How bureaucracy retards the development of SMEs

BUREAUCRACY is still existing in some micro-finance institutions which are involved in the provision of loan facilities to Small and Medium Enterprises (SMEs) including banks which are operating in the country. The situation has been described to be the main stumbling block to the development of various SMEs in the country, as some loan officers working in these financial institutions imposes tough conditions to loan seekers. The intolerable habit which is commonly being practiced in some financial institutions has discouraged most loan seekers who sometimes are asked to introduce bribes (the so-called kitu kidogo) before the service is rendered to them whenever they apply for loan facilities from these institutions. Some loan seekers who came into contact with the writer of this news recently in Dar es Salaam have said that, the low capital they have is not enough to run their business activities and instead resort to depend on loans from various financial institutions to help them but in vain. Expressing their emotions over the issue a fortnight ago, some disappointed entrepreneurs said in an exclusive interview that, they have been met with lots of challenges accompanied by tough conditions an aspect that most working groups have failed to meet them. “Postponements of unfulfilled appointments is the order of the day” says Rhoda Kilasa who has been making frequent visits in follow up for her loan application she had applied two months ago from one of the well-known financial institution (name withheld) located in Dar es Salaam, but to no avail. Ezekiel Kilambo (42) a resident of Ukonga-Madafu who was in need of a medium loan to increase his working capital from one of the famous micro-finance institution in the city (name withheld), is discouraged when he failed to get financial support due to tough conditions imposed by loan officers. However, in desperation, he says that, there was no need of establishing such institutions which do not fulfill their appointments to help the needy people as required. Mr. Kilambo is on the view of the fact that, the long process of obtaining loans is too cumbersome and time consuming without success an aspect that most loan seekers gets discouraged. According to him, loan officers have been using a loophole without shame of soliciting for bribes whenever contacted by their customers at their working places. Apart from bureaucracy, banks have to be blamed for stiffer conditions says Marcelina Adoyo. According to her, Banks have been giving stringent conditions on loans to the extent that some groups fail to meet them. Speaking to Business Times recently in Dar es Salaam, she said that, although many banks have been providing loans especially to women groups, but they have still tough conditions which requires loan seekers to own things like immovable properties such as a house or a car as security an aspect that most of them cannot afford. Cornered by this writer, one lady by name of Lucia Wambura (38) who conducts a shop business selling both human and animal drugs at Kipunguni ‘A’ suburb, had long been in need of a loan from a renowned micro-finance institution, but she is yet to receive such loan owing to conditions imposed by the firm that she can’t meet. According to her, in order to fulfill one condition, she was told by loan officers to bring a contract she had had entered with the landlord in a house in which she conducts her business. As if that was not enough, she was also told to show alongside the annual property tax receipt if paid to Tanzania Revenue Authority (TRA). When contacted for comments, the head of the loan section of the National Micro-Finance Bank operating in the city who spoke on strict condition of anonymity said that, most loan seekers are not trustworthy an aspect that ought them (as bank) to investigate their customers’ businesses to establish their existence. However, an official from one famous and long serving Micro-finance institution known as Promotion of Rural Institution and Development Enterprises Ltd, in short ‘PRIDE (T) Ltd’ who spoke in strict condition of anonymity said that, the issue of bureaucracy is personal and has nothing to do with his firm’s operations. PRIDE Tanzania has been a liberator of most women groups in the country, and in view of this, the institution takes long time to verify the authenticity of the documentation produced by their customers who needs personal loans as collaterals for proof as some documents presented by their customers are not genuine. However, he added that, they have to check them thoroughly according to procedures any documents presented to them by their customers so as to see if there is any irregularities and any suspicion that might have been noticed before decisions on acceptance are made. However, he said adding that, the exercise takes about one month or two including a visit to a principal place of business. Customers might take it as an easier task and that’s why it takes long process to complete. The essence of doing this is to verify the truth before the actual money is issued as loans to would be applicants, he said adding that many of their customers’ presented documents have sometimes been found not to conform to original ones, therefore a need for more time scrutiny is essential. According to one economic analyst, Rebeca Mdoe “lack of enough capital has been a stumbling block to most newly formed business enterprises in the country which have failed to develop for lack of bigger capital. Some of these have ceased operations for failure to meet their business targets mainly due to low capital investments”.