> Posted by Eric Zuehlke, Web and Communications Director, CFI

The following post was originally published on the Accion Ambassadors blog.

At some point during our walk down the dusty, uneven road packed with minibuses and motorcycles inches away from hitting me, unfamiliar music and sounds blasting from unseen speakers, people selling everything from plastic toys to Adidas shorts to cell phones to furniture, and a profusion of life and color all around, I thought to myself, “This is exactly what I was hoping to see in Tanzania.”

My fellow Accion Ambassador Javier and I were walking with a staff member from Akiba’s headquarters office and Dominik, the assistant branch manager at Akiba’s Temeke branch. Akiba is a commercial microfinance institution based in Dar es Salaam with branches throughout Tanzania. The four of us were off to visit clients down the street from the branch office. Before our walk, Dominik shared some background on Akiba’s work and their clients.

While every Akiba client has a deposit account, not every client has a loan. So for example, the Temeke branch serves over 4,000 clients – 2,100 have a loan while around 2,000 only have deposit accounts. However, “savings is a big problem,” Dominik tells us. “People are not saving regularly.” This is partially because Akiba has only recently promoted savings as part of their client outreach and education. The Temeke branch’s clients are all in the neighborhood and are food vendors, manage their own clothing or cell phone shops, or own other small businesses. The branch’s clients tend to be at Akiba’s “medium” level, with loans ranging from 20 million to 50 million shillings (about US$10,000 to US$25,000 – a much higher amount than I was expecting to be normal). Group solidarity loans are also popular and are smaller loans ranging from 200,000 to 5 million shillings (US$100 to US$2,500).

Competition is fierce. Recognizing a huge potential market, many traditional, corporate banks have started microfinance operations in Tanzania, emulating Akiba’s successful work over the years. As a result, Akiba has lowered its interest rates to be more competitive. Akiba is also staying on top of current technology trends, focusing attention on its mobile platform that allows clients to pay their loan, withdraw money from their account, pay their cable bill, and recharge their mobile wallet. Biometrics is being rolled out too, with fingerprint scanning. Ads for both were prominent in both branches that we visited.

During this particular branch visit, we met two clients. The first, Mohammad, sells cell phones in a small shop, one of four stores he owns. A gregarious man, he had a smile on his face as I asked him a few questions. I asked him how business is going and he told me it’s not bad – everyone needs cell phones. The problem is capital – and, thanks to Akiba, he was able to access it to expand his business. “What is your dream?” I asked. “To be a big businessman. I’m sure Akiba will help me in my goal.”

Why did he choose Akiba? Mostly because it was close to him and he appreciates their good polices. I heard similar reasons from other clients throughout the day. It appears that – based on my (small) impression – people connect with the institution that’s most convenient for them. And in Akiba’s case, they like the service, so they stay. It doesn’t seem that these clients shop around, comparing policies and interest rates.

The next client we met, a couch maker down the street, seemed to confirm my hunch. Akiba staff members had visited his shop to buy a mattress around four years ago and he decided that he wanted to work with Akiba after talking with them. Finding customers isn’t the problem for him. It’s meeting the big demand (a nice problem for a business owner to have!). Working capital has helped. He started with a 3 million shilling loan, which he paid off and now is paying off a 50 million shilling loan.

As we walked back to the office, Dominik and I talked about the upcoming U.S. elections (he seemed surprised that I thought Hillary Clinton would win), our views on Obama and Bush, and this year’s Tanzanian elections. By the time we left, I wished I could have stayed longer to chat but we had to make it to the next branch. It was already early afternoon and if we wanted any chance to get back at a reasonable hour, we had to beat the horrendous Dar es Salaam rush hour traffic.

Have you read?

Interoperability Agreement Signed Between Leading Tanzanian Mobile Money Providers

Helping Clients Understand Their Digital Data: Initial Experiences from Tanzania

Tanzania Launches National Financial Inclusion Framework