CIDA in Tanzania

Today we had the good fortune of getting a meeting with CIDA’s Tanzania representative, Ken Neufeld and his colleague Gerald Chauvet, who has responsibility over the PSD agenda. 

Canada's current bilateral program in Tanzania focuses on four main areas, with private sector development being one of the four. The other three are primary education, HIV/AIDS and finally Good governance.  Canada has renewed its 2002 commitment towards Tanzania as a country of focus in its policy, Canada's International Statement — A Role of Pride and Influence in the World. This framework, announced in April 2005, confirms Tanzania as one of the 25 development partners in which CIDA will concentrate the bulk of its country-to-country assistance. As a result, CIDA's assistance to Tanzania has grown substantially, and it should continue to grow. In line with this statement, CIDA is giving priority in its support for country-led programs that are consistent with Tanzania's Poverty Reduction Strategy. Ken confirmed that Tanzania’s bilateral program is indeed growing at a very quick rate, perhaps over $60 million this year. A huge percentage of CIDA’s funds are earmarked for budgetary support - Tanzania being such a donor’s darling. Tanzania is now into its second PSRP, which both Ken and Gerald support, although like any PRSP, there is still room for improvement and prioritization.

Under the objective to improve the Business Environment for Small Enterprises., CIDA, in conjunction with the Government of Tanzania and other donors, is providing financial assistance and technical expertise to create an environment more conducive to small enterprise development, and to establish or expand micro and small-scale credit to those financially viable proposals designed to generate employment. 

Gerald told us of a new $35 million Trust Fund which has been created to enhance and build capacity of the meso and macro levels for microfinance institutions – it is appropriately titled the Financial Sector Deepening Trust (FSDT). From numerous meetings it appears that Tanzania is in the midst of a full scale microfinance revolution and there is a mad scramble to provide services into the rural areas. This autonomous fund is being created by a consortium of donors and the Bank of Tanzania. Members include Danida, the Dutch, Sida, Dfid and CIDA. It will officially launch October 11 this year, and Canada’s own, Desjardin  will be involved in this Trust. The Trust will support the three pillars of financial sector development: (i) government policy and the legal and regulatory framework; (ii) financial and real sector infrastructure; and (iii) financial institutions and related transactions.

The general feeling of Ken, Gerald and many others is that the demand for more services, particularly credit services is largely unmet and far outstrips the available supply. However it should be noted that the evidence of this is largely anecdotal — albeit quite likely accurate. Nevertheless, there is little quantitative data available on the actual demand. Gerald informed us that a South Africa consulting firm has been hired to carry out a very large half million dollar survey of the financial demand. We raised the point that while deepening financial services available in Tanzania, shouldn’t attention be simultaneously focused on the human capital side i.e. the ability to run a proper micro or small business. The development and success of SMEs is not just the availability of credit. As Acting Dean of the Faculty of Commerce and Management of University of Dar es Salaam, Dr. Marcellina Chijoriga so eloquently put, there is a missing link to the development of SMEs, while the provision of credit is about the ability to repay. I worry that such a Fund at the FSDT will overlook this important part of the equation and will only get caught up in supply-driven activities such as developing microfinance regulatory and supervisory frameworks or supporting efforts by banks and MFIs to develop new SME microfinance products. Can we really unleash entrepreneurship or support business development without addressing the human capital side of the equation at the same time? Should we wait to address human capital until financial deepening across Tanzania is achieved and the masses have access to credit and other financial products before addressing harnessing the demand side?

CIDA continues to support the Business Environment for Strengthening for Tanzania programme (BEST). BEST is another initiative supported by a consortium of donors, which include DANIDA, Sida, DFID, the Royal Netherlands Embassy, and the World Bank, which is very focused on the regulatory environment. It looks at causes that might be hampering business, appropriate types of laws, and licensing issues to name a few. The BEST Programme identifies 5 priority areas: Regulation, Commercial Dispute Resolution, Tanzania Investment Centre, Government Culture, and Private Sector Advocacy.

Finally, CIDA is an active member of the Legal Sector Donors Group, which looks has many investment climate direct links.

Overall this was a very informative session in which we all had the opportunity to share our respective agendas on PSD. I was pleased to hear that Christine Johnson of CIDA’s policy division is traveling to Tanzania sometime soon and will have a chance to engage with Ken and Gerald on their PSD agenda.

Comments

[menFlelibly]

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