Role of Commercial Banks in Poverty Aleviation in Tanzania

African nations easily fall at the bottom of any list that involve economic measures. In fact, “34 of the 50 nations on the UN list of least developed countries are in Africa” (“UN List of Least Developed Countries”) and “40% of people living in sub-Saharan Africa live in absolute poverty” and this is definitely a problem (“Poverty”). Poverty is known as the state of being extremely poor. The causes of Africa’s poverty ranges from “political instability, national debt, discrimination and social inequality, vulnerability to natural disasters, and overpopulation” (“What Are the Causes of Poverty?”). However, these are just a few examples. There are many other economical disasters that are currently happening in Africa. Poverty is a conflict that can easily relate to any other problem, which is why it should be considered the biggest problem in Africa. Moreover, if poverty is reduced, it would solve a number of Africa’s other complications. Poverty has many affects on Africans such as reducing their education, unfortunately gives residents mental and physical issues and diseases, and extra social spending from adults.

In both developing and emerging economies, microfinance has vastly and increasingly been seen as one of the most important means for enhancing the lives of the poor and therefore a major tool for economic and social development mostly in rural areas. Lately, contrary to this widespread belief, critics have raised eyebrows against this growing popularity of microfinance as a major tool for enhancing economic development. Contrary to belief, they are of the opinion that microfinance is a ‘make-belief’ that is hindering economic and social development rather than enhancing it.

Financial improvement is actualizing new innovations, move from farming based to industry-based economy, and general change in living models. The current improvement circumstance of Africa is dumbfounding. Despite the fact that it is the wealthiest mainland as far as common assets, Africa remains the poorest and the slightest created district of the world., Africa is the last worldwide outskirts that will take after the current developing forces. The economy of Africa of China, India and South America Consists of the exchange, business, farming, and human assets of the continent.the report, simply distributed, says this development has been determined basically by enhanced monetary administration on the mainland and the private part.

Before I started my work on this topic, I was already aware that poverty is a tremendous issue in Africa through my research in reading articles online. What I didn’t know was that the scale of poverty was so tremendous and that it’s very widespread in the continent. But in my paper, I will be focusing primarily on Sub-Saharan Africa. Before I started this research, I didn’t have much focus on this issue, but after learning this, I became more interested in it.

In today’s society a lot of developing countries rely on assistance from the international lending institutions to help with funding. Africa receives about 22 percent of assistance from the World Bank. The World Bank is the main source of lending to this underdeveloped country.

Imagine a small village in Africa. What images come to mind? Is it small huts in a desolate village? Or how about exotic animals? The truth is that although some of these descriptions are accurate, they tend to leave out the pain and suffering of people. Every day 21,000 children die throughout different parts of the world (Shah). These deaths are the result of poverty as well as the conditions that come with it. Being in poverty is so much more than just not having money. Hunger, lack of resources, and wars plague developing countries, all of which have to do with poverty.

First off, One cause for poverty is the Rich. The rich bring inequality to the poor. The wealth difference between upper-class and lower-class is at its widest point. “In most nations today, inequality the gap between the rich and the poor is quite high and often widening” (”Cause of”). Shows that while the rich are seeing their wealth grow, the middle and lower-classes are seeing financial decline. The distribution of wealth and income reveals inequalities among countries. “Inequality in the distribution of money income causes poverty” (Davis 23). The distribution of wealth compares all the assets held by the richest and poorest members of society. Tanzania is the largest of the East African countries and one of the poorest countries in the world. “During the twentieth century, the gap between the income of the richest and the poorest countries grew substantially, for example, in 2006, the average U.S. citizen was

Colonialism made a profound impact on the economic development in Tanzania. The general motive behind colonization was the acquisition of raw materials for economic development in Germany. Tanzania was a supplier of raw materials like minerals and agricultural commodities and a buyer of processed manufactured goods. These economic structures established by the colonial powers had lasting implications which affected the independent government’s economic performance. Initially, and similar to the USSR after becoming a communist state, Tanzania introduced a five-year economic plan. However, unlike the Soviet Union, the first five-year plan was made to implement a programme which depended on foreign investment to support massive, capital-intensive industrialization and agricultural development projects. Consequently, this economic policy upheld colonial ideals. Later, in attempt to reconstruct Tanzania’s national identity and off the benefits of capitalism, the Arusha Declaration was avowed. This was a blueprint that declared the implementation of African socialism under the name Arusha. After the Arusha declaration, the

Tanzania is one of the world's poorest countries. Most countries of the world define poverty as a lack of money. Yet poor people themselves consider their experience of poverty much more broadly. A person who is poor can suffer from multiple disadvantages at the same time. For example, they may have poor health or malnutrition, a lack of clean water or electricity, poor quality of work, little to no education, disempowerment and threat of violence.2 Focusing on just one aspect of poverty such as income, is not enough to capture the true reality of the issue.

Another country that is in a really bad condition is Asia, “According to World Bank’s report in 2016, of the 766 million extremely poor who live below the poverty

The MEs in Tanzania are characterized by very low productivity and lack of capital accumulation; most are self-employed and located at home due to lack of designated work premises and not linked to modern sector (larger enterprise) because of people’s ignorance of regulations. This means that they do not go through business formalities (which the state imposes) such as registration, keeping accounts and even paying taxes. Another reason is use of traditional and inefficient technologies in production.

From Standard Bank’s perspective, driving Africa’s growth is not only about facilitating grand infrastructure deals on the continent and providing innovative financial solutions to women that add value to customer lives. Though integral to economic development, such initiatives are pieces of a much larger puzzle.

Tanzania’s notable economic expansion in recent years has been facilitated by open market policies related to global commerce. The financial sector and the investment framework are relatively well developed for the region. However, these strengths are offset by weak socioeconomic indicators, structurally large current account and budgetdeficits, and rising debt levels.

The generation of self-employment in non-farm activities requires investment in working capital. However, at low levels of income, the accumulation of such capital may be difficult. Under such circumstances, loans, by increasing family income, can help the poor to accumulate their own capital and invest in employment-generating activities (Hossain, 1988). Commercial banks and other formal institutions fail to cater for the credit needs of smallholders, however, mainly due to their lending terms and conditions. It is generally the rules and regulations of the formal financial institutions that have created the myth that the poor are not bankable, and since they can’t afford the required collateral, they are considered uncreditworthy (Adera, 1995). Hence despite efforts to overcome the widespread lack of financial services, especially among smallholders in developing countries, and the expansion of credit in the rural areas of these countries, the majority still have only limited access to bank services to support their private initiatives (Braverman and Guasch, 1986). In the recent past, there has been an increased tendency to fund credit programmes in the developing countries aimed at small-scale enterprises. In Kenya, despite emphasis on increasing the availability of credit to small and microenterprises (SMEs), access to credit by such enterprises remains one of the major constraints they face. A 1995 survey of small and

The data for this study will be collected from secondary sources from the recommended monetary organizations like the Central Bank of Tanzania (BOT), International Monetary Fund (IMF), and International Bank for Reconstruction Development (IBRD) and the International Development Association (IDA) the World Bank.