Deputy Minister Maghembe warns against informal loans

KILIMANJARO: DEPUTY Minister for Foreign Affairs and East African Cooperation, Dr Ngwaru Maghembe, has urged residents of Mwanga District in Kilimanjaro Region to avoid informal loans and instead utilise formal lending services to prevent negative consequences such as financial distress and mental stress.

Dr Maghembe, who is also the Member of Parliament for Mwanga Constituency, made the call while addressing residents during his constituency development tour.

“The government is doing a good job of creating a conducive environment for people to improve their livelihoods and run their businesses smoothly. That is why it introduced interest-free loans for youth, women and people with disabilities through local councils,” he said.

He encouraged residents to take advantage of the initiative, noting that proper utilisation of the loans could strengthen their businesses and eventually enable them to qualify for financing from formal financial institutions.

“If you use these loans well, they will strengthen your economic activities and eventually place you in a position to obtain loans from financial institutions, helping you avoid informal loans that have negatively affected many businesses and people’s wellbeing,” he said.

During public meetings held as part of Dr Maghembe’s visit, several residents expressed concern over rising living costs, which they said had pushed many people to resort to informal loans popularly known as ‘kausha damu’ (blood-drying loans).

ALSO READ: Tanzania, World Bank seek to help farmers’ access to agricultural loans, training

A Lang’ata Ward resident, Zainab Shaban, said many people were seeking to improve their livelihoods but lacked sufficient capital to start or expand small businesses.

“Many people want to improve their wellbeing but they lack even the basic funds to run small businesses. This situation forces some of them to take high-cost or short-term informal loans,” she said.

She acknowledged that al – though the loans help some people start small businesses, they often lead to serious financial problems when borrowers fail to repay on time.

Zainab further claimed that the proliferation of informal loans has contributed to social problems in the district, including an increase in the number of street children.

“Some children are forced out of their homes after their parents flee to escape lawsuits, humiliation and confiscation of property because they cannot repay the loans they obtained,” she said.