REPORT__Evaluating_the_potential_of_microfinance_for_sanitation_in_Tanzania_May_2013

enter the sanitation microfinance sector. To do so, it may be advisable to define joint
initiatives with the housing microfinance working group, as interests would be aligned in this
area.
Influence the allocation of public funding to stimulate the market
The inclusion of a microfinance component in the National Sanitation Campaign
should be considered as soon as possible, whilst components of the Campaign are
still being defined. As the campaign aims to develop activities both on the demand and on
the supply side, we would recommend that some of the funding be allocated to stimulate
microfinance for sanitation. Although the campaign is primarily focused on rural areas, we
believe that the potential for such microfinance products could be explored in rural areas as
well as urban ones. Funding could be channelled in several ways:
Awareness campaigns targeted at financial institutions, so that they become aware of
the potential market for sanitation microfinancing and start offering products;
Seed funding for revolving funds, guarantees or fixed-deposit receipts with the common
objective of lowering the interest rate for sanitation microfinance clients.
With respect to the latter component, other large donors may be interested in allocating
funding for guarantee funds or providing seed financing for revolving funds. For example,
PROPARCO (attached to the Agence Française de Développement) has recently developed
a similar arrangement to support the Kenya Women Finance Trust with a guarantee in
Kenya. Similarly, the World Bank housing finance programme will support the establishment
of a Housing Microfinance Fund (HMFF), in order to help in providing longer term funds to
allow loans for up to five years or longer to be granted. Such examples could be built upon
and applied to stimulate the sanitation microfinance sector.
Next steps: testing the demand for and supply of sanitation microfinance in Tanzania
Building on the findings of present study, an action research programme was designed and
obtained funding from WaterAid and SHARE.
The research is due to start in mid-2013. Detailed activities that could support the
development of a sanitation microfinance offering in Tanzania will be carried out as part of
this research with the following objectives:
To establish a network of NGOs, CBOs and FIs (financial institutions) that are mobilised
to improve and finance sanitation and hygiene education in Tanzania through a
Sanitation and Hygiene microfinance working group;
To improve the capacity of selected partner NGOs, CBOs, and Microfinance institutions
to provide appropriate financial services/products to individuals and/or community based
organisations or enterprises to facilitate access to sanitation facilities and services;
To enable community based organisations and financial institutions to trigger demand for
sanitation services and pilot test sanitation and hygiene financing among poor and
vulnerable communities;
To document and disseminate the gaps and lessons learnt from the overall research
project both at the country and international levels.
Researchers will work with selected organisations to develop and test a small number of
microfinance products specifically designed to fulfil sanitation sector investment needs.
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