REPORT__Evaluating_the_potential_of_microfinance_for_sanitation_in_Tanzania_May_2013

When they were interviewed in mid-2011, both organisations believe that demand for
household sanitation microfinance products is high, although these organisations had only
conducted partial demand studies to support this claim. The main constraint in terms of
extending such financing tends to be limited available funding rather than limited demand by
households.
Did financial institutions express an interest in this market segment?
As of mid-2011, no formal financial institution in Tanzania (including commercial banks or
MFIs) was offering sanitation microfinance products to households. This is due to a number
of factors, including these financial institutions’ general lack of awareness of the financial
needs of the sanitation sector and to the fact that such products may not be in line with their
current strategic directions.
Some of the Tanzania-based financial institutions consulted as part of this study appear to
be interested in providing microfinance products for sanitation. Specifically, Tujijenge
Tanzania Ltd, Mkombozi Commercial Bank, Dar es Salaam Community Bank, and Kenya
Commercial Bank Tanzania Ltd showed some level of interest in considering financing
sanitation facilities and services.
Most of these financial institutions are relatively new and appeared to be open to new
product development. They indicated that they could lend to households as long as the latter
can demonstrate their ability to repay the loans advanced (through a clear income stream for
example). These institutions have product development or marketing departments that are
actively looking for ways to diversify their product offerings. For example, Tujijenge is
currently offering a “solar lamp” loan and is looking to diversify into micro health insurance
products. Mkombozi bank, the most recently licensed commercial bank in Tanzania, is
seriously considering offering housing microfinance products in the near future. Similarly,
Dar es Salaam Community Bank Ltd is keen on developing low income housing loans.
However, these institutions would need to conduct a thorough market demand assessment
before deciding on whether to enter this market or not. Such a market demand assessment
could start with asking their existing customers whether they would be interested in this type
of loan product, for example.
More established microfinance institutions, such as FINCA or PRIDE, are showing limited
interest for household-level products as they equate those to consumer loans. These
institutions are currently focused on lending to small-scale entrepreneurs, via incomegenerating
loans and are less likely to be willing to diversify into consumer loans.
However, the traditional MFIs could be encouraged to embed sanitation financing in wider
social programs. For example, Tujijenge Tanzania Ltd indicated that sanitation financing
could be incorporated into their planned medical insurance loan product. Discussions with
managers of Mkombozi Commercial Bank Ltd and Dar es Salaam Community Bank Ltd
respectively indicated that sanitation financing could be included and prioritised in the
housings schemes the institutions are planning to develop. All the same, there is need to
actively develop the interest of financial institutions in Tanzania to consider financing their
customers to access improved sanitation facilities and/or services.
Annex B contains more detail on the interest expressed by each financial institution
consulted on the different market segments, and for household-level microfinance sanitation
in particular.
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