REPORT__Evaluating_the_potential_of_microfinance_for_sanitation_in_Tanzania_May_2013

Within each group, there is a Jenga treasurer, whose role is to manage the contributions,
loans and repayments. They are supposed to prepare a monthly financial report, which is
then aggregated at the ward level, and then again at the regional level. Regional-level
reports are then sent to CCI and the Jenga national coordinator. Although such systems of
reporting are theoretically in place, it appears that CCI and the Jenga national manager
are facing substantial challenges in obtaining reliable information on the group activities.
Loans can be provided for all types of activities, including housing projects or water and
sanitation investments. Regarding housing, CCI has identified a clear gap in the market,
since no financial institution in Tanzania is currently offering housing loans to the urban
poor. Interest rates offered by microfinance institutions can be as high as 35 to 40%
annually, which is clearly too high for a housing investment. With the view to stimulate a
mobilisation of range of actors for the development of the housing microfinance sector,
CCI was also one of the founding member of the Tanzania housing microfinance working
group in 2009 (see Box 7 in the main report).
An example of such process in Dar es Salaam took place in the Chamazi area, near the
port. In order to build an extension to the existing port, the government decided to expel a
community of 35,000 people. There was a saving scheme in the area, where more than
70% of the people were tenants, with no alternative shelter solution. The Federation
mobilised its members to go to the Ministry of Land and to the municipality and obtained
support from the Government to obtain new land, get financing to have the land surveyed
and ready for a low-cost housing project as well as for the construction of sewers. Funds
from the Tanzania Urban Poor Fund were used to provide housing loans. The land at
Chamazi was bought by community members at a cost of TZSs 24 million (close to USD
18,000). Housing loans are provided for incremental housing construction where members
obtain loans ranging from TZSs 2.5 million to 4.5 million (USD 1800 to 3,000). Moreover,
communities are required to provide a down payment of 10% of the value of the loan and
to provide free labour to assist with the construction.
2. Activities in microfinance for sanitation
As with housing, CCI observed that no financial institutions is currently providing financing
facilities to enable households to invest in household sanitation solutions. To address
such gap, CCI has started disbursing “micro-loans” for the construction of household
toilets, out of the proceeds of the Jenga Fund. Details of the loans provided since 2008
are given in the Table below. The loans have an average value of TZS 200,000 (USD
150). As for the other loans provided by the Jenga Fund, they have a one-year term and
carry a flat annual interest rate of 10%.
The selection of the target population for the loans was purely demand-driven, as the
communities are supposed to demonstrate their willingness to participate and to contribute
labour. All communities can take loans, although landlords have more opportunities as
they own land. A loan of TZSs 150,000 could be repaid for 12 month which means a
repayment rate of TZSs 12,500 per month. Given that the average income of the majority
of the population is TZSs 60,000 (USD 45) per month, this represents about 20% of their
total income. The loans are sufficient to cover the costs of the substructure, the toilet and
in some occasion the superstructure. In all these cases, the beneficiary has to contribute
free labour and local materials.
Table A. 1 - Microloans by Jenga Fund for construction of household toilets, 2008-2011
Region
Number of household
toilets
Amounts loan
disbursed (TZS) Repayments (TZS)
35