REPORT__Evaluating_the_potential_of_microfinance_for_sanitation_in_Tanzania_May_2013

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Abbreviations and acronyms CGAP Consultative Group to Assist the Poor CLTS Community-Led Total Sanitation CSO2 Country Status Overviews (second round) DAWASA Dar Es Salaam Water and Sewerage Authority DAWASCO Dar Es Salaam Water and Sewerage Corporation DTM Deposit Taking Microfinance institution HBS Household Budget Survey EWURA Energy and Water Utilities Regulatory Authority JMP WHO/UNICEF Joint Monitoring Programme for Water Supply and Sanitation MDGs Millennium Development Goals MFI Microfinance Institution MoHSW Ministry of Health and Social Welfare MoWI Ministry of Water and Irrigation NGOs Non-Governmental Organisations PMO-RALG Prime Minister’s Office – Regional Administration and Local Government SACCOs Savings and Credit Cooperatives SWAp Sector-wide approach TZS Tanzanian Shillings TSSM Total Sanitation and Sanitation Marketing UNICEF United Nations Children’s Fund USD United States Dollars VIP Ventilated Improved Pit WSDP Water Sector Development Program WSP Water and Sanitation Programme WSSA Water Supply and Sanitation Authorities Note: the Tanzanian Shilling has depreciated by almost 40% since 2008. For this case study, we are using an average exchange rate over the last 3 years of 1 USD = 1,350 TZS. 4
Executive Summary This case study investigates how household financing for sanitation can be mobilised via the use of microfinance in order to accelerate sustainable access to sanitation facilities and/or services. The audience for this research comprises microfinance institutions, sanitation sector actors and funders. Although most Tanzanians use a basic latrine, only a small percentage has access to what is defined as “improved sanitation”, i.e. a sanitation solution that safely separate humans from their faeces. Even fewer of them are connected to a waterborne sewerage system, which means that the vast majority of Tanzanians rely on “on-site sanitation” solutions, i.e. pit latrines or septic tanks. According to the Government of Tanzania policy, households are responsible for investing in on-site sanitation solutions and maintaining them in good working order by emptying them in a hygienic manner when they become full. Most households are struggling to do so, and sanitation expenditures are often relegated below other more pressing needs. It is also possible that cultural factors are at play in this lower priority given to sanitation. Microfinance is a financial tool that could help reduce the sanitation financing gap, which is particularly significant in Tanzania. Microfinance includes microcredit, savings products and other financial services, although this research focuses mainly on the potential of microcredit. Microfinance could be used in two main ways to promote access to sustainable sanitation services: By enabling households to spread out the costs of investing in household sanitation solutions (such as latrines and septic tanks), thereby improving the affordability of such investments; By supporting the development of a broad range of sanitation service providers, including masons (fundis), communal toilet block operators or pit latrine emptiers. Sector participants interviewed as part of this research appeared supportive of relying on microfinance as a way to expand the sources of financing for the sector and alleviating existing financial constraints. Yet, the use of microfinance instruments for sanitation has so far remained confined to small pilot programmes, with no clear strategy for scaling-up. There may be several factors accounting for the limited scale of these programmes so far: Pilot programmes have mostly been introduced by water and sanitation NGOs, with only limited outreach in isolated locations in the country and close to no prior microfinance experience. Established microfinance institutions only have a very limited appreciation of the financing needs of sanitation sector actors (including household-level investment needs and at the level of sanitation entrepreneurs). There is a real fear among MF clients to take on a loan for sanitation services and products as these are not seen as income generating and therefore cannot contribute towards repaying the debt. Tanzania has a very small and not particularly sophisticated microfinance market. Given the low coverage rate of improved sanitation and the need to keep existing latrines in good working order, the potential for development of these products is large and currently untapped. To this date, no formal sector-level dialogue has taken place on whether microfinance could play a role in mobilising the substantial household and private sector investments required to deliver sustainable sanitation services. 5
Page 1 and 2: RESEARCH REPORT Evaluating the pote
Page 3: Contents Abbreviations and acronyms
Page 7 and 8: Identifying the type of products th
Page 9 and 10: 1. Introduction 1.1. Case study obj
Page 11 and 12: sewers will fail if the sewers them
Page 13 and 14: In the 1970s, the high profile Mtu
Page 15 and 16: Table 1: Coverage and yearly capita
Page 17 and 18: 3. Evaluating the potential of micr
Page 19 and 20: Basic components that make up simpl
Page 21 and 22: Box 6: Revolving funds for water an
Page 23 and 24: When they were interviewed in mid-2
Page 25 and 26: Are household microfinance products
Page 27 and 28: 3.2 Microfinance for sanitation ent
Page 29 and 30: Could this segment be developed and
Page 31 and 32: of microfinance products could help
Page 33 and 34: Annex A: Overview of sanitation mic
Page 35 and 36: Within each group, there is a Jenga
Page 37 and 38: a position to absorb more external
Page 39 and 40: Sanitation Service Plan, which outl
Page 41 and 42: 3. Sources of funding The micro-cre
Page 43 and 44: Name of institution WaterAid Tanzan
Page 45 and 46: households to UMAWA for toilet empt
Page 47 and 48: provide entrepreneurship training a
Page 49 and 50: take business property, basic house
Page 51 and 52: of the loan portfolio. The MFI rece
Page 53 and 54: Name of financial institution Mkomb
Page 55 and 56:
Name of institution PRIDE Tanzania
Page 57 and 58:
Annex C: List of people consulted a
Page 59 and 60:
Commercial Bank Jimmy Ohanya KCB Ma
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REPORT__Evaluating_the_potential_of_microfinance_for_sanitation_in_Tanzania_May_2013

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