Linking social protection for financial equity in Tanzania
Gemma Todd, Dar es Salaam Community Manager
Dar es Salaam, 16 December 2014
Action towards financial equity has often focused on access — the poor lack access to credit and finance, and programmes are required to fill this gap. Dar es Salaam has seen a growth in micro-finance schemes. For example SACCOS, a savings and credit cooperative union, works to provide a means for poverty alleviation by providing access to financial goods and services. Across Tanzania it is estimated that there are around 1,507 SACCOS registered — urban and rural. Although SACCOS provides access as a means for financial equity, it is debatable how much and how sustainable the savings is, as the amount that can be saved, borrowed, and lent depends on the association's rules, cooperation, and unity. Looking at financial access within the "livelihoods framework," a framework developed by Carole Rakodi, among others, highlights how people are embedded within structures but also have opportunities whereby they can strategically act for poverty reduction. People are identified to have certain assets, which influence their vulnerability, capacity to cope, and to remain resilient. Therefore, if people are provided access to credit and then experience life changes, they may be pushed back to the same position, or a worse one, unless they have not been provided with the tools to ensure protection. Equity therefore needs to focus on evaluating future risks and providing a safety net. This article's focus now turns to new national policies and programmes within Dar es Salaam that focus on social protection.
The Tanzania Social Action Fund (TASAF) is a national intervention providing a safety net to the poor, while also providing sustainable income growth. It provides finances for Tanzania's 13.5 million people living below the poverty line. Its Productive Social Safety Net (PSSN), in collaboration with the World Bank, involves the poor contributing into three "funds," which enable them to afford basic necessities — food, health, and education for their children. For example, one of the funds is a Community Health Fund, whereby the individual or family pays a determined regular fee, which contributes to the health care of the household in the event it is required. The household is entered into a savings scheme, which protects their assets for when emergencies arise. PSSN is an unconditional transfer system that has had a positive impact on 280,000 poor beneficiaries. These households are now able to live with the security and protection of assets.
Additionally, changes are occurring within the SACCOS system, based on the importance of urban residents recognising and planning for risk. The World Council of Credit Unions is now working with the Bank of Tanzania to create a centralised regulatory system for SACCOS to use. The system recognises the benefits of access, but introduces a means to regulate savings and loan disbursement. It is also training workers in "risk-based supervision" and establishing early warning systems. Workers advise customers on financial risks and on how to detect risks early.
As micro-finance in Tanzania continues to evolve, regulation is key for financial equity. Nationally, the focus needs to be on reducing risk, and on providing financial protection. The solution is not necessarily providing cash, but providing a opportunity to protect assets, and also becoming incorporated in the asset consumption system. For example, one micro-finance organization in Dar es Salaam is now working with the urban poor to provide access to housing through housing financing schemes (such as WAT-SACCOS). The urban poor in Dar es Salaam are increasingly being provided financial access for financial equity; however, the government and institutions are intervening to ensure protection methods. With environmental flooding common in the city, and additional hazards faced daily, such as death, morbidity, and unemployment, a focus on savings is key.