REPORT__Evaluating_the_potential_of_microfinance_for_sanitation_in_Tanzania_May_2013

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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 financial institutions (FIs) 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 CBOs and FIs to trigger demand for sanitation and pilot-test sanitation and hygiene financing for 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. 8
1. Introduction 1.1. Case study objectives and methodology The objectives of the case study are to investigate how household financing for sanitation can be mobilised via microfinance institutions, community banks and mass market commercial banks in order to accelerate sustainable access to sanitation facilities and/or services. The research conducted in Tanzania is exploratory in nature. It seeks to map out the existing provision of microfinance for sanitation, to identify where opportunities for future market development lie and to identify how the development of such a market could be fostered (through the targeted use of public funds or regulatory changes for example). The case study in Tanzania will feed into broader research about how donors can channel financing for water and sanitation to small-scale actors. The research was conducted in July 2011 based on interviews with interested water and sanitation organisations, financial institutions and a review of the literature on the subject (see Annexes C and D for more detail). In addition, WaterAid hosted a half day workshop in Dar es Salaam on 27th July 2011, which gathered representatives from sanitation organisations as well as microfinance and banking institutions. The workshop enabled testing the level of interest in microfinance for sanitation. Within the limited context of this project, it was not possible to conduct demand assessments for sanitation microfinance products (this could be carried out as part of follow-up activities at a later stage, depending on which type of financial product is taken forward for development and by whom). The audience for this research comprises microfinance institutions, sanitation sector actors and funders. As a result, it is crucial to define key terms used in this report, such as microfinance and sanitation, as developed in Boxes 1 and 2 below. Additional details on sanitation solutions are also provided throughout the report for the benefit of readers with no prior sanitation sector knowledge. Box 1 - What is microfinance? Microfinance has been practiced for many years in different forms. It first became prominent in development circles in the 1970s in Bangladesh, with the provision of small loans for incomegenerating activities with only minimal collateral requirements and at lower interest rates than those available through traditional lenders. These loans were provided by microfinance institutions (MFIs) with a good knowledge of local communities and therefore a better ability to manage underlying risks and keep costs down. Microfinance often refers to financial services for low-income people offered by different financial institutions. The concept is commonly used to mean loans by microfinance institutions. However, over time microfinance involved the provision of a broad range of financial services including loans, savings and insurance. Microfinance institutions use various methods, such as joint liability, advance cash deposits and group members’ follow-up, to deliver and manage small loans to usually selfemployed borrowers. The entities providing such services can include MFIs (for profit or non-profit), but also traditional banks, SACCOS (Savings and Credit Cooperatives) and solidarity lending groups, such as Self-Help Groups which are very prevalent in India. The type of institutions providing microfinance services 9
Page 1 and 2: RESEARCH REPORT Evaluating the pote
Page 3 and 4: Contents Abbreviations and acronyms
Page 5 and 6: Executive Summary This case study i
Page 7: Identifying the type of products th
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
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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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