REPORT__Evaluating_the_potential_of_microfinance_for_sanitation_in_Tanzania_May_2013

employee of the municipal health department and the street leader (as they would always
be informed if someone tries to sell their house). There are no other collaterals requested.
Loan documentation clearly specifies that this is not a grant and that it has to be repaid
(so as not confuse customers with other activities conducted by MAMADO on a grant
basis). There are no saving components: a saving component was originally considered
but it was found that existing MFIs in Dodoma already offer saving products.
Project operational and governance arrangements
Management of the project has been entrusted to the NGO MAMADO, who was requested
to create a microfinance sub-unit within the organisation. The microfinance project
represents only a small part of their current activities (about 10%) and it is possible for
them to engage in lending activities as long as they do not collect any savings.
The decision to entrust MAMADO with the project was taken after due consideration of
alternative management arrangements. As part of project design activities, MAMADO
conducted a study to identify organizations with experience in the implementation of micro
loan schemes for sanitation. The objective of such investigation was to learn from them
and to find a partner to assist during the course of the project or to which they could
potentially hand over after the end of the project. At the time, they considered the potential
involvement of the following institutions:
• MFIs active in the region, such as FINCA, PRIDE or SIDO (Small Industries
Development Organisation). They found that as such MFIs are profit-orientated and
focused on lending to income-generating activities; they were not interested in this
type of microloans for sanitation. FINCA was helpful during the preparation of the
project (e.g. provided a model for group lending contract) and have a representative
on the Project Steering Committee but they were not interested in a bigger part in the
project, as they would usually require a security from their borrowers (such as
ownership title for the house) which most Chang’ombe residents are not able to
provide.
• DUWASA, the Dodoma water and sewerage company, was not at all interested in this
type of microloan scheme for sanitation;
• Large water sector organisations, such as WaterAid and UNICEF, had no experience
in this area and would therefore not contribute any specific skills whilst adding to the
costs;
• SACCOs (Savings and Credit Cooperative Societies) are mostly active in rural areas
(to help financing mostly agricultural project) and do not exist in Chang’ombe.
Therefore, going through SACCOs could not be considered as there would have been
considerable costs entailed with facilitating and supervising their creation in
Chang’ombe.
They therefore recommended that MAMADO be in charge of the project and create a
responsible sub-unit within the organisation. The risk of facing difficulties to obtain
repayment of the loans (given their status as an NGO and the fact that they conduct other
activities in the same area on a grant basis) was clearly identified and provisions made to
counter that risk (such as clear marketing).
The project is supervised and monitored by Swiss consultant (EAWAG-SANDEC). In
addition, a Project Steering Committee (PSC) was established to provide overall guidance
to the project, be responsible for key strategic decisions and approve the project’s
activities. The PSC is made up of one representative from each of the following:
municipality of Dodoma, Moshi University (specialised in microfinance and small business
development), DUWASA, the local MFI and one nominated representative from the
beneficiary community.
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