Young entrepreneurs in Sengerema build up their business with microcredit

[March 12, 2016]
The Dutch Sengerema Foundation started education and training of disadvantaged youngsters in the small town of Sengerema, 20 kilometers from the southern shores of Lake Victoria, western Tanzania. After one year of training and internship they get, when their results are positive, a microfinance loan from the foundation to start their own business. GoTanzania spent 2 weeks in Sengerema to get insight in how the project runs, visited the young entrepreneurs at their business and had good talks with the local administration, the CBO ('community based organisation').

In The Netherlands I already had a couple of meetings with Jeroen Vegt, member of the board of the Dutch foundation. I agreed with him about my own 'project' while visiting the Sengerema project in Tanzania. My idea was: when I take interviews, make pictures and write stories about it, this will be good marketing information for the foundation. The sponsors in Holland get insight in the results of the projects, get to know the project just by getting to know the young entrepreneurs themselves. So they can have a vision of the results of their funding activitities.
Jeroen thought this to be a good initiative. He arranged everything for me in Tanzania, so I was heartly welcomed by Maico, one of the first supported young entrepreneurs, and his family. I was guest in his house. Within just a few days I felt totally at home with his family. I enjoyed the long walks through the vast fields and shattered villages surrounding the town of Sengerema.

CBO SengeremaOn my first day I had a good conversation with the local board, the so called CBO Sengerema Young Entrepreneurs (SYE), which consists of entrepreneurs that already paid their loans back. So this is really a 'teach the teacher'-program. I told them my mission and in respons they told me everything I needed to know about how the system works.

The main condition for applying for a loan is: being without a job and having no perspectives whatsoever.
Being admitted to the program, the training starts. The first five months the students get education in English, computer skills (Word, Excel, internet), basic bookkeeping and marketing.
After this first phase they start a practical assignment: they get a small amount of money to test their business skills with. If they succeed they enter the next phase: run an internship for 3 months with some existing business. Of course this business is related to their own plans, later on, for what they need their own loan for. 

Having done also the internship and still doing good, they are allowed to write a business plan, based on which they get the approval for getting the loan. Normally the loan amount is between 3 and 4 million Tanzanian shillings, so between 1500 and 2000 dollar. They have to pay this loan back in 4 years (48 monthly stages) and also they pay 10% interest.

During this 4 years they get mental and expertise support from the CBO and also board members from Holland visit the project in Sengerema on a regular basis. The Sengerema foundation is not depending on volunteers from abroad. By time volunteers from Holland or other countries visit the project and do splendid work. Volunteers can do custimized tasks helping specific entrepreneurs with their business or can help the local board to improve administration en business assistence. But the project can run on its own, with the dedication of the local board.
For expertise volunteering the organisation does not ask for any project fee. You only have to pay a little money for food and lodging; 100 dollars in a week will do splendidly.

What I found out in Sengerema, while getting to know the entrepreneurs, is that just running the business from day to day is something completely different than really being an entrepreneur. That is where the changes lay: try to enhance their real business skills; skills that are so 'normal' for western people. The mindset of the Tanzanians completely differs from ours. Saving money for later spending is just not in the minds when there is another mouth to feed in the extended family, when a grandfather is sick, or when school fees for a nephew still are a problem. So building up new investment capital álways is a problem.

In five days I visited 13 entrepreneurs, interviewed them and made a lot of pictures. Most of the enterpreneurs are capable of speaking some English, but I could always fall back on Maico, my translator. I also interviewed Maico himself. He is a sofa maker, builds big couches, totally hand made. You would tell by the looks they just come from a factory. I visited a welder, a restaurant owner, a motorbikerepairman, two taylors, two owners of home needs shops, a telephone shop, a fashion shop, the owner of a private nursery school and finally also the owner of a medical laboratory, a place where the people can have malaria and HIV tests.

Of course sometimes the loaning process is not succesful. They don't completely succeed in getting the money for the paying back of the loan. The Sengerema foundation works with sponsorships and donations and is able the take this into account. But most of the loans are returned in the end. The entrepreneurs that I inverviewed are really doing good. Within four years they are the owners of their own business, the feel confident with themselves, really having build up a life in which they can take care of their families.

They all  want to move on further, expand their business. But making this next step, like I said before, is so difficult, just because really saving money, for later use, is extremely difficult for them. So most of the loaners are really eager to... getting a new loan. But of course that is not really how it works! While interviewing I often felt like someone who was there to give business consults.

My last interview I had with Ramadan, a 27 year old guy who has a diploma from a medical laboratory education. When he wrote his business plan, he aimed at starting his laboratory in an faraway village on the shores of Lake Victoria. There were no facilities in that village to do medical tests. So now he has build up a kind of monopoly in Kijiweni, that village. He's an important man in the village. He is a real smart business man. Now he also wants to open up his pharmacy, so he doesn't have to send them to another pharmacy after they get the results from his tests. With a twinkle in his eyes he tells me this is just the next step. Later on he wants to build a dispensary out of his growing business and then his big dream will come closer: building his own hospital!

The system in Sengerema has, over the last 10 years, proved to work. The foundation is now working on building up new project locations in Tanzania. In February a new location is started in Misungwi, about 40 kilometers from Sengerema. About 70 proposed young entrepreneurs start their training. Even government official from Dar es Salaam went over (1000 kilometers) to visit the startup festivities.
Right now the foundation is having talks with government banks about supporting funds. The governmental Youth Development Fund is interested in working together with the Sengerema project. The government official, present in Misungwi, told the Sengerema board members that the national project has a lower pay back percentage than Sengerema has!

At this moment the Sengerema foundation is working on a general platform for microfinance projects that makes implementation of the system easier possible on other project locations. You can read some on the website YEP Tanzania (Young Enterpreneurs Program). Although the website is on the air, it's not yet completely filled.
To me it was a great experience to spend a couple of weeks in Sengerema and I already have planned to come back in June.

Niko Winkel, March 12, 2016

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