It is quite expensive to be poor in Tanzania. A paradox? Unfortunately not.
At a very basic level, it can be difficult for farmers to hang onto any money they earn when they are surrounded by such high need from the other poor people in their village. Imagine trying to save money for a big investment or just something you really want when your neighbour’s baby is deathly ill. Of course you would help your friend or family with their urgent need. But impoverished communities always have urgent needs.
This lack of savings ability also leads to other unexpected costs. In rich countries, it is cheaper to buy in bulk. It is no different in Tanzania but impoverished Tanzanians cannot afford to invest in bulk purchases even if these larger purchases will eventually save them a lot of money. For example, a middle class Tanzanian household cooks with a gas stove that requires a gas refill about every six months. The canister costs $24 leading to cooking costs of about $50 each year. Impoverished Tanzanians cannot afford the initial investment of buying the gas stove and first canister or the $24 to refill the gas. Instead they cook with charcoal and pay $5 each week for it, leading to cooking costs of $270 each year. This is a big difference if you live in poverty! (Not to mention the lost time from cooking with charcoal rather than gas.)
Similarly, a month of phone credit costs TZS 50,000 ($22), but someone in poverty can only afford to purchase phone credit one day at a time for TZS 400 ($0.18). The “less expensive” option breaks down to 57 TZS/min compared to the monthly price of 36 TZS/min. When you live in poverty, these small amounts make a big difference.
Even the financial services that poor people can use are much more expensive at smaller scales. Although participation in formal banking institutions is rare in Tanzania, mobile banking through phone companies is extremely widespread. Fees are proportionately lower for larger transactions. A customer must pay a whopping 14% transaction fee ($0.12) to withdraw TZS 999 ($0.89) compared to a 0.2% fee to withdraw TZS,000,000 ($1,345).
This reality is part of what drives us at Seed Change. We know the poor are unable to escape poverty partially due to these types of structural barriers. With Seed Change trees, farmers can earn higher incomes which will allow them to stretch their money further. Bottom line: it’s expensive to be poor.