51-year-old Agatha Rojas is a well-regarded member of the local farmers’ association in Pemba on the coast of Tanzania where she lives. She owns a two-acres paddy farm, which keeps her very busy. But Agatha wants to do more – and earn more income. To do so, she is planning to invest and expand her rice production. The only problem with that is the financing. Agatha had previously succeeded to access financing through a group loan from a local microfinance institution, but the funds were disbursed in very small amounts that were tied to the performance of other group members. Not exactly what she was looking for. When Ms. Rojas asked various banks in the area for an individual loan, she could not qualify. She was told that she lacked the required collateral and a sufficient financial history.
In the outskirts of Dar-es-Salaam, Tanzania, Donald Rwechungura faces a similar problem. After his university graduation, the 24-year-old turned his head to his poultry business. Now, he wants to expand and has already visited numerous banks to request financing. The business is successful, it has a strong sales record and a solid customer base. But despite his viable loan application and proven business model, he could not qualify for support from any of the local banks.
These examples of financial exclusion and lack of access to financial services remain the reality for many hundreds of thousands, if not millions, of young adults and women from low-income families in the Tanzanian agricultural sector.
But Agatha’s and Donald’s situation might improve soon. The Tanzania Agricultural Development Bank (TADB), a state-owned development bank, now wants to expand its focus to improve its lending to women and youth in the agricultural sector. The bank’s goal is that farmers can access loans that address their unique needs. For instance, the repayment periods and frequency, the interest rates, the processing time, and the collateral requirements shall be adaptable to individual needs of these borrowers. The bank is currently working on the details of the new lending scheme and by the end of 2022 it should be launched.
To develop and roll out the new scheme, TADB also tapped into external resources. The Investment Climate Reform (ICR) Facility assisted TADB to develop a new gender strategy and a revised market approach to women and youth in rural areas. The strategy contained an analysis of value chains to highlight those that are particularly profitable and also where women/youth involvement in these commodities is high. Based on the strategy and value chain analysis, TADB plans to focus its funding primarily to borrowers who are active in the dairy, horticulture, fish, poultry, maize, and sunflower sectors, which are value chains of strong interest and presence of women and youth.
Jointly with the ICR Facility, TADB organized a workshop in May 2022 to validate the new gender and youth scheme with its partners from ministries, development partners and women’s and youth organizations. At the workshop it was agreed that the new scheme of TADB should not only include direct lending to women and youth. Therefore, TADB is also working on a loan guarantee mechanism covering credit risk, an on-lending approach to provide funds to microfinance institutions and commercial banks, and technical assistance to TADB’s partner banks as well as to the women and youth agribusinesses.
The new scheme speaks to the problems that farmers like Agatha and Donald have. TADB’s new scheme will be made available to women and youth in the identified sectors but also leave flexibility for their own business ideas. As for Agatha and Donald, they are lucky because they have already been made aware of the upcoming credit line as they were interviewed for this blog post. They look forward to the new opportunity so that they can finally go ahead and invest to expand their businesses.
However, many other women and youth farmers will first have to be made aware of the new opportunity. To do that, the TADB will also promote the credit line among its partners. Among these partners are, for instance, the local Agricultural Marketing Cooperative Societies (AMCOs), the Sokoine University Graduate Entrepreneurs Cooperative (SUGECO), the Tanzania Horticultural Association, the Tanzania Youth Alliance, and the Tanzania Women Chambers of Commerce. As many potential clients as possible, people like Agatha and Donald, should hear of the new offer. If all goes well, investment by women and youth may well increase in the upcoming years in Tanzania.
This publication is part of an intervention supported by the Investment Climate Reform (ICR) Facility. The ICR Facility is co-funded by the European Union (EU), the Organisation of African, Caribbean and Pacific States (OACPS) under the 11th European Development Fund (EDF), the German Federal Ministry for Economic Cooperation and Development (BMZ) and the British Council. The ICR Facility is implemented by GIZ, the British Council, Expertise France, and SNV.
The contents of this publication are the sole responsibility of the authors and do not necessarily reflect the views of the donors or the implementing partners.
