Chairperson Visit and Diverted Loans - Weeks 8 - 11: 10th August - 4th September 2009

The BOARD CHAIRPERSON discusses MAKAZI BORA with Boaz in the Mbagala Office.

It has been some time since we posted an update. During the period from 8th August, we were fortunate to have a visit from Dorothy Massawe, the board chairperson of Habitat for Humanity Tanzania. She visited the Mbagalal Office to meet with the staff, some clients and to see first hand how the program was going. Afterwards, she reported to the rest of the board.

On the not so positive side, one of the credit officers resigned. Her portfolio was divided among two other credit officers and we have not yet engaged a new one. While staff turnover is a fact of life and part of business, this was unexpected so early after start-up.

As of the close of week 11, the total number of registered clients are over 175. Out of these registered clients, 55 have received MAKAZI BORA home improvement loans and others have applications in process. It appears that most clients are ready to begin the process of obtaining a loan soon after registration. Although we are happy with the 55 loans disbursed so far, our short-term target is to increase loan disbursement to 50 loans per month. To achieve this, we may have to expand into several additional wards in Temeke Municipality. We are currently working in Azimio, Chamazi, Charambe, Kibada, Mbagala, Mbagala Kuu, Mtoni and Tuangoma.

The first group of loans has gone through the loan verification process. 4 loan were considered "diverted" and will continue to attract a higher interest rate instead of being discounted after having loan use verified. Two of these diverted loans were for electricity connections. Our indicator to have loan use verified was that electricity is connected. Unfortunately, TANESCO (Tanzania Electric Supply Company) was unable to install the electricity in the 30 days given for the work to be done. We are considering accepting a receipt from TANESCO for payment for the installation as evidence of loan use and allowing the client to have the discounted interest rate that goes with loan use verification.

Two other clients were also considered to have diverted loans. One failed to roof his house in the given time, saying that he had been waiting for a builder from Tanga Region who disappointed him. Another did only part of the work agreed upon, which appeared to be a deliberate loan diversion. Both of these clients remain with the punitively high interest rates. Our objective, however, is to see the home improvement completed and we will allow a second-chance verification after six months.

The clients who had their loans disbursed in July made their first payments in August. There is a one month grace period on principal, so the August payments were interest-only payments. The first complete installments will be paid in September. As at the close of August, all clients were current on their payments. This is a good start, but there will still be challenges ahead.

The Board Chair visiting the Mbagala Office