TechInAfrica – Tanzania annual GDP growth has stood at 7% since 2013 and made the nation as one of the fastest-growing economies in Sub-Saharan Africa. The economic growth is mostly driven by SMEs and over half of them owned by women entrepreneurs
Despite the fact, most businesses that owned by Tanzanian women cannot be developed due to the lack of financing. Small businesses around the world generally rely on debt to finance them. Nevertheless, research reveals that most women entrepreneurs in emerging economies like Tanzania do not apply for formal loans—bank and microfinance loans.
A survey in 2013 shows that among 80% of approved bank loan applications and 90% of approved microfinance bank applications, only 18% of women entrepreneurs applied for the bank loans and 28% for microfinance loans.
The low number of Tanzanian women entrepreneurs who applied for formal loans is caused by the limited use of formal loans as a result of negative beliefs to bank and microfinance loans, thus, preventing them from applying for formal loans.
Another study conducted by the Conversation shows that there are several reasons why most women entrepreneurs tend not to apply for formal loans. The study was taken from the interviews of 29 Tanzanian women entrepreneurs who lived in Dar es Salaam, the largest city in the country.
Most of women interviewees said that they have lack of interest to terms offered by banks. There are collateral requirements that they found a burdensome. Many women interviewees said that they had no collateral—they did not own a house or land nor did they have husbands’ permission. Even if they had a house or land, they did not want to risk of losing them if they could not pay back the loans.
Besides the collateral issue, many of the women interviewees found that the loan application process was too long and cost much money. Moreover, they also admitted they had received inappropriate behavior from loan officers, like sexual harassment in order to get loans.
Apart from their own experiences, many women entrepreneurs have heard stories from others about how their loan applications rejected. These stories of bad experiences about formal loans affect and form women entrepreneurs’ beliefs on formal loans.
Based on the research, what causes women entrepreneurs tend not to apply for formal loans is the negative beliefs about formal loans that need to overcome. For example, loan inappropriate behavior from loan officers should be tackled by the policymakers to prevent harassment, abuse, and corruption. Other issues as a result of entrepreneurs’ lack of knowledge about loans can be surmounted by giving them some education about loans and all that surrounds it.