sanfin-tz 15th of may: workshop report

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SanFin Tanzania

Proceeding from the second working group meeting

15th

of May, Dar Es Salaam

May 2014

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1 Introduction

SanFin Tanzania is a working group focused on supporting microfinance for sanitation in Tanzania.

The working group first meeting was held on the 3rd

December 2013 with the support of a SHARE

(DFID)-funded action-research for developing microfinance for sanitation in Tanzania.

Following on from this first meeting, participants from eight microfinance institutions (MFIs) and

NGOs took part in a two-week training on developing microfinance products for sanitation provided

by MicroSave. Three of these organisations (Tujijenge, ECLOF and CCI) are currently developing

financial products for sanitation.

One main objective of the second SanFin working group meeting was to enable the three institutions

currently developing sanitation microfinance products to share their experiences with a wider

audience: what steps are they taking to develop sanitation products? Have they identified demand

from their customers for sanitation-focused financial products? What challenges are they anticipating

and what kind of support they would need?

Another objective was to inform SanFin members on the next phases of the SHARE action-research.

2 Attendance

The working group meeting was hosted at WaterAid’s offices in Dar Es Salaam and gathered

representatives from Mama Bahati Foundation, ECLOF-Tanzania, Tujijenge Tanzania, K-Finance,

YOSEFO, CCI, WAT-Human Settlement Trust, Habitat for Humanity, Tanzania Association for

Microfinance (TAMFI), VKS construction support services, Trémolet Consulting and MicroSave. A

full list of participants is available in Annex 2.

3 Proceedings

3.1 Introductory remarks

Following introductory remarks by Abel Eliezer Dugange (Director of SSTZ) on behalf of WaterAid

Tanzania country representative, Sophie Trémolet (Trémolet Consulting, Lead SHARE researcher)

gave a brief background on the SHARE initiative behind the initial formation of SanFin. Sophie

insisted that one legacy of the SHARE research would be the establishment of a working group

dedicated to microfinance for sanitation, beyond the period of the action-research due to end in

November 2014. Sophie invited local stakeholders, including WaterAid or TAMFI, to take the lead in

carrying out this activity and creating a community of thinking and practice around sanitation

microfinance. Such community could act as a focal point for external agencies interested in rolling-

out sanitation activities through microfinance.

3.2 A recap on the SHARE action-research – George Mugweru, MicroSave

George Mugweru from MicroSave gave the audience a brief recapitulation of the progress of the

action-research since December 2013. Through the action-research 14 participants from 4 MFIs and 4

NGOs received training on qualitative market research for sanitation, i.e. conducting focus group

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discussions (FDGs) to extract data on customers demand for sanitation-related products. Participants

were given skills to organise and lead the FDGs so as to extract appropriate data. During the training,

they were also familiarised with sanitation issues through presentations from sanitation specialists,

including from WaterAid, VKS and SAWA. This exposure to activities enabled participants to form

the FGDs questionnaires. Participants were also exposed to sanitation business activities through a

field visit to Kigamboni (in Temeke municipality in Dar Es Salaam) were they met the Director of

UMAWA, a community-based enterprise which has received the support from WaterAid to deliver

emptying services.

After the training, ECLOF-Tanzania, TujijengeTanzania and CCI expressed their interest in taking

part to the next phases of the action-research and receive further assistance from MicroSave to

develop their concepts. From February to May 2014, ECLOF-Tanzania and CCI carried out market

research activities. Tujijenge had already hosted market research activities during the January

training.

Following George’s intervention, three representatives from ECLOF-Tanzania, CCI and Tujijenge

gave presentations, which provided some background information on their institutions and the

outcome of the training they received.

3.3 ECLOF Tanzania, Dativa Mtui

Background

The Ecumenical Church Loan Fund Tanzania (ECLOF-T) was established as a department of the

Christian Council of Tanzania in 1961. Based in Arusha, ECLOF was re-launched as a NGO in 1994.

ECLOF portfolio grew from TZS 1.9 billion (USD 1,123,050) in 2010 to TZS 3 billion (USD

1,773,240) at the end of 2013. It currently employs 55 full-time employees. The institution’s annual

income grew from TZS 6.8 million in 2006 to TZS 1 billion (USD 591,000) in 2012. Its current

savings deposit amount to TZS 400 million.

ECLOF-T is currently serving the market through 6 products, the main ones being Jikwamue and

Jitegemee which consist of 65% of the portfolio.

Table 1 - ECLOF-T current range of products

Source: ECLOF-T

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Activities under SanFin Project

Two members of ECLOF-T received training with MicroSave in January 2014. Following the

training, ECLOF conducted market research in March 2014. A total of 8 Focus Group Discussions

(FGDs) were conducted in 3 days with 95 respondents. Through these FGDs, the following lending

product concepts for sanitation were identified:

Toilet/Bathroom Construction/Improvement for households, businesses and institutions

Integrated sludge collection pit and biogas production unit construction

Working capital for sanitation businesses

Anticipated challenges

Although demand for the above products was identified, ECLOF expects that there will be challenges

for rolling out such products. These challenges are the following:

ECLOF has limited funds to carry out WASH financing;

Its credit officers lack of skills for assessing/appraisal of sanitation businesses;

The institution lacks of experience in marketing/identifying sanitation type business opportunities;

Customers have a poor perception of sanitation financing

Loans for sanitation will multiply customers’ loans.

Lessons learnt so far

There is high demand for the WASH activities/products;

The customers appreciate the benefits of improved toilet and bathroom;

By providing sanitation loans ECLOF Tanzania will improve the general well-being of its

customers

Technical Support Requirements

For ECLOF-T, overcoming the above challenges would require:

Funds for supporting the WASH product;

Training on sanitation to management team to generate buy-in;

Training on sanitation businesses appraisal and marketing of the products;

Sanitation awareness to customers.

SanFin activities likely to be carried out

ECLOF-T is likely to train its customers concerning the WASH products (awareness raising) to

increase uptake. ECLOF-T is likely to develop products like biogas loans because there is high

demand and they seem sustainable as they reduce other costs for households.

3.4 CCI, Teressia Ntanga

Background

The Centre for Community Initiative (CCI) is an NGO that was established in 2004. CCI mobilises

urban communities to form savings and credits schemes. Saving schemes contribute to Tanzania

Urban Poor Fund (TUPF). The TUPF operates at regional level through the Jenga Fund, a revolving

fund established for purpose of financing different livelihood projects including the purchases of land,

home improvements, water and sanitation projects and other development projects initiated by

Tanzania Federation of the Urban Poor.

Currently, 350 communities or groups have been mobilised in different regions: Dar Es Salaam,

Dodoma, Arusha, Morogoro, Mwanza, Mara, Zanzibar and Tanga. The total amount of savings within

the groups amounts to TZS 165,600,400 (USD 97,557). The Jenga fund has disbursed a total of 1,189

loans for housing construction, water connections, borehole and toilets construction. Since 2009, TZS

450,690,900 (USD 274,811) of loans has been disbursed. The Jenga Fund has an outstanding loan

balance of TZS 222,707,250 (USD 135,797). The current repayment rate is 30%.

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Outside the SanFin project, CCI has been financing WASH activities in urban areas. In regards o

sanitation, a total of 980 toilets have been constructed, with 780 of these financed on loans. CCI also

facilitated the financing of one public toilet through a loan to one of the community group. About

TZS 190 Million (USD 115,853) worth of loans has been disbursed for toilet construction.


As a result of the training provided by MicroSave in January, CCI conducted a market research in

order to:

Identify factors limiting the uptake of the loan;

Establish the reasons for low repayment rate;

Explore additional sanitation loan products that Jenga Fund could offer to its customers; and

Evaluate the current delivery mechanism with a view to make more efficient and responsive.

A total of 16 FGDs were conducted in 4 days with 166 respondents. Research was conducted in

Karakata, Vingunguti, Chamazi, Kekomachungwa, Kekomwanga, Tandale and Msasani Bonde la

Mpunga.

Following the FGDs, CCI intends to work with MicroSave on revising the features of their current

toilet construction loan (including targeted customers and delivery mechanism). CCI will also define

loans for purchasing Gulper equipment and construction of DEWAT systems and for housing

improvement.


One main challenge anticipated by CCI is that most customers perceive the loans given under the

Jenga Fund as a grant, which induces poor repayment rates. This situation means that there is less and

less fund available in the revolving fund for loans. Overall, the current disbursement and repayment

mechanism are lengthy processes as the Jenga fund relies on the federation committees to remit their

payments (savings and repayments).

In addition, low or irregular income in informal settlements threatens the viability of lending schemes.

One way to enhance income is to provide livelihood loans as well.


One important lesson that has emerged is the potential need to reform the Jenga Fund into a full-

fledged MFI, particularly to reach non-federation members and adopt mechanism to ensure

repayments. Another key lesson is to match financial services with customer needs, identified through

market research. This activity has confirmed that there is an unmet need for sanitation financing in

informal settlements. However, to increase sources of revenues, it might be suitable to introduce other

types of loans that are “income generating” – livelihood loans.


CCI requires technical support to revise their current loan process within Jenga Fund. The NGO needs

capacity building on loan managements through exchange visits and training of staff. In the event

where it would deem necessary to transform the Jenga fund into an MFI, CCI would need support in

this process.


CCI will engage in a process to revise their current loan products and process to make the Jenga Fund

more efficient and sustainable. They will carry out activities to increase uptake of the loans and

chances of repayments – activities aiming at changing people’s perception of the Jenga fund. CCI will

also look into including livelihood loans (business loans) to improve income levels in the informal

settlement.

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Box 1 – Discussion following CCI’s presentation:

Following Teressia’s presentation, the discussion was animated by two subjects: the Jenga Fund’s poor

repayment rates and CCI’s project to transform it into an MFI.

Japhet from SEDIT said that as toilets are non-income generating, CCI cannot expect to have the loans repaid

and questioned CCI’s procedure for issuing the loans. Harry from TAMFI added that if loans were targeting the

destitute, it is normal that the repayment rate is low.

Judith Sando from WAT-Human Settlements reminded the audience that in Tanzania there was only two

institutions officially registered as MFIs, i.e. which are regulated by the Bank of Tanzania. All other institutions

are considered as NGOs. Judith praised CCI for realizing the need to make improvement to their organization.

However, she advised CCI to carefully weigh whether they should leave behind the federation system. She

invited CCI to visit other countries (where federation systems work well). “Don’t abandon it!” said Judith. She

added: “NGOs are community-driven. Their perspective started changing a few years back as sources of income

started to fade. CCI needs to look for a middle ground: will you continue to be a NGO community-driven and

adopt an enterprise system? What would that mean as an institution? Be careful that what you transform into

does not take you away from the community. If CCI become MFI, you might lose this.”

George Mugweru from MicroSave clarified that it was not CCI that is transforming but the Jenga Fund itself.

Kenneth Sinare shared Judith’s concerns and advised CCI “to guard their mission”. He added: “Rather than

deviating giving livelihood loans, find a partner, and concentrate on what you do best – building the community

– In that way you complement each other.”

3.5 Tujijenge, Debora Kiwale

Background

Tujijenge Tanzania Limited is a microfinance company that started operating in April 2006. It

currently operates through five branches located in Dar es Salaam, the Coastal region, Mwanza and

Mara (in both urban and rural areas).

Tujijenge’s social mission is “to improve quality of lives of families in Tanzania through the

provision of microfinance”.

Tujijenge’s main focus is the provision of loans to its customers, via both via Group and Individual

lending methodologies. Other services include pre-loan training to group clients, savings services and

mobile phone banking (for loan disbursement and repayment). Currently, Tujijenge has over 8,000

active borrowers, with an outstanding loan balance is of TZS 4.9 billion (USD 3,062,500)


In January 2014, two senior staff of Tujijenge attended the training on sanitation microfinance. With

support MicroSave, Tujijenge developed a draft of a sanitation microfinance product.

Having met with the director of UMAWA (a sanitation –focused community-based enterprise),

Tujijenge disbursed a loan of TZS 5 million to UMAWA at 36% IR. This was Tujijenge’s first step

towards funding sanitation-related activities that fit into their current lending activities.


The main challenges for developing further sanitation related financial services are:

Tujijenge’s staff lack of capacity for appraising sanitation-related businesses

Start-up loans are deemed too risky - therefore Tujijenge needs funding to share the associated

risks of lending to sanitation start-ups

For many people, sanitation is still not at the top of their priority chart


There is still a big market for sanitation microfinance;

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Staff selling the sanitation products must be groomed to be able to deal with sanitation-related

businesses as they are not conventional microfinance products;

The products roll out might need to go along with education and awareness campaigns.


To develop the identified products, Tujijenge would require:

Staff training on sanitation microfinance

Training of credit officers on individual lending (which is new business for Tujijenge) and

marketing skills

Lending funds to mitigate on start- up lending risks

Networking with other stakeholders to unlock the product potential

Conducting a mapping out of areas to identify those where sanitation elated activities would fit

into their lending activities


Through the mapping out activity, WASH enterprises could be identified and Tujijenge will be able

scale-up their sanitation business activities. Tujijenge hopes it can get a funding partner to do better

with the sanitation product in the future. Such funding will support financing sanitation businesses

start-ups.

Box 2 – Discussion following Tujijenge’s presentation

The discussion focused on Tujijenge’s first loan to a sanitation business and the need to train loan officers so

that they’re able to recognize sanitation businesses. Tujijenge’s loan officer had to go three times to meet

UMAWA before issuing the loan. According to Tujijenge, there was little evidence of cash flow (there were

cheques from the municipality, but no other means to assess the cash flow).

Tujijenge’s findings are surprising since UMAWA has been receiving support from WaterAid and BDS

partners, precisely to enhance their bankability. As a result of these activities, UMAWA is probably one of the

best trained gulper entrepreneurs that is currently operating in Dar es Salaam. However, this puts in evidence the

difficulties of building the capacities and business management skills of this type of businesses, so that they can

interact with financial institutions.

Goufrane Mansour from Trémolet Consulting wondered whether this absence (or poor) evidence of cashflow

was typical or not of businesses that Tujijenge usually deals with and if Tujijenge helps businesses (through

training) to package themselves in a way that is attractive for a financial institution.

According to George Muruka from MicroSave, the loan issuance was also the fruit of innovative thinking from

the CEO. Tujijenge normally provides individual loans to those who are members of a loan group and have

proved ability to repay (“Most of individual borrowers graduate from the group”) – this was exceptional for

them and demonstrates the high level of interest at the level of Tujijenge’s management for this new market.

George Mugweru recognized the need to provide training to loan officers on sanitation: “There is a need to build

capacity of financial institutions: how do you see an opportunity in a sanitation finance business – which is a

very different business from what they know. If I were an MFI officer and meet this man carrying sludge, I may

not see him as a businessman: need for us to build capacity of FI staff to be able to identify this opportunity.”

3.6 Other SanFin members

The working group also enabled taking stock of the other present institutions’ activities, particularly

focusing on those that had received the training provided in January.

Yosefo are not carrying out sanitation activities yet – but this is partly because they are busy

transforming the organisation into a microfinance bank.

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K-Finance finds that there is a business potential in sanitation but there are other issues to overcome.

(1) The problem of funds: sanitation is a new business (taking funds from the banks). It is risky to test

such product with funds from the bank. They would need soft loans to carry out such activities. (2)

Demand for sanitation is another challenge. (3) Training of loan officers and give them capacity to

assess sanitation businesses.

SEDIT has registered as an MFI on the side to complement its current activities. SEDIT currently has

a sanitation and hygiene project in Dodoma – linked with sanitation marketing. They are working

with Vicoba groups but are expecting to top up the capital of the groups through microfinance

institutions and capacitate members of the group in entrepreneurship.

SEDIT has just started this sanitation activity [under a WSSC/Plan funded programme]. SEDIT

expects that four month will be needed to train people so that they start saving for sanitation and

VICOBA groups start lending for sanitation related-activities.

Each Vicoba group has 30 people. A typical VICOBA group collects TZS 1,500 per person per week.

After 4 months, people will be able to take loans through the Sanitation Fund. SEDIT estimates that

each group will have contributed 180,000 TZS (USD 106.1) towards the Sanitation Fund. [1500 * 30

= 45,000 * 4 months = 180,000 TZS] SEDIT is looking to influence 261 VICOBA groups to

contribute towards the Sanitation fund. The sanitation fund will provide loans that will help them buy

small sanitation components. There are plans to distribution centres, which will buy and in bulk and

enable groups buy at reduced cost.

SEDIT plans that households will contribute to the toilet construction by providing some materials..

Artisans that will be hired will come from the Vicoba groups.

MAMADO implemented a microfinance project 4 years ago but they were not successful. They are

analysing the challenges that made the project not successful. The report could be shared at the next

working group meeting.

Habitat for Humanity started providing loans in 2009. They do not differentiate toilet loans from

other home improvement loans. They charge 2% flat rate. If the loan is taken and not used for home

improvement, H4H issues penalties. H4H is looking for regional expansion and for funds from other

partners.

3.7 Wrap-up: the main challenges to developing microfinance products for sanitation

Wrapping up the discussions, Sophie Trémolet identified the following key challenges or areas where

CCI, ECLOF and Tujijenge needed support:

Identifying sources of fund to generate sanitation loans:

o Possibility of saving schemes?

o Establish links with providers of grants or soft loans

o Issue of interest rate: lower interest rates or lower the capital?

Training of credit officers: it is important to develop and roll-out a programme for training credit

officers so as to sensitise them to the sanitation market and provide them the basis for evaluating

applications for financial support coming from the sanitation sector. This needs to be explored

further particularly to identify who can lead on this (e.g. whether there is a role for TAMFI (which

provides umbrella training) or for Water NGOs (such as WaterAid)

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Training of CEOs and senior management of microfinance companies: similarly there is a need

to raise the awareness of CEOs and senior management of microfinance providers. Similar

questions arise as for the training of credit officers, although the answers might be different.

Increasing viability of sanitation entrepreneurs

o Better communication about what is needed in terms of demonstrating financial viability

for sanitation businesses

o Who should support these entrepreneurs? Will they repay?

Collaboration between organisations

o Distribute roles: who is the best placed to issue loans?

o Who can provide training and support?

o How can they best coordinate?

o How to involve local government? Who would take the lead in advocating stronger

enforcement? MFIs or NGOs?

o Role of the working group: who could host? What could be future activities?

According to James Mturi, WaterAid can take the lead to organise training to loan officers. Another

potential partner for this would be SNV (Dutch NGO) which has recently been awarded a Euros 28

millions service contract for the Sustainable Sanitation & Hygiene for All (SSH4A) Results

Programme.

3.8 Next phases

Finally, George Mugweru presented the estimated timeline for the next steps:

19th

-23rd

May: finalizing concepts

26th

-30th

May: concept testing

9th

-12th

June or16th

-18th

June: pilot testing workshop

12th

-27th

June: pilot planning and financial projection support

1st July: Pilot Launch

October: pilot testing review

Late November: final Working Group meeting under SHARE Research.

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Annex 1 – Agenda

9:00-9:15 Welcome and introductions Abel Eliezer Dugage,

Director of SSTZ,

WaterAid

9:15-9:45 Update on the action-research:

overview of the training and steps

undertaken since

Microsave

9:45-10:30 Market research and ongoing product

development: Eclof Tanzania

ECLOF

10:30-10:45 Coffee break


development: CCI

CCI


development: Tujijenge

Tujijenge

12:15-13:00 Wrap-up and next steps Trémolet Consulting

13:00 Lunch (provided by WaterAid)

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Annex 2 – Attendance

Institution Name Email

Mama Bahati Foundation Japhet Makau [email protected]

ECLOF Davita Mtui [email protected]

Tujijenge Tanzania Debora Kiwale [email protected]

K - Finance Arthur Kaane [email protected]; [email protected]

K - Finance Oscar P.Bwanakunu [email protected]

YOSEFO Ndeu Naboja [email protected]

Tujijenge Tanzania Debora Kiwale [email protected]

CCI Teressia Ntanga [email protected]

Mama Bahati Foundation Japhet M.Jackson [email protected]

WAT-HST Judith Sando [email protected]

Habitat for Humanity Anna Kway [email protected]

Habitat for Humanity Tonny Charles [email protected]

TAMFI Harry Ndambala [email protected]

VKS construction support

services Kenneth Sinare [email protected]

WaterAid Abel Eliezer Dugange [email protected]

WaterAid James Mturi [email protected]

WaterAid Sally Faulkner [email protected]

Trémolet Consulting Sophie Trémolet [email protected]

Trémolet Consulting Goufrane Mansour [email protected]

MicroSave George Muruka [email protected]

MicroSave George Mugweru [email protected]

mailto:[email protected]



mailto:[email protected]/[email protected]



mailto:[email protected]/[email protected]








sanfin-tz 15th of may: workshop report

Economy & Finance