to register the bank because it is not their co-operatives as it was the case before.

All kind of customers are welcomed to benefit from the bank services. Of course, they are encouraged to become a member and to buy capital shares also but iti is up to them to take the decision once they are satisfied with the services provided by the bank.

Saving accounts can be opend under the following categories:

Fixed account not less than 5000T shillings (6.50 Euros)and for a fixed period of 3 months or 6 months,

Account under special agreement any amount.

These accounts are paid an interest rate of 5% for a 3 month period. Then the customer can choose either he/she opens a new 3 month account or he/she is given his/her money back.

For customers to obtain a loan from Tchenzema bank, they have to file a request and to prove that they want to invest this money in an economically viable activity. A guarantee is required and is equivalent to one third of the money requested. Loan interest rate is 10% per month where as 5% goes to the account holder as share building and 5% goes to the bank as bank charges. If the customer is not a member, 10% interest goes to the bank.


There are Tshs.1,200,000/= (1600 Euros)that has been disbursed as on-going loans and by the end of 1998 a total of about 3 million (4000 Euros)was given as loan and reimbursed.

There is a regular increase of money under bank control because the people have understood that their advantage was to put their money at the bank whether they are farmers, traders, civil servants, groups, co-operatives or local institutions. Loan scheme has expanded and now agricultural and business activities are being covered.

The number of accounts and the frequency of loan disbursement have increased. However, since all loans are linked to the local saving capacities through fixed account on a limited period of time, it has not yet been possible to give loans for mid-term or long term investment.


Sokoine University of Agriculture through UMADEP project encouraged rural banking activities. In association with the Department of Cooperatives, it provided a regular follow-up on operationnal issues and advisory services.

Recently, money from donors was obtained to finance certain activities. A contract establishing the conditions of use of the borrowed money is signed. The respect of the content of such contract, specially the reimbursement schedule, is crucial to enforce the credibility of the rural bank, which are highly respected and will be required to pay back.



, Tanzânia


This card can’t be included in the realm of either the Lome Convention or the EU ACP Cooperation.


Tchenzema Rural Bank, Nyandira Village, Mgeta Division, PO box 1880, Morogoro, Tanzania.

[[Written for the public debate "Actors and processes of the cooperation", which could feed the next Lome Convention (European Union/ACP countries relations). This debate, animated by the FPH, has been started by the Cooperation and Development Commission of the European Parliament and is supported by the European Commission.]

Interview with BANZI, Siriak



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