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Title A glimmer of hope for economic growth in Africa. Introduction Show slide with 90% not access to finance 90% of the Tanzanian population does not have access to finance Why? Traditional lending institutions such as banks do not lend to the very poor. Their business model and structures are not designed to do this. And here is the sad thing about developing countries such as Tanzania: The way out of poverty is economic growth. And economists have shown that growth is in turn dependent on the availability of finance to start and grow new businesses. Well there might be hope for Tanzania. Today I am going to share with you how a new type of financial provider has entered the lending market and are lending money to the poor. I will explain why economists are cautious about these lenders. Do they indeed signal a way out of poverty or do they in fact spell disaster for the Tanzanian economy? I hope to share with you some of the research I have done to help us answer this question. Point 1: Slide with 2 words very large SACCO’s Savings and Credit Cooperatives What exactly are these new businesses I am talking about? They are called Saving and Credit Cooperatives, or SACCOs for short. The core business of a SACCO is to provide funding to the poor. You might have heard about micro financing. Well, these are a type of micro lender, but with a unique structure As the name suggests, these cooperatives differ from banks in that they are owned and managed by their members within a democratic structure. Show slide with growth curve (same as yesterday) Here you can see the astounding growth of SACCO’s in Tanzania. Over the last 10 years they have grown by 587% Point 2 (Keep growth slide on screen). For economist such an explosive growth rate demands attention. Something significant is happening. It either signals a stairway to economic heaven or a high way to financial crisis. You have all heard of financial bubbles which after a period of rapid growth, simply burst, often leaving economic destruction in its wake. Now economists have a number of ways in which they asses the risk of this happening. It comes down to assessing whether the businesses are based on sound financial health. ( not sure if this is accurate. I think some kind of summarizing comment about these measures could help, eg financial principles? fundamentals? Sound economics?) I will share just two such measures with you: Show slide with 2 words printed very large Profitability Sustainability (While this slide is up you must explain profitability and sustainability in the simplest and shortest possible way. As you heard yesterday, the longer explanation with the ratios and percentages was simply too much for people. It might make them forget your message altogether. I have attempted an explanation of these two things below, but of course you will know if it is correct or not. so please feel free to change. And shorten it even more is you can! ) The first measure is profitability. How does the profit made compare to the money put into creating the business? Does the business actually justify the investment made in it? Or does it run at a loss? Or offer such a low rate of return that investors will eventually withdraw their money? A second measure that we use is that of sustainability. Even if a business is able to make a profit now, can the monthly income cover all the monthly expenses PLUS enough money to invest in sustaining the business and keeping it profitable? If not, this business will eventually run out of steam or crash more spectacularly leaving creditors and clients in the lurch. Point 3: So now to my research. For my PhD project in Economics, I used the measures of profitability and sustainability on these particular micro lenders in Tanzania, called SACCO’s. How did they score? Now from the outset I have to say that it is not so easy to do an analysis on this type of business. For this type of analysis economists are reliant on the financial records of the businesses in an industry. Large banks are required by law to publish audited results. Many of the Sacco’s that are springing up are very small and quite informal, and have no such audited results. Fortunately, for my research I managed to get hold of the results of about 50% of these unique micro lending businesses in Tanzania, through (very simple explanation of where you got data, or just leave out where you got it, just say you got hold of data of about 50%. people can always ask a question at the end) And the conclusion of my study is that at least for the one investigated se the news seems very good. I found that the x number of Sacco’s I had data for are indeed profitable and sustainable. Now of course those I studied were probably also the ones that were more established and more formal and therefore more likely to score high on these measures than those I did not find data for. However the point remains that micro financiers, run as cooperatives CAN in fact be run profitable and sustainably and therefore DO offer a way out of poverty. ? What is needed now might be some regulation to ensure that all Sacco’s are run responsibly. (not sure if this was what you said. Perhaps leave out) Conclusion I would like to end off by summarising the main points I shared with you today. First I pointed out that the availability of finance is crucial for financial growth in a country and that ironically access to finance is limited in many developing countries. I told you about alternative micro financiers in Tanzania that promise to wider access to finance and stimulate much needed growth in Africa.. I have alerted you to the risks involved in high growth industries and how economists can contribute through assessing the risk. Finally I hope I have also given you a glimmer of hope trough showing that sustainable alternatives to larger banks are indeed possible, opening the door to finance for the poor and creating a possible pathway for economic growth in Tanzania and other developing countries.