Tanzania Country Scan Microfinance

info@triodosfacet.nl www.triodosfacet.
nl
Triodos Facet
P.O. Box 55, 3700 AB Zeist,
The Netherlands
Tel.: +31 (0)30 6933766
Fax.: +31 (0)30 6923936
Tanzania
Country Scan Microfinance
For Hivos/MicroNed
December 2007
FINAL
LIST OF ABBREVIATIONS
ACB
ADB
BOT
CCM
CIDA
CRDB
CMSA
COASCO
DANIDA
DFID
DID
DSM
EAC
EFA
EKN
FERT
FICO
FSDT
GDP
GOT
IFAD
IFC
IFM
IMF
KFCB
NMB
NGO
MFC
MFI
MUCCOBS
PTF
RFSP
SACCO
SCCULT
SECO
SEDA
SELF
SIDA
SMEs
TA
TANZALEP
TBA
TIOB
TOR
Tsh.
VICOBA
VSLA
WB
Akiba Commercial Bank Ltd.

African Development Bank
Bank of Tanzania
Chama cha Mapinduza
Canadian International Development Agency
CRDB Bank Ltd.
Capital Markes and Securities Authority
Cooperatives Audit and Supervision Corporation
Danish International Development Agency
Department for International Development (UK)
Dveloppment International Desjardins
Dar es Salaam
East African Community
Equity for Africa
Embassy of the Kingdom of the Netherlands
Formation pour lEpanouissement et le Renouveau de la Terre
Financial Cooperative
Financial Sector Deepening Trust
Gross Domestic Product
Government of Tanzania
International Fund for Agricultural Development
International Finance Corporation
Institute of Finance Management
International Monetary Fund
Kagera Farmers Cooperative Bank
National Microfinance Bank Ltd.
Non-governmental Organisation
Microfinance Company
Microfinance Institution
Moshi University College of Cooperative and Business Studies
Presidential Trust Fund
Rural Financial Services Support Project
Savings and Credit Cooperative Society
Savings and Credit Cooperative Union League of Tanzania Ltd
Swiss Governments State Secretariat for Economic Affairs
Small Enterprise Development Agency
Small Enterprise Loan Facility
Swedish International Development Agency
Small and Micro Enterprises
Technical Assistance
Tanzania Leasing Project
Tanzania Bankers Association
Tanzania Institute of Bankers
Terms of Reference
Tanzanian Shillings
Village Community Banks
Village Savings and Loan Associations
World Bank
Triodos-Facet 2007
Tanzania Country Scan Microfinance
List of abbreviations
TABLE OF CONTENTS
INTRODUCTION........................................................................................................................ 1
1 General Information .......................................................................................................... 2
1.1
SOCIO-POLITICAL CONTEXT............................................................................................ 2
1.2
ECONOMIC CONTEXT ..................................................................................................... 3
2 The Financial Sector ......................................................................................................... 5
2.1
GENERAL ...................................................................................................................... 5
2.2
NATIONAL POLICIES ....................................................................................................... 5
2.3
THE LEGAL FRAMEWORK ................................................................................................ 7
3 microfinance services....................................................................................................... 9
3.1
DEMAND FOR FINANCIAL SERVICES ................................................................................. 9
3.2
MICROFINANCE SUPPLIERS .......................................................................................... 10
3.3
SUPPORT AND FUNDING NEEDS .................................................................................... 16
3.4
DONORS AND INVESTORS ............................................................................................. 17
3.5
SUPPORT GAP AT INSTITUTION LEVEL............................................................................ 18
3.6
SUPPORT GAP AT CLIENT LEVEL ................................................................................... 19
4 Actors on sector level ..................................................................................................... 20
4.1
OVERVIEW OF ACTORS ON SECTOR LEVEL .................................................................... 20
4.2
SECTOR NEEDS ........................................................................................................... 22
4.3
SECTOR SUPPORT ....................................................................................................... 24
4.4
SECTOR GAPS ............................................................................................................. 24
4.5
IMPACT MEASUREMENT & SOCIAL PERFORMANCE MANAGEMENT ................................... 24
5 Conclusions & Recommendations................................................................................. 26
ANNEXES:
Annex 1
Annex 2
Annex 3
Annex 4
Annex 5
Annex 6
Terms of Reference
Directory of Actors at Sector Level
List of Relevant Documents and Resources
Dutch Donors & Investors in Microfinance, Tanzania
Other Donors & Investors in Microfinance, Tanzania
Overview of Microfinance Providers in Tanzania
Triodos-Facet 2007
Table of contents
INTRODUCTION
MicroNed is a network that brings together the four Dutch development organisations Cordaid,
Hivos, ICCO and OxfamNovib. It was created in 2006, and aims to provide a structural basis for
coordination and establishment of a specialised sector approach to microfinance.
MicroNed specifically aims to strengthen microfinance sector interventions on national level,
geared to the development of an enabling environment. Coordination and collaboration in countries
and regions as well as on specific themes play a central role. MicroNed will not provide direct
support to retail MFIs; this is the exclusive domain of its members. MicroNed will harmonise its
members activities as far as grant support for sector development in selected focus countries is
concerned.
Tanzania is one of the nine focus countries of MicroNed. Hivos is country coordinator for Tanzania
within MicroNed, and responsible for developing a country sector development strategy, to serve
as the basis for coordination between the four MicroNed members.
The objective of this assignment is to produce a Country Scan on Microfinance for Tanzania. This
document will serve as input to Hivos and MicroNed in the formulation of a country sector
development strategy for Tanzania.
Marjan Duursma
Triodos-Facet
Dar es Salaam, October 2007
Triodos-Facet 2007
GENERAL INFORMATION
1.1
Socio-Political Context
Basic Socio-Political Indicators1

Area, km
Capital
Population
% below 15 years
% living in rural areas
Population growth
Population density
Ethnic composition
Religious composition
National language
Adult literacy
Life expectancy at birth
People with HIV/Aids
Ranking in Human Dev.
Report
ODA Category
Proportion poor people
Ranking in Gender
Empowerment Measure
945,000 km
Dodoma (political) ; Dar es Salaam
(commercial)
37.6 Million (2004)
46% (2004)
66% (2004)
1.7% per year (2004 2015)
37 people per km
> 80% Bantus (over 120 ethnic groups)
Indian minority, dominating trade
Christian 50.4%, Muslims 31.8%, African
Traditional 16.1%
Swahili, English
Female 62.2%, Male 77.5% (>15 years)
Female 46.2 years, Male 45.6 years
6.5% (in age group 15-49 years)
nd
162 (out of 177 countries, 2004)
Least Developed Countries & Territories
2
50,87% (2004)
th
36 (out of 75 countries, 2004)
Political structure / political forces / conflicts

Tanzania became independent in December 1961. Politically Tanzania has been one of Africas
most stable countries. There are no major conflicts between religions or tribes. Tanzanias
transition from a one-party socialist political system under the Chama cha Mapinduzi (CCM) to a
multi-party political system has been without social and political upheavals. Executive power rests
with the president and the ruling CCM. The latter is very often the only party within the villages,
where the CCM leadership still has a great influence. Government transparency and democratic
dialogue are limited. During elections in 2000 and 2005 opposition parties were divided and
effective social and political harassment of opposition people by security forces prohibited equal
opportunities and a leveled playing field. In both years, elections on Zanzibar (where the main
opposition party CUF has its stronghold), were accompanied by political violence. In 2005, J.K.
Kikwete was elected as President. Next elections are scheduled for 2010.
Tanzania is one a founding member of the East African Community (EAC), which has five
members: Tanzania, Kenya, Uganda, Rwanda and Burundi (latter two became full members in July
2007). The 3rd EAC Development Strategy (2006-2010) will guide the members to increased
cooperation. Since January 2005, the EAC functions as a customs union, as a first step towards a
common market and East African Federation.
Incidence and characteristics of poverty, income distribution
After over four decades of independence Tanzania remains one of the 10 poorest countries in the
world. Poverty remains widespread and deep, with half of Tanzanians living under conditions of
deprivation, concentrated in the rural areas where approximately 66% of Tanzanians live. Poverty
is closely related to the low profitability of agricultural activities. Major causes of concern are the
unequal distribution of wealth and resources. The HIV/Aids situation in the country is less
worrisome than in neighboring countries but still HIV/Aids is a leading killer disease for the age
1
2
Sources: UNDP Human Development Report 2006 (based on 2004 data).

% of population living in households with consumption or income per person below the poverty line.
Triodos-Facet 2007
group 15-49. This, in combination with population growth, results in 46% of the population being
below 15 years of age.
Although Tanzania experienced relatively rapid growth in per capita GDP over the past decade,
decline in poverty has been low and concentrated in urban areas. Unemployment is formally about
16%; underemployment is widespread. Therefore, allowances and other non-salary opportunities
remain important in the survival strategies of many, especially civil servants. Corruption at all levels
remains a major challenge.
1.2
Economic Context
Basic Economic-Financial Indicators3

Gross Domestic Product
GDP per capita
GDP growth rate
Main exports
Inflation rate
External debt ratio
Exchange rate
Treasury Bills Weighted Average Yield
Overall lending rate

Short term lending rate (< 1yr)
Time Deposit (1 yr)
US$ 12.956 billion (2006)

US$ 339 annually (2006)
5.9% (2006)
coffee, minerals, cashew nuts, tobacco, cotton, tea
7.5% (2006)
48.4% of GDP (2006)
Slow annual decline against US$, but since 2002 strong decline
against Euro (due to dollar devaluation against Euro)
15.4% (August 2007)
16% (August 2007)
14% (August 2007)
9% (August 2007)
General economic development

Tanzanias economic performance has been strong over the past decade, supported by prudent
macroeconomic policies and far reaching structural reforms. The structural reform agenda has
focused on economic liberalization, improved public financial management and tax and customs
administration, and financial sector development. Together with infrastructure investment and
structural policies to enhance the business environment, this has contributed to solid productivity
growth. Since 2000, real GDP growth has averaged 6.3% per annum, one of the highest in SubSaharan Africa. Inflation rates have been around 4-6% in the same period. Tanzanias external
debt burden, in net present value terms, has been reduced to about 16% of GDP at the end of
2006, due to improved tax revenue performance and debt relief under the Enhanced Heavily
Indebtedness poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative.
Nevertheless, with a GDP per capita of less than $340 and widespread poverty, Tanzania still has
a long way to go to reach its Millennium Development Goals (MDGs). Tanzania remains highly
dependent on aid, with over 40% of its national budget funded by donors (11% of GDP).
Agricultural sector
Tanzanias economy is still predominantly agricultural. Its share in GDP is 45%, in exports 75% in
employment 80%. Subsistence cultivation and smallholder cash crop production are predominant.
The main subsistence crops, accounting for 55% of total agricultural output, are maize, sorghum,
millet, cassava, rice plantains, wheat and pulses. Yields are poor due to low input use and limited
access to new technologies. The agricultural sector has been growing modestly, although
production levels are still far below potential, and have been affected by recurrent droughts.
Environmental degradation is widespread in many rural areas due to inappropriate land use and a
lack of appropriate technologies. Agricultural growth has occurred mainly through the expansion of
areas under cultivation.
Monetary indicators
Monetary aggregates have grown at a stable pace since 2000, reflecting rapid financing
deepening, albeit starting from a very low base. Bank lending to productive non-government
3
Sources: IMF: Country Report Tanzania, Nr. 07/246, July 2007 and BOT Monthly Economic Review,
August 2007.
Triodos-Facet 2007
sectors has expanded sharply (average 32% per annum). However, small and medium enterprises
and agricultural activities in rural areas, have so far failed to benefit from this increase. The spread
between lending and deposit rates has continued to narrow, indicating more efficient intermediation
by banks (5% in August 2007). Nevertheless, general lending rates remain high.
Treasury Bill rates have become increasingly volatile since 2005, and overall yields remain high
(between 12 18% in 2006/2007). This reduces the financial sectors incentive to broaden the
provision of credit to the private sector. In the June 2007 budget, the GOT introduced various
strategies to reduce the level and volatility of Treasury bill yields, including focusing its fiscal policy
on minimizing domestic borrowing, and transfer of all government deposits from commercial banks
to the central bank (approx. Tsh. 1 Trillion). This will especially affect NMB and CRDB.
Triodos-Facet 2007
THE FINANCIAL SECTOR
2.1
General
Tanzanias financial sector, and the microfinance industry in particular, is relatively young. Over the
past fifteen years, the financial sector as a whole has undergone major changes from the originally
state-owned and -controlled system to a liberalized financial sector. Principal elements of reform
included liberalization of interest rates, restructuring of state-owned financial institutions,
strengthening the BoTs role in regulating and supervising financial institutions, and allowing entry
of local and private banks into the market.
The far-reaching reforms have assisted to diversify the banking sector, and develop a small capital
market. However, despite the progress, Tanzanias financial sector remains relatively small, and
access to financial services remained stunted for the majority of Tanzanians.
By December 2006, total bank assets stood at Tsh. 6.6 Trillion, total customer deposits amounted
to Tsh. 5.3 Trillion, with Tsh. 2.4 Trillion outstanding in loans and advances. In all three aspects,
there has been over 200% growth compared to 2002. The sector counted 294 bank branches and
176 ATMs, and employed 6,400 Tanzanians4.
A number of market trends can be observed:
As the above figures show, there is excess liquidity in the formal banking sector. Governments
recent efforts to reduce the level and volatility of T-bill yields (see 1.2) is expected to further
encourage lending to the productive sector, as well as product innovations (e.g. unsecured
loans, mortgage finance, leasing). Product innovations will need to be supported by
adjustments in the regulatory framework.
Several commercial banks are entering the lower income/SME market by introducing and
refining their products for retail clients, often combined with short seminars/training for SMEs.
Particularly in individual loans to the middle and upper segment of micro-enterprises, there is
increasing competition in (peri-)urban areas, involving commercial banks, MFI-NGOs and to
some extent SACCOs and their networks. MFIs and SACCOs will need to become more
competitive, otherwise they might be forced to less profitable segments and zones.
Technological innovations are bringing financial services within reach of more people, at more
convenience. There is growth in delivery channels. Electronic banking, extension of access
points are changing the nature of banking. All major banks now have ATMs, or are in the
process of deploying them, and POS devices are entering the market, creating new
partnerships but also new regulatory challenges. Mobile phone banking is expected to become
the next revolution.
Salary-based consumption lending is on the increase. Both by commercial banks, as well as by
other new (non-regulated) providers, e.g. Blue, Bayport Financial Services, Easy Finance.
The second-generation Financial Sector Reform Action Plan approved by Cabinet (2006 2011,
with $22 million funding from WB and DFID) aims to further strengthen the banking sector, develop
financial markets, reform the pension sector, strengthen the insurance industry, provision of longterm development finance and strengthening micro and rural finance.
2.2
National Policies
Over the past 5-10 years the enabling environment for microfinance in Tanzania has improved
significantly. The GoT has come out strongly in support of the development of the industry. The
National Microfinance Policy, approved by Cabinet in May 2000, articulates a clear vision for the
development of a sustainable microfinance industry, specifying the respective roles of the key
stakeholders. According to the policy, the private sector is to be the key provider of financial
services; the Government is not to engage actively in the delivery of microfinance. Providers of
4
Source: speech by TBA Chairman (TBA Newsletter, June 2007).
Triodos-Facet 2007
microfinance are expected to apply sound financial principles in delivery of their services,
particularly with respect to pricing, loan delinquency control, financial reporting, appropriate
techniques and products, gender equity and governance.
The microfinance policy is part of the wider policy framework for Tanzania. Other national policies
and strategies with relevance to microfinance include:
The National Strategy for Growth and Reduction of Poverty (known as MKUKUTA, 2005
2010) contains Tanzanias overall development strategy. The MKUKUTA addresses three
clusters of outcomes: i) growth, and the reduction of income poverty; ii) improving the quality of
life and social well-being; and iii) strengthening governance and accountability.
Small and Medium Enterprises Development Policy, Ministry of Industry and Trade, 2002;
National Land Policy, 1995
The Government of Tanzania has also come out strongly in support of the revival and
strengthening of SACCOs. The cooperative history in Tanzania is a tainted one: in the past, the
system was highly politicised, resulting in mismanagement, poor governance and in many cases
collapse, all at the expense of poor (rural) producers and their savings.
In 2001, the Tanzania mainland Department of Cooperatives within the Agricultural Ministry was
upgraded to the Ministry of Cooperatives and Marketing. In 2002, a new National Cooperative
Development Policy was approved, in line with the 1995 International Cooperative Alliance (ICA)
Statement of Cooperative Identity and Principles.
In 2006, the Government
introduced
the
National
Economic Empower-ment and
Job Creation Programme. The
programme encourages the
establishment of SACCOs at
Ward level and offers to lend
them a total of Tsh. 21 Billion
(Tsh. 1 Billion per region,
therefore popularly known as the
JK Billions). So far, the
Government has approved NMB
and CRDB as its agents to
channel the funds to individuals
and
SACCOs.
Financial
institutions are expected to triple
the amount guaranteed by the
Government. By end of March
2007, NMB had received over
50,000 applications and stopped
accepting more. In the near
future, MFIs, SCCULT and SELF
are expected to channel part of
the funds.
The Government and BOT, with
support from FSDT, aim to
develop
a
Rural
Finance
Services Strategy in 2008.
Triodos-Facet 2007
JK Billions for SACCOs the Risks Involved

Although the recent drive has increased the popularity of SACCOs both
in the political and public arena, it is not likely to assist in the
development of long-term sustainable SACCOs, and might even be
contra-productive, for several reasons:
Interest rates to the individual borrower are capped at 10% per year.
This goes against microfinance best practices of market regulation of
interest rates and will not contribute to the sustainability of SACCOs;
There is not much expected financial benefit for SACCOs. The 10%
interest has to be shared between the SACCO and the bank
(NMB/CRDB). With their relatively weak negotiating powers, it is
doubtful if SACCOs will even manage to cover their costs of lending;
Applications from SACCOs/individuals go through financial
institutions regular channels and need to adhere to existing criteria.
Although this is positive from the best practices point of view, it has
created political tension, including pressure on the banks to revise
the loan criteria;
Experiences from previous Government attempts to reach small
producers has shown that although security has been a problem,
generally limited capacity to identify, use and manage business
opportunities has been a more serious constraint for the majority of
the poor;
Furthermore, historically, peoples attitude towards government
funding is mostly synonymous to grants, and as such does not
encourage good repayment practices;
SACCOs are not likely to be sustainable at Ward level, due to limited
scope for growth (given population distribution and level of economic
activity), as well as limited management capacities. District level
SACCOs with branches at Ward level seem to be a more promising
alternative;
It is feared that encouragement of members savings culture will not
be internalised as they are mobilised to join SACCOs to be able to
access loans. Politicization of SACCOs into a credit-first approach
may have far reach consequences, as it may erode peoples savings
first attitude.
2.3
The Legal Framework
2.3.1
BOT supervised institutions
Tanzania has a tiered structure of licensed and prudentially regulated and supervised financial
institutions through different entry requirements in terms of required minimum core capitalization,
for commercial banks, non-bank financial institutions, Micro-Finance Companies (MFCs) and
Financial Cooperatives (FICOs):
Minimum Capital Requirements
In Tsh
In USD 5
In Euro
Commercial Bank
Regional Unit Commercial Bank
5 Billion
200 Million 50 Million6
2,999,400
119,976 29,994
Non-Bank Financial Institution
100 Million 50 Million
Micro Finance Company (MFC)
800 Million (national)

200 Million (1 unit)
800 Million in savings
and deposits
$ 4,255,319
$170,212 $
42,550
$85,106
42,550
$ 680,851
$ 170,213
$ 680,851
Financial Cooperative (FICO)
59,988 29,994
479,904
119,976
479,904
The regulatory and supervisory framework includes the following Acts:

The Banking and Financial Institutions Act (2006);
The Bank of Tanzania Act (2006);
The Companies Ordinance (Cap 212).
In addition, a number of Regulations are relevant for microfinance activities:
The Microfinance Companies and Microcredit Activities Regulations (2005). This allows for the
establishment of MFCs, able to take deposits from the public, subject to supervision of BoT.
The minimum core capital requirement for MFCs has been set at Tsh. 800 Million for a nationwide network and Tsh. 200 Million for a one unit entity. So far, no MFC has yet been licensed.
Banking and Financial Institutions Regulations (1997) prescribe conditions of entry or exit into
the banking industry in Tanzania (licensing requirements).
Capital Adequacy Regulations (2001) provide for capital adequacy requirements for various
forms of banking institutions in Tanzania;
Other regulations (e.g. on management of risk assets, liquidity assets ratio, credit
concentration and exposure limits, internal control and audit).
Entities applying for a license from the BoT as a commercial bank, non-bank financial institution or
MFC have to be legally registered with the Registrar of Companies (the Business Registration and
Licensing Agency, BRELA) as companies limited by shares under the Companies Ordinance
(Cap 212).
2.3.2
SACCOs
SACCOs are formally registered by the Ministry of Cooperatives and Marketing. The Cooperatives
Audit and Supervision Corporation (COASCO) is mandated to conduct an annual external audit of
all SACCOs. In practice, supervision by the Ministry of Cooperatives and Marketing (through the
Registrar of Cooperatives) is weak. Partly this is due to lack of adequate technical staff and
resources. However, there also seems to be lack of willingness (and/or political room) to take
restrictive actions against SACCOs that do not abide by the laws.
5
15 October 2007: 1 US$ = Tsh. 1,175 and 1 = Tsh. 1,667 (www.oanda.com).

Tanzanias banking law permits the establishment and operation of licensed commercial banks and nonbank financial institutions with lower minimum capitalization requirements, depending on the size of the city
where the institution is located (see Schedule 4 and 5 of Capital Adequacy Regulations, 2001).
6
Triodos-Facet 2007
The Cooperative Societies Act, 2003 creates four cooperative tiers: primary cooperative societies;
secondary cooperative societies; apex cooperative societies and federation. The allocation of
powers between the different levels, however, is not clearly indicated in the law. In addition, the
Cooperative Rules 2004 were formulated, containing amongst others prudential guidelines for
SACCOs.
In 2005, the Financial Cooperative Societies Regulations were approved. These regulations
specify that Savings and Credit Cooperatives engaged in accepting savings and deposits from
their members for an amount totalling or greater than Tsh. 800 Million will be licensed as a
Financial Cooperative (FICO), supervised by the BOT. So far, no FICO has yet been licensed.
2.3.3
NGOs
The NGO-type MFIs are virtually unregulated, even though a number of governmental authorities
are involved in the registration of both international and local NGOs:
The Registrar of Societies under the Societies Ordinance;
The Administrative General under the Trustees Incorporation Ordinance;
The Registrar of Companies (the Business Registration and Licensing Agency, BRELA) for
companies limited by guarantee, under the Companies Ordinance (Cap 212).
Triodos-Facet 2007
MICROFINANCE SERVICES
3.1
Demand for Financial Services
There is a huge unsatisfied demand for financial services both in rural and (peri-)urban areas of
Tanzania. Approximately 70% of the population lives in rural areas and has limited to no access to
financial services. In 2006, FSDT commissioned a national survey of the demand for, and barriers
to, accessing financial services. With close to 5,000 interviews conducted, the FinScope Survey
represents the national population of 16 years and over, on the mainland and Zanzibar (21 Million
people).
FinScope contains a wealth of data, which is available to interested parties for further analysis (per
geographical area, per segment of the population, etc). Initial analysis was done by FSDT early
2007 and presented and discussed in a series of workshops (for commercial banks, SACCOs,
MFIs, mobile phone companies, researchers). Main findings from FinScope include7:
Population profile: confirms that the population of Tanzania is relatively young: 57% of the adult
population is less than 34 years, and mainly rural-based (72%). In addition, there are
approximately 14 Million people under 16 years of age, which fall outside the scope of this survey.
Exclusion: A large segment (54% overall; 45% of urban, 57% of rural) of the adult population has
no access at all to financial services, either formal or informal (overall, 9% has a formal bank
account (11% men, 5% women, 16% urban, 4% rural), 2% has access to semi-formal finance
(NGOs, SACCOs) and 35% has access to informal finance like ROSCAs/ASCAs and
moneylenders these categories are mutually exclusive). Only 20% of the population has access
to formal bank within 1 hour walking distance.
Financial literacy: is generally low, and lower still for women and for people living in rural areas
(92% of the population has heard of loans, but 84% do not understand how interest rates work, or
collateral, guarantors, opening an account etc.; 27% has never heard of a savings account).
Beyond loans and savings, financial literacy is close to nil (e.g. on insurance, ATMs). Nevertheless,
82% of the total population indicated that they would like to know how to open an account in a
financial institution. This indicates a huge need for better and more communication on financial
services with the larger population, in the right language.
Sources of income: Only 4% of the population is employed in the formal sector. Most people
make a living from agriculture, either by selling food crops (36%), cash crops (12%),
cattle/livestock produce (9%), or livestock (11%). Others run an informal small business (28%), not
(directly) related to agriculture. A large majority of people (61%) goes without cash income at
times. Many (28%) depend on getting money from family and friends.
Use of credit and loan facilities: of those that borrow, most (38%) turn to family and friends. An
additional 33% has a loan from a kiosk, 23% borrows in-kind (e.g. livestock). Only 4% said that
they have a loan from a bank (5% of men, 1% of women). SACCOs and MFIs serve only a small
percent of all borrowers; 9% and 6% respectively.
Use of savings facilities: most people with money do not save it with a bank or financial
institution. Of those who save, four out of ten favour saving in-kind (even more so in rural areas)
and three out of ten say they keep money in a secret hiding place (similar for urban and rural).
Another interesting aspect is that of the people with a bank account (9%), many also save with or
borrow from informal providers (48%), SACCOs (26%) or MFIs (15%).
Source: Brochure on FinScope Key Findings (2006), and statistics presented in the FSDT workshops (see
http://dgroups.org/groups/FSDT-Tanzania). Unfortunately, there is no comprehensive report with analysis,
conclusions or recommendations from the survey. Next FinScope survey is planned for 2008.
Triodos-Facet 2007
Non-monetary financial services: Out of the 54% that has no access at all, 20% uses nonmonetary products and transactions (e.g. barter, savings-in-kind). In-kind transactions are
especially popular in the rural areas (used by 84% of the rural population, 16% of urban
population). Similarly, 80% of the rural population have savings in-kind, compared to 20% of the
urban population. Savings in-kind are primarily in livestock (goats, cows), but also to a lesser
extent in agricultural produce, food, entertainment items (e.g. radio), means of transport (e.g.
bicycle), household items (e.g. salt), agricultural inputs and clothing.
Transferring money: 90% of all remittances are within Tanzania. When people want to transfer
money around the country, they are seven times more likely to use a personal contact, and three
times more likely to use a courier (usually a bus), than any kind of financial institution. Women use
any method slightly less often than men.
Technology: the internet and mobile phone technology is expanding the potential for financial
service customers more rapidly than anything else. Although the number of people who use
internet is very low (9% overall, 23% in urban and 4% in rural), nearly half the population already
has access to a mobile phone. Internet access is expected to increase in the medium term when
connectivity speed increases and cost goes down (e.g. through EASSy project connecting
Tanzania to international glass fibre network in 2-3 years time).
3.2
Microfinance Suppliers
The principal providers of financial services to poor and low income households in Tanzania
consist of licensed commercial banks, regional and rural unit financial institutions, SACCOs and
several local and international NGOs.
Currently, there is no comprehensive, detailed data available on the supply side of financial
services. FSDT is planning to conduct a supply side survey in 2008. Below follows a description of
the various categories.
3.2.1
Regulated and Supervised Institutional Providers
As per mid 2007, Tanzania had 23 commercial banks, 5 regional unit banks (Kilimanjaro
Cooperative Bank, Kagera Farmers Cooperative Bank, Dar es Salaam Community Bank, Mbinga
Community Bank, Uchumi Commercial Bank), 3 non-bank financial institutions8 (Tanzania
Investment Bank, Tanzania Postal Bank and Twiga Bancorp) and 2 regional unit non-bank
financial institutions (Mufindi Community Bank and Mwanga Community Bank).
There are three commercial banks with financial services and products aimed at the poor and low
income households: National Microfinance Bank (privatized in 2005 to a consortium led by
Rabobank Netherlands, 120 branches nation-wide); CRDB Bank (40 branches nation-wide) and
Akiba Commercial Bank (5 branches in Dar es Salaam and Arusha, over 15,000 microfinance
clients). The Tanzania Postal Bank, a state-owned non-bank financial institution, provides a variety
of savings deposit services nation-wide (total over 100 outlets, and more than 1 million account
holders) and has entered into micro-credit provision on a small scale.
NMB has by far the largest network of branches, followed by CRDB. Barclays Bank has recently
turned its strategy around, and intends to focus on lower segments of the market. It will increase its
currently small network to 24 branches in 14 regions by early 2008, using cheaper methods: reinforced containers, rather than the traditional, expensive brick and mortar branches. In addition,
the National Bank of Commerce (NBC) has vowed to go rural, and is increasing its branches from
the current 42 to over 50 early 2008, using pre-fabricated (and thus cheaper and more flexible)
branch buildings.
8
NBFIs are restricted in some areas, e.g. they are not allowed to offer current accounts to their clients.
Triodos-Facet 2007
10
A new entrant into the market has recently opened its first branch in Dar es Salaam: Access Bank
Tanzania, which will focus on SMEs and the low income population. Shareholders include Access
Microfinance Holding (38%), ADB, BOI, IFC and KfW (all 15.8%). Grameen Bank is also
considering to start operating in Tanzania - initial discussions were held with GoT and BoT mid
2007.
Currently there is a trend of commercial banks down-scaling and entering into microfinance (both
at the wholesale and the retail level). CRDB provides microfinance services through SACCOs:
more than 270 SACCOs are linked to CRDB (> 140,000 members), and at least Tsh. 25 Billion has
been loaned to these SACCOs in 2006. With assistance from DANIDA (also 30% shareholder in
the bank), CRDB has developed an effective business model that combines tailor-made capacity
building with provision of financial services. CRDB has established a separate subsidiary company
to drive the growth of this product. SACCOs also make use of the TemboCard (debit card) through
CRDBs ATM (>40) and POS network (>600).
NMB is another major player, with large potential given its network of over 120 branches. Since
2006, the influence of Rabobank Netherlands and its consortium is increasingly apparent in the
strategic direction of the bank, including a stronger focus on rural lending. NMB is lending to both
the top segment of MFIs as well as SACCOs and smaller MFIs.
Uchumi Commercial bank is also on-lending to SACCOs (63 by end of 2006), and so is Mbinga
Community Bank. Other commercial banks active in the wholesale market include Standard
Chartered (Tsh. 5 Billion for wholesale to MFIs, including PRIDE), CitiBank (Tsh. 24 Million to
BRAC in DSM), Federal Bank of the Middle East, and to some extent Akiba Commercial Bank and
Azania Bank (both overdraft facilities only).
As per BOT regulations, unsecured loans to a single borrower may not exceed 5% of a licensed
banks capital, with acceptable collateral limited to cash or near cash securities. This ceiling is
likely to have an adverse impact on the wholesale lending by licensed banks, including regional
banks, to microfinance NGOs or SACCOs.
In general, the commercial banking system has excess liquidity which is still mostly invested in
government bonds. As the economy expands, investment opportunities grow and the remuneration
of government bonds is going down, the interest of banks to look for alternative markets will
continue to grow, both at a retail level (e.g. SME lending, see 3.2.5) and at the wholesale level.
3.2.2
NGOs
Most NGO-type MFIs are registered as companies limited by guarantee, societies or trusts. The
main players include PRIDE-Tanzania (>90,000 active borrowers), FINCA-Tanzania (>43,000
active borrowers), SEDA (>17,500), BRAC-Tanzania (>50,000) and Presidential Trust Fund
(>10,000). In addition there are a number of smaller NGOs, whose outreach is limited to their
immediate geographical area, including SEF and FAULU-Tanzania (both >2,000 active borrowers),
WEDAC in Kilimanjaro (>2,000 active borrowers) and FAIDERS in Biharamulo. SELFINA (>1000
active clients) specializes in micro-leasing.
Other, relatively new entrants into the Tanzanian market are Tujigenge Afrika, Easy Finance (>
1,100 active borrowers) and GroFin Tanzania. All operate in Dar es Salaam. Another new entrant
is Micro Provident Tanzania (Faidika), with employee-based lending through 7 branches.
Most of the NGO-type microfinance players are credit-driven and mainly based in (semi-)urban
areas. Some (notably SEDA, PRIDE, FINCA) are in the process of transforming into Microfinance
Companies (MFCs), so as to be able to attract savings from the public. However, the requirements
for an MFC license are stringent and these transformation processes will take time.
Triodos-Facet 2007
11
BRAC started operating in Tanzania mid 2006, and in 1 years managed to grow to 40 branches
in 6 locations, with a total of over 50,000 members (November 2007). Clients are mainly based in
urban and semi-urban areas, all are women. In the course of 2007, BRAC started introducing its
non-financial services, mainly in the area of agriculture/livestock and health.
The major MFIs (incl. FINCA, PRIDE and SEDA) have reached financial self-sufficiency (on a selfreporting basis). However, the transformation process is costly and likely to reduce self-sufficiency
for a certain period (as experience of Micro Deposit-taking Institutions in Uganda showed). Other
financial NGOs generally have not yet reached full sustainability and remain dependent on donor
support.
3.2.3
Savings and Credit Cooperative Societies
SACCOs are the main providers of financial services in the rural areas. In December 2006, there
were over 3,500 SACCOs registered with the Ministry of Cooperatives and Marketing, with
approximately 420,000 members9. About 60% can be classified as rural and 40% as urban (mostly
wage-based). Over the past two years, the number of SACCOs has increased rapidly (to a large
extent, recent growth can be attributed to the JK Billions, see 2.2), however, the average number
of members per SACCO has come down to about 120.
In general, capacity in SACCOs in Tanzania is weak. There is lack of full-time staff; leaders,
managers and staff lack training, adequate record keeping systems and appropriate facilities
(secure, with professional image). The majority of rural-based SACCOS are very small (in terms of
membership and savings and therefore loan portfolio) pursuing the atomized model. Sustainability
of such stand-alone rural SACCOs is questionable, due to sparse population, limitations in
infrastructure (roads, power, and communication), subsistence economy with limited business
accentuated by seasonality and difficult loan diversification (cotton, coffee, tobacco) thus high
risks.
Current trends in microfinance thinking, based on worldwide experience, increasingly agree that
stand-alone SACCOs are not likely to survive in the long run. External monitoring, supervision and
support will continuously be required, in order to allow the SACCOs to grow and prosper. In
addition, there are common, specialized needs amongst SACCOs like liquidity management,
insurance and auditing, which are better placed in an intermediary organisation.
So far two relatively new networks of SACCOs have emerged in Tanzania, where SACCOs own
shares in the intermediary organisation and pay for the services delivered:
Dunduliza Limited: Dunduliza is a company limited by shares, an off-spring from FISEDA,
registered in 2004. Dunduliza receives funding from FSDT, and technical assistance from
Desjardins International Development (DID). Dunduliza has 34 associated SACCOs (> 52,000
members) in three regions: Ruvuma, Lake Zone and Dar es Salaam. Services include training to
the SACCO staff and leaders, material support (building, safe, stationary, furniture and MIS), salary
for the SACCO-manager and intensive performance monitoring. Dunduliza as a network - is
aiming to become licensed by the BoT as a FICO.
Umoja wa SACCOs Wakulima (USAWA) was registered in 2006 as a company limited by shares. It
is an off-spring from a 4-year project where FERT (a French NGO) provided support to SACCOs in
Kilimanjaro region, with funding from EU. USAWA brings together 15 SACCOs in Kilimanjaro (>
3,000 members/clients), all rural/agricultural based. Technical assistance is provided by FERT,
funding from FSDT is expected to commence soon.
There are a number of other organisations that provide capacity building services to SACCOs,
without being a network in the sense as described above. These include:
9
Source: Registrar of SACCOs, December 2006.
Triodos-Facet 2007
12
Savings and Credit Cooperative Union League of Tanzania (SCCULT), see 4.1.1.
CRDB, see above.
Rural Financial Services Programme (RFSP, a 9-year IFAD-funded programme under the
Prime Ministers Office, focussing on strengthening of SACCOs. It is being implemented in the
Northern, Central and Southern zones, head office in Mbeya. Besides training, SACCOs
receive some material support (stationary, safes). RFSP works through the government
system, i.e. the District Cooperative Officers.
KADERES, an NGO in Karagwe
MuCCOBs through its field wings, e.g. ICCDE-Dodoma
Small Enterprise Loan Facility (SELF)
Arusha Community Initiatives Support Trust (ACIST) in Kilimanjaro. With financial assistance
from Norwegian Aid (loan to ACIST for wholesale lending to SACCOs); technical assistance
from TRIAS (Belgian volunteer).
3.2.4
Other Relevant Actors
Informal savings and credit associations, in their various forms, play a significant role in creating
access to financial services in Tanzania, as the FinScope survey confirmed.
Village Savings and Loan Associations (VSLA) are informal, time-bound accumulating savings and
credit associations (ASCAs) of 15-30 people. CARE Tanzania has been using this model since
2001. Initially, CARE supported the establishment of VSLAs on Zanzibar between 2001 and 2002.
The groups continue to function and grow under an apex organisation that they run themselves,
the Jozani Savings and Credit Associations (JOSACA). In July 2006, there were 158 VSLAs with a
total membership of 4,552 (70% women)10. Various other CARE-supported projects have also
adopted (and/or adapted) the methodology. Roll-out of the Zanzibar model to one or two mainland
regions expected in 2008.
Village Community Banks (VICOBA) are informal, village based savings and credit groups being
promoted in various parts of Tanzania. For example by:
Land Management Programme (LAMP), implemented by local authorities of Babati, Kiteto,
Simanjiro and Singida districts, Kilimanjaro region (funded by SIDA, with project management
and technical assistance from Orgut, a Swedish consultancy firm);
Floresta Tanzania, an environmental NGO in Kilimanjaro (13 village banks with nearly 400
members);
World Conference on Religions for Peace (WCRP) Tanzania supports VICOBA in Dar es
Salaam for youth employment creation.
Community Conservation Banks (COCOBA) are informal savings and credit associations
supported by World Wildlife Fund (WWF) in various regions of Tanzania as part of their
conservation programmes, amongst others in Ruaha and on Mafia Island. A similar model is used
by the Wildlife Conservation Society Tanzania, around Pugu forest, close to Dar es Salaam (7
groups, 300 members).
Financial Services Assocations (FSAs) International are supported in Tanzania by Plan
International. In 2006, they had a total membership of 4,412 (52% women) in 5 FSAs around
Mwanza, Lake Zone11.
10
Source: Village Savings and Loan Associations: experience from Zanzibar, E. Anyango and others, DFSKenya and FSDU, 2006.
11
Source: Microfinance in Plan, A Brief, Delores McLaughlin, October 2006; Member-owned Financial
Institutions, lessons from Uganda and Tanzania, 1997 2004, A. Jazayeri, 2005.
Triodos-Facet 2007
13
3.2.5
Products and Services
Agriculture: Agricultural finance is yet in its infancy even though the sector provides the
mainstay for the large majority of the (especially rural) population. Some of the initiatives include:
CRDB has always been involved in agricultural lending to some extent, with varying degrees of
success. Barclays Bank recently introduced a new scheme to support commercial farming
(provide farm inputs and equipment straight from the supplier). Overall, commercial banks still
shun away from lending to agricultural small holders, as do NGO-MFIs. Rural SACCOs are
usually involved in agricultural lending, but not necessarily in a sustainable manner.
Some interesting pilots in the area of warehouse receipt schemes, e.g. by FBME Bank (to be
combined with insurance cover for stock in warehouses) and soon by NMB Bank. The World
Bank is also involved in this.
A weather insurance product has been developed, yet to be piloted further after initial pilot
phase. World Bank, Technoserve, MEDA and local insurance companies will be involved.
USAWA SACCOs, the network supported by FERT in Kilimanjaro, have developed certain
innovations for agricultural lending;
The Agricultural Input Trust Fund (AGTIF) was established by the GoT in 1994. Loans can be
accessed (for inputs and tractors) through various banks and SCCULT. Dunduliza also
borrowed funds from AGTIF in 2006, for on-lending to its SACCOs.
Tanzania Fertilizer Partnership (involving IFAD, Ministry of Agriculture, others) aims to upgrade
the agricultural supply chain, including fertilizer input.
SME Lending: The missing middle is only recently being addressed and SME finance is still in
the developmental stages. SMEs contribute over 30% of Tanzanias GDP, but lack business skills,
track record and/or collateral to meet existing lending criteria from banks. Various banks have
started to develop more appropriate products for SMEs:
Akiba Commercial Bank is traditionally focused on SMEs and developed various products;
Exim Bank received $ 6 Million from NorFund for long-term foreign currency lending to SMEs,
through its 10 branches;
CRDB has introduced an SME product, and trained over 700 SMEs, as have NBC (so far 300
SMEs attended workshops) and Barclays Bank;
BOA Bank (former EurAfrican) has a $40 Million fund Aspire Tanzania (in partnership with
GroFin and Shell Foundation) which focuses on SMEs in renewable energy;
Tanzania Investment Bank is being transformed by the GOT into a development bank, to
become a major long-term financier to productive sectors. A recapitalization effort is underway,
involving the GOT and NORSAD.
The Government introduced a Credit Guarantee Scheme for SMEs. By January 2007, loans
valued Tsh 2.2 Billion had been approved under this facility, and guarantees of Tsh. 1.1 Billion
had been issued. Various banks participate.
Equity for Africa provides equity to SMEs, with focus on agricultural and food processing and
manufacturing sectors, initially in northern Tanzania (28 investments so far, total over
100,000).
FSDT plans to conduct an SME survey to assess the demand for financial services from SMEs in
2007/2008.
Housing Finance: has been introduced recently by a few banks (e.g. United Bank of Africa), but
legal and regulatory issues impede growth.
As part of the Second Generation Financial Sector Reforms that the Tanzanian authorities are
in the process of implementing, the project will develop an integrated strategy and an action
plan for mortgage finance development. This will include implementing recommendations on
regulatory changes, liquidity mechanism and credit enhancement schemes and will particularly
include recommendations on options for enhancing mortgage finance provision to lower
income groups. The strategy will distinguish between actions needed to support development
of the primary mortgage market and extra actions eventually needed to address the needs of
low income households.
Triodos-Facet 2007
14
Low-cost housing finance: Women Advancement Trust (WAT) SACCO in DSM (largest
SACCO in Dunduliza network) is introducing low-cost housing finance. Possibly with support
from UN Habitat. FINCA Tanzania is also experimenting with housing loans.
Leasing Finance: Leasing finance is in the early development stages.

Tanzania Leasing Project (TANZALEP) is an IFC/SECO supported project to develop and
support the growth of financial leasing. The initial focus is on developing an enabling tax, legal
and regulatory framework, as an essential prerequisite for leasing development. A Leasing Act
has been developed, but is yet to be approved. In addition, TANZALEP provides leasing
product and business development support and training to banks, prospective leasing
companies, equipment supply companies, institutional investors, micro leasing companies and
various GOT departments. Tanzalep is also working on a strategy that will enable it to work
closely with MFIs, to develop micro leasing for micro enterprises. Furthermore, the
establishment of a national leasing association (TALA) is underway.
Some of the current providers include SELFINA. FINCA Tanzania offers leasing finance for
solar home systems, in partnership with Umeme Jua Limited. Tunakopesha Limited offers
(salary-based) hire-purchase services for domestic appliances, since 1993. It has 18 branches
and over 20,000 clients. The USAWA, the network of SACCOs in Kilimanjaro have also
successfully introduced leasing loans.
Micro-insurance: Micro-insurance is yet in its infancy. There are no specialized providers of
micro-insurance. The main existing insurance companies do not provide appropriate products or
services for the rural and low-income segments. PharmAccess is preparing the piloting of a micro
health insurance product, together with a local insurance firm.
Remittances: As highlighted by FinScope, the large majority of remittances is done through
personal transfer. Only a minor part is handled by the formal financial system. For example through
Western Union Money Transfer, offered by Tanzania Postal Bank, DSM Community Bank (linked
with MUCOBA) and Kilimanjaro Cooperative Bank.
HIV/AIDS: there are a few developments and partnerships in the field of HIV/AIDS and
microfinance in Tanzania.
PRIDE Tanzania is associated with the Tunajali Programme (2007 2011, with $ 56 Million
funding from USAID), which aims to provide care and (anti retro-viral) treatment to individuals
through 38 participating hospitals and health centres.
MEDA Tanzania was involved in research on microfinance and HIV-AIDS in 2005 (focus risk
mitigation strategies related to MFI clients as well as staff), followed by a workshop.
Technological Innovation:
Umoja Switch provides a shared card payment switching infrastructure and ATM network for
a consortium of six local banks (Azania, Akiba, BOA Bank (formerly EurAfrican), Dar Es
Salaam Community Bank, Twiga Bancorp and Tanzania Investment Bank). The six banks
have a total of 17 branches.
Debit Cards: CRDB introduced the Tembo card, and Tanzania Postal bank offers its TanPay
system. Both have a limited network of Point of Sale (POS) devices. There are about
200,000 Tembo-card holders. CRDB has also started to offer its Tembo cards to SACCOs.
Active use of debit cards is still limited; most clients use it for ATM withdrawals. NMB is
currently rolling out ATMs nation-wide (so far 200,000 card holders), and will have 100
ATMs by December 2007.
Credit Cards: Exim bank introduced Mastercard in July 2006 as the first (and only) bank.
SMS banking: various banks have started introduction of SMS-banking, e.g. CRDB and
NMB. This mainly involves requesting and receiving information by SMS, e.g. on account
balance, or alert message when salary has been deposited.
Triodos-Facet 2007
15
Internet banking: various banks have introduced internet banking, e.g. NBC. However, with
only 9% of the population having access to internet, this is not likely to be a driver for access
to financial services for those currently excluded.
Mobile phone banking: Mobile phone banking is expected to be a major driver that will
create access for large amounts of people given that already over 50% of Tanzanians has
access to a mobile phone. So far, one entrant into this market has been licensed by the
BOT (June 2007): E-Felusi Africa Limited, a local company. They are currently piloting their
system (mobipawa) with FMBE Bank. Other entrants are expected, notably Vodacom, which
is planning to roll out its successful M-PESA from Kenya to Tanzania in 2007/2008. Other
mobile phone operations may follow. There are regulatory issues yet to be addressed in the
process of developing mobile banking.
3.3
Support and Funding Needs
Category
Commercial Banks
Community Banks
NGO-MFIs
SACCOs
SACCO Support
Organisations
Triodos-Facet 2007

- Develop appropriate loan products & risk analysis techniques for small-holder
agriculture
- Developing appropriate loan products for SMEs & risk analysis techniques
- Build staff capacity to enter into the SME, agricultural, microfinance market
- Develop whole-sale lending linkages with SACCOs and smaller MFIs
- Support to develop other products (micro-leasing, housing finance, micro-insurance,
remittances)
- Spreading best practices & facilitate exchange of experience in mentioned
innovative products and services.
- Support impact assessment, social performance reporting, GRI
- Capacity to select, buy, introduce and manage an appropriate MIS
- Capacity building of management, staff and board members
- Support to develop new products (micro-leasing, housing finance, agricultural
lending, SME finance, micro-insurance, remittances)
- Support in transformation into a regulated MFC (TA, sub-ordinated debt, equity), for
the largest MFIs
- Capacity to select, buy, introduce, and manage an appropriate MIS
- Support to develop new products (agricultural lending, micro-leasing, housing
finance, micro-insurance, remittances, SME finance)
- Capacity building support to scale-up outreach and manage this effectively (TA,
training, grants)
- Capacity building of SACCO staff, leaders and members in SACCO management,
governance, record keeping
- Develop adequate record keeping systems (esp. weak on loan portfolio
management)
- Develop appropriate facilities (secure building, safe)
- Develop appropriate loan products (agriculture, micro-leasing)
- Develop appropriate network (legal) structures
- Support in legal and regulatory issues (federated network, FICO, other options)
- Business plan development (sources of income generation, financial sustainability)
- Capacity building of field officers in microfinance best practices (esp. loan portfolio
management)
- Appropriate MIS to monitor SACCO performance on network level
- Development of other services at network level (e.g. liquidity management,
insurance, security, lobby and advocacy)
16
3.4
Donors and Investors
3.4.1
MicroNed Members
MicroNed is a network of the Dutch development organisations Cordaid, Hivos, ICCO and Ofam
Novib. It was created in 2006 to cooperate on a structural basis with respect to the establishment
of a specialised sector approach for microfinance.
Cordaids microfinance policy focuses on a few selected countries, in which Tanzania is not
included: Ghana, Malawi, Zambia and Sierra Leone. Support to microfinance initiatives is limited to
i) those partnerships already in place before the new policy (and country selection) took effect;
ii) initiatives that fit within the programme Access to Markets, for example access to credit for
small-holder agriculture (i.e. directly linked to production).
Instruments include grants and loans.
Hivos: Tanzania is one of Hivos focus countries for microfinance. Hivos provides grants for
capacity building, and conditional grants (seed capital) to promising initiatives. The Hivos-Triodos
Fund provides loans, guarantees and equity to (more mature) microfinance institutions. Hivos is
MicroNed country coordinator for Tanzania.
ICCO: Currently, ICCO is not active in Tanzania. ICCO partners with Oikocredit and Rabobank in
Terrafina. Terrafina supports microfinance in Africa (especially in rural areas and lower segments
of the market). Currently, Tanzania is not part of the focus regions: West Africa, Great Lakes and
Horn of Africa. The number of focus countries is expected to increase in 2010. Instruments include
grants, loans and guarantees.
Oxfam Novib: Oxfam Novib provides grants for capacity building to microfinance actors in
Tanzania. Its microfinance strategy includes a focus on increasing rural outreach, women/gender
mainstreaming and encouragement of competition, with the aim of reducing interest rates. Triple
Jump, a fund management company, currently manages the Oxfam Novib Fund (targets emerging
MFIs, loans size between $150,000 and $1 Million) and ASN-Novib Fund (targets
expanding/mature MFIs, loan size between $500,000 and $5 Million). Triple Jump Advisory
Services provides technical assistance and consultancy services to Triple Jump supported MFIs.
In 2006, the three MicroNed members working in Tanzania (Cordaid, Hivos and Oxfam Novib),
granted 382,300 to 7 microfinance organizations. Their outstanding loan portfolio totaled
3,660,183 in loans and equity to 7 MFIs by 31st December 2006 (with two institutions receiving a
combination of grant and loan/equity: WEDAC and SEF). The two largest clients are PRIDE
Tanzania (nearly 50% of total loan/equity portfolio, by HTF and Oxfam Novib) and Akiba
Commercial Bank (32% of total loan/equity portfolio, by HTF). See Annex 4 for details.
3.4.2
Other Donors and Investors
The Financial Sector Deepening Trust (FSDT) is the major donor in the microfinance market in
Tanzania. FSDT was established in 2004 as a joint initiative of four donors: EKN, DFID, SIDA and
CIDA. DANIDA joined in 2005. Since 2006 the World Banks Improving Access to Financial
Services programme is also channelled through the Trust. FSDT supports three pillars of financial
sector development: i) expanding the scale and viability of financial institutions, ii) financial sector
infrastructure (including capacity building) and iii) the policy, legal & regulatory framework. FSDT
provides grants, loans, guarantees to commercial banks and debt/equity instruments such as
convertible loans (against market interest rates/fees). All donors are member of the Programme
Investment Committee (PIC). The total budget for FSDT is around US$ 50 million for 2006 to 2010.
Actual disbursements of funds is picking up in 2007. It took longer than expected to hire a qualified
team for the Trust and the Trust had to invest a lot of time in developing a pipeline of projects.
Triodos-Facet 2007
17
Priorities for FSDT for 2008 include:

Conducting a microfinance supply side survey, and an SME demand survey;
Developing a rural financial services strategy for the BOT and GOT (including SACCOs);
Developing a financial literacy strategy;
Capacity building, principally for SACCOs a national training and standards programme for
SACCOs and other small MFIs;
SACCO networking developing more programmes along similar lines to Dundulizas;
Developing programmes to support informal financial groups;
Developing enabling environment for mobile phone banking. Vodacom is planning to roll out its
MPESA mobile banking in Tanzania in 2008 (with internal resources, based on pilot in Kenya).
FSDT is interested to support a second commercial provider to pilot mobile phone banking;
Agri-finance: weather insurance, warehouse receipt schemes etc.;
Develop facility to provide MIS advice and support for MFIs and small banks;
Build capacity in banks and MFIs to improve SME lending;
Support to various MFIs (banks, NGOs, SACCO networks) to increase outreach
Apart from the three MicroNed members, there are a few other Dutch donors and investors active
in microfinance in Tanzania. These include DOEN Foundation/Triodos DOEN, FMO, Ministry of
Foreign Affairs, Oikocredit, Rabobank, and Rabobank Foundation. Total grants provided amounted
to 530,000 to two institutions in 2006 (mainly Ministrys support to FSDT) and 933,557 in loans
and equity to 4 institutions (36% of the total in Akiba, by Triodos DOEN and FMO). See Annex 4
for details.
Other major international donors and investors include Africap, Care International, DANIDA, IFAD
SIDI and Stromme Foundation. See Annex 5 for details.
3.5
Support Gap at Institution level
There are huge gaps still to be filled at institution level. The Tanzanian economy in general and the
financial sector in particular, still lack sufficient base capacity in terms of human resources and
effective and efficient organisations. This lack of absorption capacity at institutional level is
considered the major bottleneck in developing the microfinance market in Tanzania.
Currently, the major donors and investors, including MicroNed members, all support the same top5 microfinance institutions (ACB, FINCA, PRIDE, SEDA, BRAC). Additionality should be a point of
attention for MicroNed members. So should creating leverage (making additional funds flow to the
microfinance market as a result of the donor/investors intervention). With excess liquidity in the
national banking system, the creation of wholesale linkages should be a priority. One way of
creating leverage is through using guarantees, but this instrument is not widely used by donors and
investors active in Tanzania.
Other major bottlenecks affecting all financial institutions and their limited rural outreach are
beyond their (and their donors) control. Structural weaknesses in power supply (most rural areas
have no electricity), roads and telecommunications all limit growth of microfinance actors. Reform
of the agricultural sector by the GOT is another area that would support the growth of the
microfinance market.
The support and funding needs as identified per category in 3.3 have been ranked in order of
priority. Dutch MicroNed members could contribute to all or a selection of categories. Additionality
(notably with FSDT) would be found especially in the smaller and more risky investments. Given
the generally weak capacity in the less mature MFIs, SACCOs and their networks, the priority of
grant funding should be on capacity building, including bringing in expert (if necessary
international) on-the-job training, coaching and TA, with regular contact and follow-up.
Triodos-Facet 2007
18
3.6
Support Gap at Client level
There are huge gaps at client level, as was highlighted by the FinScope survey (3.1). Only 9% has
access to the formal financial system, 2% to NGO-MFIs and SACCOs, and 35% to informal finance
leaving 54% of the population over 16 years completely excluded.
At client level, the three main bottlenecks on the demand side are i) limited capacity to invest
money effectively (limited basic education, lack of entrepreneurial attitude, lack of business and
management skills; ii) lack of financial literacy; iii) lack of collateral.
Priorities at client level should therefore include:
Improve financial literacy, especially in rural women and children (primary schools), starting
with basic financial products;
Access to savings and loan products that are appropriate, are brought physically close to the
(rural) client, and fit their needs. Given that currently the majority of all savings is either nonmonetary, kept at home or in the informal system, promotion of a savings culture should be a
priority. Given that the large majority of the rural poor depend on agriculture, agricultural loan
products and micro-leasing should also be part of the priorities. Given that physical access is a
major bottleneck in Tanzania, support to innovative mechanisms for financial services delivery
should be part of the strategy (mobile phone banking, rural mobile banking vans, sms-banking,
POS devices, smart cards etc
Improving outreach of financial services to the currently excluded will need to be supported by
appropriate strategies in the area of Business Development Services and access to markets for
small producers, to improve the capacity to invest money (savings or loans) effectively.
Investing in education, vocational training centres and business support centres enhances
business skills and increases the number of bankable projects.
Triodos-Facet 2007
19
ACTORS ON SECTOR LEVEL
4.1
Overview of Actors on Sector Level
4.1.1
Networks and Associations
There are various networks and associations within the financial sector. However, representation is
fragmented according to legal status (commercial banks, community banks, SACCOs). The
microfinance sector lacks a network or association that can bring together the variety of players
and represent their common interests.
The Bank of Tanzania (BoT) is the Governments focal point in microfinance, has the following
responsibilities: develop a policy, legal and regulatory framework; guide the development of the
sector; coordinate Government intervention and interface with other stakeholders in the
field; monitor performance of the sector; and disseminate relevant information to the public (e.g.
through the microfinance sub-web on BoTs website).
Tanzania Bankers Association (TBA) was established in 1995 and has 27 members (December
2006). Membership of TBA is open to all banks and financial institutions licensed by the Bank of
Tanzania to carry on banking business in Tanzania. TBA has produced a Code of Banking Practice
which is about to be adopted. In addition, ownership and management of the Dar es Salaam
Electronic Clearing House will be migrated from the BoT to TBA. TBA also produces regular
newsletters.
Coalition for Microfinance Practitioners and Service Providers was established as a company
limited by guarantee in June 2006. It has 14 fully paid up members (24 registered members). The
coalition is led by interim leaders (including Mr. Joel Mwakitalu of SEF and Ms. Felistas Coutingho
of Tujijenge Africa). An AGM and election of the board is planned for early 2008. So far, the
coalition has organized a few events (e.g. a workshop on MFC regulations with BoT). The initiative
is much welcomed, as the Tanzania Association of Micro Finance Institutions (TAMFI) has been
dormant for a number of years and is considered beyond resurrection.
Community Banks Association of Tanzania: The five community banks in Tanzania have formed
an association, chaired by Mwanga Rural Community Bank.
Savings and Credit Cooperative Union League of Tanzania (SCCULT) is the apex body of
SACCOS in the country. More than 700 SACCOs out of 3,500 are members of SCCULT. However
most of the membership in SCCULT is urban and employee based. The apex is envisaged to
provide technical support to members including common and specialized services like internal
auditing, insurance, supply of stationeries and training, lobbying and advocacy. However,
SCCULTs capacity is limited, in terms of staffing, financial resources and equipment. SCCULT
also has a wholesale Credit Fund for on-lending to SACCOs, which has attracted many new
members.
Tanzania Federation of Cooperatives (TFC): SCCULT is one of the founding members of TFC.
TFC was registered in 1994 as a national cooperative umbrella organization, to unite all registered
cooperative organizations (through their credit unions/apex).
The Capital Markets and Securities Authority (CMSA) is a Government Agency established to
promote and regulate securities business in the country. It was established under Capital Markets
and Securities Act, 1994. CMSA's Mission is to design and implement purposeful measures which
will enable the creation and development of sustainable capital markets that are efficient,
transparent, orderly, fair and equitable to all.
Lobby: there is very little pro-active, co-ordinated lobby within the microfinance sector. This is
partly caused by the lack of a network or association that unites the various players (from
commercial banks to rural SACCOs). On the side of commercial banks, TBA is a relatively strong
Triodos-Facet 2007
20
platform for lobby. Lobby for and by SACCOs is less coordinated, in practice mainly by the few
strong networks (Dunduliza, FERT, MuCCOBs) on incidental basis. MFI-NGOs lack
representation/networking possibilities. FSDT supports lobbying efforts of various players where
possible; however, as it is a donor funded trust, its room for (political) maneuver is limited. The
recent establishment of the Coalition is therefore considered as an interesting initiative and
opportunity.
4.1.2
Capacity Building Services
In general the supply of capacity building services (training, technical assistance, consultancy) to
microfinance actors (banks, MFIs and SACCOs) is still very weak. Tanzania has a young and
growing market economy, and there are few qualified service providers available to enhance the
capacity of the industry. Existing suppliers of capacity building and training support include:
BOT Training Institute in Mwanza provides a number of training courses relevant for microfinance
(especially relevant for non-cooperative models, such as solidarity group lending NGOs and
commercial banks involved in microfinance).
Tanzania Institute of Bankers (TIOB) was established in 1993 and provides a Banking Certificates
Programme. TOIB aims to set, promote and upgrade professionalism in the banking and financial
services industry in Tanzania. Members are financial institutions and individuals.
Institute of Finance Management: provides graduate and post-graduate education, as well as short
courses in banking, insurance and finance management.
Moshi University College of Cooperative and Business Studies (MUCCoBS), affiliated to Soikoine
University of Agriculture, is the main institution dealing with training of cooperative officers, auditors
and staff of SACCOs. In partnership with DID, MUCCoBS offers a distance learning programme
(40 weeks) on Professional Financial Co-Operative Management. In addition, MUCCoBS has a
network of 20 regional wings (Institutes of Continuing Cooperative Development and Education,
ICCDE). Some of these (e.g. Dodoma) have well-developed programmes for facilitating the
establishment and strengthening of SACCOs. MUCCoBS also provides consultancy services.
In addition to the above, various microfinance actors provide training to their SACCO-affiliates or
clients. This includes Dunduliza, USAWA, RFSP, SELF, SCCULT and CRDB.
MicroSave has trained various individuals from Tanzania in its variety of courses. However,
currently there is only one active Certified Service Provider. MicroSaves action research
programme works with FINCA Tanzania, Tanzania Postal Bank and PRIDE Tanzania. MicroSave
is expected to transform into a consultancy company (based in Kenya) from 2008.
Consultancy companies: there are a small number of consultancy firms active in the sector, but
most are small and few are specialised in microfinance best practices (including MEDA, Economic
Development Initiatives (EDI), Ernst and Young, Global Associates, CEMIDE, K-REP Advisory
Services and Triodos-Facet). Three individual consultants have been trained by MicroSave in
various courses and products. However, only one is available in the market (with CEMIDE).
Generally, there is serious lack of professional, national providers of microfinance capacity building
(training, TA, consultancy services) on the individual level, and on the institutional level. As a
result, several institutions have resorted to bringing in those services from abroad: ACB (ACCION
International), Dunduliza (DID), USAWA (FERT), NMB (Rabobank, and formerly Fineline
Consulting from Kenya). SNV-Tanzania also provides capacity building services for microfinance in
various regions of the country, as does Swiss Contact.
Triodos-Facet 2007
21
4.1.3
Other Services
Rating Agencies: The practice of external ratings has yet to gain ground in the relatively young
microfinance industry of Tanzania. Of the various international rating agencies, MicroRate has
been most active in Tanzania, with ratings of PTF (2005 and 2007), FINCA-Tz (2004) and PRIDETz (2004). There are no rating companies based in Tanzania.
Auditors: there are 13 auditors approved by the BoT to audit BoT supervised financial institutions.
Non-regulated financial institutions may choose any auditor. For SACCOs, COASCO formally has
to conduct an annual audit (although often late, and often not at all). Auditors generally have
limited understanding and knowledge about microfinance.
Credit Information Bureau: the establishment and operationalization of a credit reference bureau
for the financial sector has since long been on the drawing boards. In 2004, a Credit Information
Bureau for the commercial banking sector was established with Tanzania Bankers Association.
However, its successful implementation is hampered by the lack of a national ID-system12.
4.2
Sector Needs
Legal and Regulatory System

Improve legal framework for land ownership and weak judicial system (to encourage
agricultural lending, leasing, housing finance);
Improve legal/regulatory framework for mobile phone banking;
Capacity building in BOT in prudential supervision to oversee fast-growing and diversifying
financial system;
Strengthen regulatory framework for non-bank financial institutions (e.g. pension funds);
Capacity building for Registry of Cooperatives in supervision of SACCOs.
Market Information: There is need for reliable market information to facilitate and encourage
financial institutions to enter into new areas (geographically, as well as in terms of client segment
and products):
The FinScope survey has brought about a wealth of data on (potential) clients demand for
financial services. The database is available to any interested party for further analysis.
However, most local financial institutions lack the capacity, skills and time to use the database
effectively. Support (technical support as well as grants) will be needed to enable them to
utilize its potential.
Need for specific demand data on SMEs (study to be commissioned by FSDT, 2008)
Need for specific data on current supply of microfinance (geographically, as well as in terms of
client segments and products). Comparison with data from FinScope will highlight the black
spots in access of financial services (and thus indicate priorities for intervention). FSDT will
commission a national supply side survey in 2008.
Need for reliable and timely information about borrowers, their credit history, and other lenders
to the potential client, to facilitate risk assessment and reduce delinquency. This information
should be shared between lenders, through a Credit Information Bureau. Tanzanias CIB is so
far only available to regulated entities (excluding MFIs and SACCOs), and its successful
operationalization is hampered by lack of a national ID system.
Networking: There is strong need for much more sharing of information, coordination,
networking and exchange within the sector (involving practitioners, government, donors and
capacity builders). This could be done through organising workshops, information seminars,
through an email network, newsletters etc.
12
A National ID system has been on the Governments drawing board for years, however, not likely to
materialize in the short term.
Triodos-Facet 2007
22
The Tanzanian sector so far lacks an entity that can bring together, coordinate and represent
the various institutions engaged in microfinance commercial banks, community banks,
NGOs, SACCOs, donors and service providers (like the Association of Microfinance Institutions
in Uganda). Such an entity could also
o Represent microfinance players interests, including lobbying and networking with the BOT
and the Government, on policies and the regulatory framework for microfinance;
o Improve sharing of information, networking and exchange within the sector (involving
practitioners, government, donors and capacity builders);
o Spearhead capacity building for the sector.
There is need to bring together the various fragmented networks, including Tanzania Bankers
Association, Coalition for Microfinance Practitioners, SCCULT, Association of Community
Banks.
Capacity building/training: Tanzania lacks specialised microfinance training agencies offering
(accredited) courses open to all, as well as a dedicated entity spearheading capacity building for
the sector as a whole. In order to build (more) sustainable institutions, second and third tier MFIs
and SACCOs require access to capacity building and training which is:
In line with international best-practices;
Accessible in terms of language used (Swahili); knowledge level, geographical location, cost
and time involved;
Focused on building sustainable, market-driven institutions (including all aspects of
management and governance);
Standardized, and of guaranteed quality;
Tailored to their specific situation and needs, per segment: commercial banks, rural community
banks, NGO-MFIs, rural SACCOs, SACCO Networks. Also, auditors, accountants and
consultants should be encouraged to participate, to increase the level of professionalism of
supporting services offered. Courses should include:
o All aspects of SACCO management (for SACCO staff and leaders);
o Agri-finance and risk assessment tools
o SME lending products and risk assessment tools;
o New products (micro-leasing, micro-insurance, HIV/AIDS risk mitigation, housing finance)
As an entry point, there is a need to assess training needs across the microfinance sector. This
should include commercial banks, community banks, NGO-MFIs, SACCOs and their networks, but
also service providers to the industry like auditors, accountants, and consultants.
Improving financial literacy: As confirmed by FinScope, there is a huge need to improve financial
literacy, especially in women, and especially in rural areas. As education for the majority of rural
women is limited to primary education (92%), this would be a logical starting point. Financial
literacy should also be supported by the government (education), but also by the financial sector
itself, through improved transparency on financial products, code of conduct for consumer
protection etc. Should be spearheaded through national level agency e.g. Tanzania Bankers
Association, in partnership with Coalition for Microfinance Practitioners, SCCULT, Association of
Community Banks.
Support to ICT innovations and mechanisms that bring financial services closer to the rural
people in a more efficient and effective way. This could include support to mobile phone
companies or other providers of mobile phone banking solutions, rural mobile banking units
(instead of expensive brick and mortar branches), introduction of smart-card solutions and Point
of Sale networks etc.
Develop partnerships between different players for introduction of new products, just like
TANZALEP is an engine of change for the leasing sector, there is need for coordination and
initiation in other areas as well. For example in micro-insurance: bringing together insurance
companies, MFIs, regulators, and best practices from elsewhere (e.g. MicroCare Uganda).
Similarly for low cost housing finance and in HIV/AIDS risk mitigation.
Triodos-Facet 2007
23
Market Linkages Promote market linkages and local wholesale financing (through linking Tier 1,
Tier 2 and Tier 3 institutions). The market for wholesale lending consists mainly of SACCOs
(3,500) and both large and small NGOs. This market is huge, and is currently mainly restricted by
the limited capacity of SACCOs and NGOs to deliver financial services effectively and service
(semi-) commercial loans.
4.3
Sector Support
The main donors and investors in broader sector support include:

FSDT (see 3.4.2)
WB and DFID through the second-generation Financial Sector Reform Action Plan of the
Government ($22 Million, 2006 2011), see 2.1.
IFC and SECO through the Tanzania Leasing Project (TANZALEP), see 3.2.5.
4.4
Sector Gaps
Of the sector needs identified in 4.2, some are (also) being addressed by the donors and investors
mentioned in 4.3.
Priorities for MicroNed members at the sector level should include:
Support to networking: sharing of information, coordination, networking and exchange within
the sector, involving practitioners, government, donors and capacity builders and best practices
from elsewhere.
Support to capacity building/training: building specialised microfinance training agencies
offering accredited, accessible, tailor made, Swahili-taught courses open to all. Should be
tailored to specific situation and needs per segment: commercial banks, rural community
consultants should be encouraged to participate. Courses should include:
people in a more efficient and effective way.
Develop partnerships between different players for introduction of new products, just
like TANZALEP is an engine of change for the leasing sector, there is need for coordination
and initiation in other areas as well. For example in micro-insurance, low cost housing finance
and in HIV/AIDS risk mitigation.
Develop market linkages and local wholesale financing (through linking Tier 1, Tier 2 and Tier
3 institutions), to increase additionality and leverage of funding provided by MicroNed
members.
4.5
Impact Measurement & Social Performance Management
Very little work has been done in Tanzania on impact measurement and social performance
indicators to date.
Akiba Commercial Bank, as an investee of Triodos Bank, participates in a project initiated by
Triodos Bank and the Global Reporting Initiative (GRI) in 2004, called Transparency in
Sustainability and Finance. The project focuses on assisting MFIs in the implementation of GRI as
a reporting mechanism. In 2006, six institutions (including K-REP from Kenya and Centenary Rural
Development Bank from Uganda) presented their first triple bottom line reports. So far, Akiba has
not actively implemented the approach.
Triodos-Facet 2007
24
In addition, Triodos Bank and Triodos Facet implement SMARTRAC, a capacity building
programme that integrates risk management tools and skills with sustainable reporting, to support
MFIs in managing their triple bottom line (with funding from EU, Doen Foundation and Triodos
Foundation). No partners yet in Tanzania, expected in 2007/2008.
Evaluations and assessments of various microfinance actors (MFIs, SACCO networks) have, to
some extent, taken impact of financial services into account. However, these types of assessment
only generate anecdotal evidence of impact and/or some case studies. Full-fledged impact studies
of microfinance in Tanzania are not available.
Triodos-Facet 2007
25
CONCLUSIONS & RECOMMENDATIONS
Opportunities for supporting microfinance initiatives in Tanzania are enormous. It is one of the ten
poorest countries in the world, but politically stable and enjoying continued economic growth. This
economic growth is driving increasing demand for access to financial services. At the same time,
still 54% of Tanzanians has no access at all to financial services, be they formal or informal.
As result of structural reforms, there is continued financial market deepening, including growing
bank interest in down-scaling to SME and microfinance sub-sectors. The regulatory framework
provides for licensed MFCs and FICOs. However, major bottleneck are limited market capacity (in
terms of human resources and effective and efficient organisations), low levels of financial literacy
in clients, as well as limited business skills to invest money effectively, and recent politicization of
SACCOs formation.
Recommendations and priorities for MicroNeds country strategy for Tanzania can be summarized
as follows:
At Institution Level:
Category
Commercial Banks

- Develop appropriate loan products & risk analysis techniques for small-holder
agriculture
- Developing appropriate loan products for SMEs & risk analysis techniques
- Build staff capacity to enter into the SME, agricultural, microfinance market
- Support to develop other products (micro-leasing, housing finance, micro-insurance,
remittances)
- Spreading best practices & facilitate exchange of experience in mentioned
innovative products and services.
Community Banks

- Capacity to select, buy, introduce and manage an appropriate MIS
- Capacity building of management, staff and board members
- Support to develop new products (micro-leasing, housing finance, agricultural
lending, SME finance, micro-insurance, remittances)
NGO-MFIs
- Support in transformation into a regulated MFC (TA, sub-ordinated debt, equity), for
the largest MFIs
- Capacity to select, buy, introduce, and manage an appropriate MIS
- Support to develop new products (agricultural lending, micro-leasing, housing
finance, micro-insurance, remittances, SME finance)
- Capacity building support to scale-up outreach and manage this effectively (TA,
training, grants)
SACCOs
- Capacity building of SACCO staff, leaders and members in SACCO management,

governance, record keeping
- Develop adequate record keeping systems (esp. weak on loan portfolio
management)
- Develop appropriate facilities (secure building, safe)
- Develop appropriate loan products (agriculture, micro-leasing)
SACCO Support
Organisations
- Develop appropriate network (legal) structures

- Support in legal and regulatory issues (federated network, FICO, other options)
- Business plan development (sources of income generation, financial sustainability)
- Capacity building of field officers in microfinance best practices (esp. loan portfolio
management)
- Appropriate MIS to monitor SACCO performance on network level
Triodos-Facet 2007
26
- Development of other services at network level (e.g. liquidity management,

insurance, security, lobby and advocacy)
At Client Level:
Improve financial literacy, especially in rural women and children (primary schools), starting
with basic financial products.
Access to savings and loan products that are appropriate, are brought physically close to
the (rural) client, and fit their needs. Given that currently the majority of all savings is either
non-monetary, kept at home or in the informal system, promotion of a savings culture should
be a priority. Given that the large majority of the rural poor depend on agriculture, agricultural
loan products and micro-leasing should also be part of the priorities. Given that physical
access is a major bottleneck in Tanzania, support to innovative mechanisms for financial
services delivery should be part of the strategy (mobile phone banking, rural mobile banking
vans, sms-banking, POS devices, smart cards etc.
Improving outreach of financial services to the currently excluded will need to be supported by
appropriate strategies in the area of Business Development Services and access to
markets for small producers, to improve the capacity to invest money (savings or loans)
effectively. Investing in education, vocational training centres and business support centres
enhances business skills and increases the number of bankable projects.
At Sector Level:
Support to networking: sharing of information, coordination, networking and exchange within

the sector, involving practitioners, government, donors and capacity builders and best practices
from elsewhere. MicroNed members could especially encourage this between various
microfinance actors supported in Tanzania, as well as between similar actors in, especially,
Uganda and Kenya. Examples might include:
o Between commercial banks focusing on microfinance (K-Rep and Equity Bank in Kenya,
CERUDEB in Uganda and Akiba Commercial Bank, but possibly also the smaller
Community Banks, in Tanzania)
o Between NGO-MFIs involved in transformation (e.g. MDIs in Uganda, those whishing to
become MFCs in Tanzania)
o Between MFIs and other players that have developed and tested innovative products
(micro-leasing, micro-insurance e.g. MicroCare, agricultural lending, SME lending)
Support to capacity building/training: building specialised microfinance training agencies

offering accredited, accessible, tailor made, Swahili-taught courses open to all. Should be
tailored to specific situation and needs per segment: commercial banks, rural community
consultants should be encouraged to participate. Courses should include:
people in a more efficient and effective way.
Develop partnerships between different players for introduction of new products, just
like TANZALEP is an engine of change for the leasing sector, there is need for coordination
Triodos-Facet 2007
27
and initiation in other areas as well. For example in micro-insurance, low cost housing finance
and in HIV/AIDS risk mitigation.
Develop market linkages and local wholesale financing (through linking Tier 1, Tier 2 and Tier
3 institutions), to increase additionality and leverage of funding provided by MicroNed
members.
Coordination:
Maintain and further improve coordination between the four members in terms of investments
in Tanzania. All three seem to have similar focus, additionality could be improved.
Maintain and further improve coordination with other microfinance investors in Tanzania,
especially the FSDT, as the major donor for the sector. FSDT has a strong focus on broader
sector development. As it is locally based, the trust is generally well-informed and wellconnected to developments and players in the market. Given its structure, the trust mainly
funds large projects and initiatives. MicroNed members have a niche in funding initiatives which
require smaller amounts, a faster processing time and/or carry more risk.
The Embassy of the Kingdom of the Netherlands (EKN) in Dar es Salaam is interested to
stay informed and updated on intiatives by MicroNed members in Tanzania. EKN is one of the
funders of FSDT, and part of its Project Investment Committee.
Triodos-Facet 2007
28
ANNEX 1
Terms of Reference
Country Scan Microfinance Sector in Tanzania
Introduction
MicroNed is a network organisation that has been established early 2006 by Cordaid, Hivos, Icco
and Oxfam Novib, in order to strengthen and coordinate the joint contribution of Development
Finance Organisations in the Netherlands to the microfinance sector. Only less than 20% of the
people in need has access to financial services and an increased effort should be made to support
new and emerging MFIs. Furthermore MicroNed wants to strengthen national microfinance sector
interventions, geared to the development of an enabling environment. Coordination and
collaboration in countries and regions as well as on specific themes play a central role. MicroNed
will not provide direct support to retail MFIs; this is the exclusive domain of its members. MicroNed
will harmonise its members activities as far as grant support for sector development in selected
focus countries is concerned. Each focus country has a coordinator who is responsible for
developing a country sector development strategy paper serving as the basis for coordination
between the four MicroNed members. For Tanzania Hivos is the country coordinator with the
responsibility to make a country scan.
Objective and expected results
Objective of the assignment is to make a country scan providing the necessary information needed
to formulate a country sector development strategy paper for the MicroNed members. The country
scan should really serve policy development. It should provide the information needed to identify
priority needs of the microfinance sector in Tanzania, especially on sector wide level. The expected
result of the assignment is a document with the main text structured along the following lines:
1. General information (political history, population (demographics and culture), social indicators
(literacy rate, position of women, hiv/aids, ..), macro economic situation and indicators,
2. Financial sector
2.1. General
2.2. Banking sector
2.3. Microfinance sector: national microfinance strategy, regulatory framework and supervision
3. Microfinance services
3.1. General characteristics of microfinance sector (maturity, volume, rough estimation of
potential and actual market size (rural and urban), competitiveness of the microfinance
market in urban and rural areas (e.g. signs of saturation for certain products or certain
groups), degree of professionalism, recent and expected future developments)
3.2. Microfinance suppliers: description according to category (banks, NGOs, Companies, S&C
cooperatives, Microdeposit taking institutions, informal financial institutions, ., with
respect to numbers, volume, outreach, savings, client profile, lending methodologies,
products and services (with explicit attention for micro-insurance, HIV-Aids, remittances,
rural financial services, and technological innovation), performance and sustainability, etc.
Specify for rural/urban, men/women, What are common problems/weaknesses of the
different categories of MFIs?
3.3. Support and funding needs: what are the main support and funding needs of the MFIs per
category (not per individual MFI but common needs that many MFIs in a certain category
have). Which needs have a priority?
3.4. Donors and investors: Who are the main donors and investors for the microfinance sector
and what are the details of their support/investments (target categories of MFIs, type of
support, amounts, etc.) Give a specific overview of MicroNeds members activities in the
country.
Triodos-Facet 2007
29
3.5. Support gap: What general needs of MFIs are not fulfilled? Which ones have a priority?
What could the Dutch MicroNed members contribute?
3.6. Support gap: What general needs of (possible) clients are not fulfilled? Which ones have a
priority?
4. Actors on sector level
4.1. Description of networks/associations, training & advisory services, consultants, rating
agency, specialised auditors,, their activities, performance, outreach, etc.
4.2. Sector needs
4.3. Sector support
4.4. Support gap
4.5. Impact measurement and social performance management: what has been done in the
country on impact measurement and social performance indicators, by whom, what are the
results, any additional support needed?
5. Conclusions and recommendations/input for a country sector development strategy paper,
identification of priority needs, with special attention for sector level.
Annex 1: Directory (institutions, addresses, websites, contact persons, telephone numbers, email
addresses) (only at sector level)
Annex 2: Overview of relevant studies, reports, etc. on the country.
The main text should count between some 15 and 30 pages with detailed relevant information
added in annexes. Amounts should be given in both local currency as in Euro with specification of
exchange rate and date thereof.
Triodos-Facet 2007
30
ANNEX 2
Directory of Actors at Sector Level
Institution
Contact Person
Contact Details
Bank of Tanzania
Directorate of Microfinance
10 Mirambo Street, P.O.Box 2939, DSM

Tel: +255 22 238384 (Directorate of Microfinance)
Website: www.bot-tz.org
Capital Market and Securities Authority

(CMSA)
Dr. Fratern M. Mboya, CEO
P.O. Box 75713 Dar es Salaam, PPF Tower, 6 Floor Ohio St./ Garden Ave.
Tel: +255 22 211 4960 and 212 9724-/28
Email: cap-markets@cats-net.com
Website: www.cmsa-tz.org
Savings and Credit Cooperative Union

League of Tanzania (SCCULT)
Mr A. Mshaweji , Executive
Secretary
Coop. Building, 10th Floor, Room No. 10,11&12, Lumumba Street, PO Box 20640, DSM
Tel: +255 22 - 218529; Mobile: + 255 741 - 326719
Email: sccult@covision2000.com
Coalition of Microfinance Practitioners and

Service Providers
Joel Mwakitalu, interim leader

(Global Associates)
Email: coallition_microfinance@yahoo.com
Mobile: + 255 784 - 657718
Community Banks Association of Tanzania
A.Y. Ghuhia, Chairman (and

CEO Mwanga Rural
Community Bank)
Ms. Touse M. Joune, Executive
Assistant
Mwanga Rural Community Bank, PO Box 333 Mwanga, Kilimanjaro Region

Email: mwangabank@satconet.net
Authorities, Networks, Associations
Tanzania Bankers Association (TBA)
Tanzania Institute of Bankers (TIOB)
th
Sukari House, 4th Floor crn Sokoine/Ohio, PO Box 70925, DSM

Tel: + 255 22 212 0551 / 212 7764 Mobile: + 255 - 756 547707
Email: touse@tanzaniabankers.org; info@tanzaniabankers.org
Website: www.tanzaniabankers.org
C. J. Nyoni, Executive Director
10th floor, NIC Investment House, PO Box 8182, DSM

Tel: + 255 22 - 2133350
Email:bankers@africaonline.co.tz
Website: www.bot-tz.org/TIOB
Mr. Wamgimwa, Principal
PO Box 131 Capri-Point, Mwanza

Tel: + 255 28 2500709 / 0983
Email: wamgimwa@yahoo.co.uk or wamgimwa@hq.bot-tz.org
Website: www.bot-tz.org
Capacity Building Services

Bank of Tanzania Training Institute
Triodos-Facet 2007
31
Institution
Contact Person
Contact Details
Centre for Microfinance & Enterprise

Development (CEMIDE) - consultants
Altemius Millinga,
Executive Director
Mkunazini House, Kidongo Chekundu, P.O. Box 10272, DSM

Mobile: +255 - 754 376 122
Email: altemiusm@yahoo.com
Economic Development Initiatives (EDI)

Limited consultants
Ms. Louise Barnett, Managing

Director
PO Box 393, Bukoba

Tel: + 255 28 222 0188, Mobile: + 255 754 742494
Email: l.barnett@edi-africa.com
Website: www.edi-africa.com
Global Associates - consultants
Joel Mwakitalu, Partner
Mobile: + 255 784 - 657718

PO Box 42110, Dar es Salaam
Tel: +255 - 22 285 0097 or 0745 826259
Fax: +255 22 285 0972. Email: globalasstz@bol.co.tz
Institute of Finance Management (IFM)
Prof. Tadeo Satta, Director of

Dev. Finance
Shabaan Robert Street, PO Box 3918, DSM

Tel: + 255 22 211 2931/4
Email: satta.tadeo@gmail.com
Website: www.ifm.ac.tz
K-REP Advisory Services - consultants
Country Manager
2nd Floor, JM Mall, Samora Avenue, P.O. Box 77152, DSM

Tel: + 255 22 - 2136944/8 or Mobile: + 255 - 754- 060054 or 880808
kas@k-repconsulting.com
Website: www.k-repconsulting.com
Mennonite Economic Development

Association (MEDA) consultants
Boaz Boazi, Faustin Tarimo
386, Toure Drive, Masaki, DSM

Tel + 255 - 22 - 260 1822 or 260 1830
Email: bboaz@tz.meda.org; faustintarimo@yahoo.com
Website: www.meda.org
Moshi University College for Cooperative &

Business Studies (MUCCoBS)
The Principal
Sokoine Road, PO Box 474, Moshi

Tel: + 255 27 54401 or 54403
Email:
Website: http://muccobs.ac.tz
Triodos Facet consultants
Ms. Marjan Duursma
P.O. Box 79331 DSM or PO Box 55, 3700 AD Zeist

Tel: + 255 22 2600054, Mobile: + 255 754 091 618
Email: m.duursma@triodosfacet.nl; mduursma@hotmail.com
Website: www.triodosfacet.nl
Triodos-Facet 2007
32
Institution
Contact Person
Contact Details
Ms. Moushumi Jani, Director

Ms. Leena Kapadia, Business
Analyst
Nadeem Juma, Managing
Director
Tel: +255 - 22 - 218 0625/35, Mobile: +255- 754 - 2444 454

Email: moushumi.jani@ecardsolutions.net
Ms. Kineneko
Manager
Email: kineneko@yahoo.com
Tel: + 255 22 - 212 1911, Mobile: + 255 - 784 - 466500
Other Service Providers

E-card Solutions Ltd.
E-Felusi Africa (Mobipawa)
Umoja Switch
Donor Organisations and Projects
Mtei,
Project
nd
Chole Road, Masaki

Tel: + 255 - 22 - 2602012 / 3/ 7, Mobile: + 255 - 773 - 665 222
Email: njuma@efelusi.cc
Website: www.efelusi.cc
th
Embassy of the Kingdom of the

Netherlands, EKN
Ms. Mirjam Tjassing, 2

Secretary Economic Affairs
Umoja House, 4 Floor, Garden Avenue, P.O Box 9534, DSM

Tel: + 255 22 211 0000
Email: mirjam.tjassing@minbuza.nl
Website: http://tanzania.nlembassy.org
Cordaid
Kor Voorzee, Programme

Officer Tanzania
(Entrepreneurship)
Ms. Annemiek van der Leij,
Financial Sector Deepening Trust (FSDT)
Ian Robinson, Technical

Director
Sosthenes Kewe, Technical
Manager
PO Box 16440, 2500 BK Den Haag

Lutherse Burgwal 10, 2512 CB Den Haag
Tel: +31 - (0)70 - 3136 300; Fax: +31 (0)70 - 3136 301
Email: kor.voorzee@cordaid.nl; Annemiek.van.der.Leij@cordaid.nl;
Website: www.cordaid.nl
PPF Tower, Ohio Street, PO Box 4653, DSM
Tel: + 255 22 2129060-2
Mobile: 0746 092 564 (Ian) and 0756 -776 336 (Sosthenes)
Email: ian@fsdt.or.tz; sosthenes@fsdt.or.tz
Hivos
Mr. Pieter Bas Schrieken,

Programme Officer
PO Box 85565, 2508 CG The Hague, The Netherlands

Tel: +31 (0)70 376 5500; Fax: +31 (0)70 362 4600
Email: p.schrieken@hivos.nl; website: www.hivos.nl
ICCO
MicroNed
Ms. Resi Janssen, Executive

Director
P.O. Box 8190, 3503 RD Utrecht, The Netherlands

Joseph Haydnlaan 2a, 3533 AE Utrecht, The Netherlands
Tel: +31 - (0)30 - 692 7811; Fax: +31- (0)30 - 692 5614
Email: ; Website: www.icco.nl
PO Box 85565, 2508 CG The Hague, The Netherlands
Raamweg 16, 2596 HL The Hague, The Netherlands
Tel: +31- (0)70 376 5516; Fax: +31 - (0)70 - 362 4600
Email: resi.janssen@micro-ned.nl; website: www.microned.org
Triodos-Facet 2007
33
Institution
Contact Person
Contact Details
Oxfam Novib
Thur de Kuijer, Programme

Officer East and Central Africa
PO Box 30919, 2500 GX The Hague, the Netherlands

Tel: +31 (0)70 342 1621; Fax : +31 (0)70 361 4461
Email: thur.de.kuijer@oxfamnovib.nl; Website: www.oxfamnovib.nl
Rural Financial Services Project (RFSP)
Attilio Mohele, Manager

Bernard Ulaya, deputy
Monitoring & Evaluation
P.O. Box 1982, Mbeya

Tel: + 255252504067, Mobile:+255-754 558824 (Mohele) +255-713604499 (Ulaya)
Email: mohele@rfsp.org, attiliomohele@yahoo.com, nyalukolo@yahoo.com (Ulaya)
Small Enterprise Loan Facility (SELF)
Abia Kaaya, Project Manager
Nyumba ya Maarifa, Ohio Street, PO Box 5380, DSM

Tel: + 255 22 213 5321
Email: abhkaaya@yahoo.com
Tanzania Leasing Project, TANZALEP
Moyo Ndonde, Operations

Officer
Joass Lyatuu, Financial analyst
WB Country Office, 50 Mirambo Street 4th Floor, PO Box 2054, DSM

Email: mndonde@ifc.org; jlyatuu@ifc.org
Telephone: +255 22 2163219
Website: www.ifc.org/ifcext/tanzalep.nsf
This directory only includes relevant actors on sector level. For additional information:
Commercial Banks and Non-Bank Financial Institutions (BOT, 2007): http://www.bot-tz.org/BankingSupervision/registered_banks.htm
Directory of Microfinance Practitioners (BOT, 2005) with SACCOs, MFIs, Banks: http://www.bot-tz.org/MFI/Default.asp?Menu=PRACT
Directory of Development Organisations, Tanzania (2006): http://www.sarpn.org.za/documents/d0001795/Country_Dir_Tanzania_2006.pdf
Triodos-Facet 2007
34
ANNEX 3
List of Relevant Documents & Resources
Institution
Relevant Documents
Website
Bank of Tanzania (BOT)
- Monthly Economic Report

- Quarterly Economic Bulletin
- Statistics of Macro-economic Indicators
- Directory & contacts of BOT staff
- Microfinance sub-web
www.bot-tz.org
- Improving Operational Performance of SACCOs in

Tanzania, BOT and Ministry of Marketing and
Cooperatives, K-REP Advisory Services, June
2005
BOT Training Institute
- Training programmes offered
CRDB Bank Ltd.
Greater Access to Finance for the Ordinary

Tanzanian a tale of microfinance technology
developed by CRDB Bank Ltd., Sept. 2006
Village Savings and Loan Associations: experience
from Zanzibar, E. Anyaongo and others, 2006
A literature Review on Housing Finance
Development in Sub-Saharan Africa, Mary R.
Tomlinson, May 2007
Brochure on Finscope, statistics presented in FSDT
FinScope workshops (May June 2007)
DFS-Kenya and FSDU

FinMark Trust
FSDT
Government of Tanzania
- National Microfinance Policy (2000)
Hivos and Triodos-Facet
Report and material for Seminar on ICT trends in

Microfinance, Tanzania (June 2007)
Member-Owned Financial Institutions: lessons from
Uganda and Tanzania, 1997 - 2004
Country Report Tanzania, Nr. 07/246, July 2007
The landscape of micro insurance in the worlds
100 poorest countries, April 2007
- Annual Report 2006
- NMP Database December 2006
Asessing the Demand for Microinsurance in
Tanzania, 2002
TBA Newsletter, June 2007
Human Development Report 2006
- Access Finance, bi-monthly newsletter
- Making Finance Work for Africa, S.M. Maimbo, T.
Muller and L. Lang, 2007
Jazayeri, A.
IMF
Microinsurance Centre, J.
Roth and others
MicroNed
MicroSave, Millinga, A.
TBA
UNDP
World Bank
Triodos-Facet 2007
www.bot-tz.org
www.finmarktrust.org.za
http://dgroups.org/groups/FSDTTanzania
www.bot-tz.org/MFI
www.microfinancegateway.org
www.microfinancegateway.org
35
ANNEX 6
Overview of Microfinance Providers in Tanzania
Type / Name of
Microfinance
Institution
Products Offered
1. Regulated & Licensed Providers of Microfinance Services
Market/Area of
Operations
Loans
Outstanding
Commercial Banks
Access Bank ltd.
Main focus on SMEs. Various savings and

Dar es Salaam, 1
Not available (recently
st
fixed deposit products, individual loan
branch
opened 1 branch)
products.
Akiba Commercial Bank
Main focus on SMEs and microfinance.
DSM and Arusha, 5
15,531 (Dec. 2006)
Various savings and fixed deposit products, branches
individual loan products, group lending
CRDB
Part of portfolio in microfinance. Various
National, 40 branches
270 SACCOs, with 140,000
savings and fixed deposit products,
members
individual loan products, wholesale lending
to SACCOs
NMB
Part of portfolio in microfinance. Various
National, 120 branches MF clients: not available
savings and fixed deposit products,
(n.a.)
individual loan products, wholesale lending
to MFIs/SACCOs
Plus: Various banks are down-scaling, expanding branch network and entering into SME and whole-sale lending to MFIs and SACCOs
(incl. Barclays Bank, National Bank of Commerce, CitiBank, FBME Bank, Exim, Boa Bank etc.)
Regional Unit Commercial Banks
Dar es Salaam Community Bank
Various savings and fixed deposit products, Dar es Salaam region
n.a.
individual loan products, incl. microloans
(since 2001)
Kagera Farmers Cooperative Bank Various savings and fixed deposit products, Kagera region
n.a.
individual loan products, incl. micro loans,
wholesale lending to SACCOs
Kilimanjaro Cooperative Bank
Various savings and fixed deposit products, Kilimanjaro region
n.a.
individual loan products, incl. micro loans
Mbinga Community Bank
Various savings and fixed deposit products, Ruvuma region (since
5,382 (Dec. 2005)
2003)
Uchumi Commercial Bank
Various savings and fixed deposit accounts, Kilimanjaro region
63 SACCOs by end 2006
(since 2005)
Triodos-Facet 2007
36
Amount
Outstanding
Not available (recently
st
opened 1 branch)
Total: US$ 14.3 Milion
(Dec. 2006). MF-portfolio
unavailable
Tsh. 25 Billion to SACCOs
in 2006
MF-portfolio: not available
Tsh. 10.8
2005)
n.a.
Billion
(Sept.
n.a.
$ 699,729 (Dec. 2005)
n.a.
Type / Name of
Institution
Microfinance
Products Offered
Regional Non-Bank Financial Institutions

Mufindi Community Bank
Various savings and fixed deposit products,
individual loan products incl. micro loans
Mwanga Community Bank
Various savings and fixed deposit products,
individual loan products incl. micro loans
Non-Bank Financial Institutions
Tanzania Postal Bank
Variety of savings savings accounts and
fixed deposits, some individual microlending
Market/Area of
Operations
Loans
Outstanding
Amount
Outstanding
Iringa region (since

1999)
Kilimanjaro
region
(since 2000)
n.a.
Tsh. 1 Billion (Dec. 2003)
n.a.
n.a.
> 1 million account holders
n.a.
National, semi-urban
89,783 (Dec. 2006)
$ 16.4 Milion (Dec. 2006)
National, semi-urban
42,785 (Aug. 2006)
$ 5 Million (Aug. 2006)
Semi-urban
National (7 locations,
40
branches,
incl.
Zbar), semi-urban
Semi-urban
DSM, Mbeya region,
semi-urban + rural
Semi-urban
Kilimanjaro
region,
semi-urban
Bilaramungo / Kagera
Region, rural
DSM, semi-urban
National
DSM
17,577 (Dec. 2006)

52,788 (in 2116 groups),
Nov. 2007
$2.3 Million (Dec. 2006)

$ 6.2 Million (Nov. 2007)
10,064 (June 2006)

2,000 (Nov. 2007)
$ 1.9 Million (June 2006)

$ 263,569 (Dec. 2005)
2,250 (Dec. 2006)

2,000 (est.)
$199,899 (Dec. 2006)

n.a.
2,000 (est.)
n.a.
2,000 (est.)
3,382 (March 2007)
7 SMEs
n.a.
$1.8 Million (March 2007)
n.a.
DSM,
Lake
Zone,
Ruvuma region, semiurban + rural
Kilimanjaro
region,
mainly rural
34 SACCOs, total 52,000

members (2007)
National,
outlets
over
100
2. Registered but Non-Regulated Providers of Microfinance Services

Financial NGOs
PRIDE Tanzania
SEDA
BRAC Tanzania
Group solidarity lending, individual loans.

Mandatory savings.
Group solidarity lending, individual loans.
Mandatory savings.
Group solidarity lending
Group solidarity lending
Presidential Trust Fund

SEF
Group solidarity lending?

Group solidarity lending, individual loans
Faulu Tanzania
WEDAC

FINCA Tanzania
FAIDERS
Tujijenge Tanzania
SELFINA
GroFin Tanzania
Registered SACCO Networks
Dunduliza Limited
USAWA Limited
Triodos-Facet 2007
Individual and group lending

Micro leasing
SME lending + business advice
Savings and fixed deposits, individual micro
loans, pilot housing loans (for members
only)
loans including agriculture, leasing (for
members only)
37
15 SACCOs, total >3,000

members (2006)
Type / Name of
Institution
Microfinance
Products Offered
Market/Area of
Operations
Loans
Outstanding
Other SACCOs
Total 3,500 SACCOs (incl.
networks above)

loans (members only)
National, urban (40%)

and rural (60%)
Total 420,000
(Dec. 2006)
Amount
Outstanding
members
n.a.
3. Unregistered and Non-Regulated Providers of Microfinance Services

Village Savings and Loans
Associations (VSLA)
Village Community Banks
(VICOBA)
Financial Service Associations
Time-bound, accumulated savings and

credit assocations, 15-30 people.
Informal, village based savings and credit
groups
Informal savings and credit associations
(may be registered at local level)
Sources: Mix market, TriodosFacet and estimates.
Triodos-Facet 2007
Zanzibar
4,552 (70% women)
n.a.
various
n.a.
n.a.
Lake Zone
4,412 (52% women), 2006
n.a.
38

Tanzania Country Scan Microfinance

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Tanzania Country Scan Microfinance

Hochgeladen von

Copyright:

Verfügbare Formate

info@triodosfacet.nl www.triodosfacet.

Akiba Commercial Bank Ltd.