REPORT__Evaluating_the_potential_of_microfinance_for_sanitation_in_Tanzania_May_2013

provide entrepreneurship training and will provide a guarantee on the Bank loan. The CBO
leaders will also need to pledge their own personal assets to guarantee the loan.
Azania bank (which is represented on TAFSUS Board of Directors) has indicated a strong
interest in funding the project. The loan currently under discussion is for approximately
TZS 19.7 million (slightly under USD 15,000), to cover the purchase of two tricycles, two
gulpers, two sludge tanks, 50l barrels, spades and operating equipment, initial operating
funds and training costs. It would carry an interest rate of 13.5% (which is lower than the
typical 18% they would offer, thanks to TAFSUS’s guarantee). The loan maturity is 2 years
with a 3 month grace period.
Another sanitation project close to financial closure entails financing the construction of
boreholes, public toilets and water taps to supply a public market and surrounding
communities. Although markets are owned by municipalities, the day to day activities are
managed by a market committee, formed by the vendors’ association. The market
committee will borrow be managing and running the public toilet and will apply user
charges from which to service the loan. The municipality still has to agree that the market
committee can access loan. If market committee is not performing, then the municipality
could dissolve it and put a new one in place. Approval for taking on the loan also has to go
through the general meeting of the vendors’ association. However, the project is currently
on-hold due to a land dispute problem, which affects the ability to build the public toilet.
3. Sources of funding
TAFSUS was created based on the recommendations of a study funded by UN-Habitat as
part of its Slum Upgrading Facility project. This initial feasibility study for setting up Local
Financing Facilities was carried out in 2004 in Ghana, Sri Lanka, Indonesia and Tanzania.
A number of donors were involved in the setting up of the credit enhancement facility,
including SIDA, DFID (with funding channelled via the Cities Alliance then transferred to
UN-Habitat, the implementer of the project.
4. Overall assessment of their sanitation microfinance experience
TAFSUS is also working at a broader level to develop financial services for housing
improvements, through the housing microfinance working group and through individual
actions. For example, they have been working with the Dar Es Salaam Community Bank
to assist them with the development of a housing microfinance product to finance housing
improvements (such as a roof, a latrine). Under this programme, TAFSUS would deposit
money in a Fixed Deposit Receipt account (TZS 500 million or USD 370,000 for 3 years)
that DCB could use for extending housing microfinance loans. DCB currently have 11,000
solidarity group lending clients, which means that their existing customers will be able to
access these housing loans. They will select the middle section of their clientele (those
deemed able to repay). They see that as a way to add an additional product to their range
and as a way to retain their clients.
However, they believe that sanitation has its own challenges, as few people want to talk
specifically about it. Therefore, they would recommend the establishment of a separate
working group to give the issue a special push as well as collaborating with the housing
microfinance working group (given that investment in a latrine can represent about 20 to
25% of a housing loan.
The role of a sanitation microfinance working group could be to disseminate information,
carry out advocacy activities, strengthen enforcement of existing requirements to have a
sanitation facility (through working with the Ministry of health and local governments). In
addition, they believe that the development of pit latrine emptying services would facilitate
enforcement as people would no longer have the excuse of saying that no option is
available for pit latrine emptying and therefore empty their pit content on the street.
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