Unlocking access to finance for youth and women in Tanzania: 5 Learnings and 3 Opportunities
— by Winnie Msamba and Collins Kimaro
The Tanzanian proverb of “haba na haba hujaza kibaba” is also reflected in the structure of our economy with the majority of businesses being Micro, Small and Medium Enterprises (MSMEs). Improving access to finance has been identified as a key strategy to help grow these businesses and drive inclusive economic development aligning with the Tanzania Development Vision 2025 and Financial Sector Development Masterplan 2030.
From June 19 -20 2024, the European Union (EU) Delegation to Tanzania with its partners including the Tanzania Private Sector Foundation and the Ministry of Community Development, Gender, Women and Special Groups for Tanzania Mainland and Zanzibar; convened the Grow with European Union Information Session and Breaking the Glass Ceiling Technical Working Group on Women Economic Empowerment and Access to Finance. The Youth Sounding Board of the EU Delegation was represented by Winnie Msamba and Collins Kimaro with the following key takeaways to help youth and women entrepreneurs gain more funding.
- Keep your business in order from day 1
Poor record keeping was cited as a key inhibitor for lending institutions to provide credit to Tanzanian businesses. Do not wait until you are seeking external funding to start keeping accurate records of your business. Keep accurate records e.g. of transactions into and out of your business accounts, from when you start. This will build credibility and allow the assessment of your past business performance in order to determine potential funding.
2. Build a strong network
The saying “your network is your net worth” is popular for a reason. There are many funding opportunities that exist for youth and women which you can discover from being connected to the right institutions to get the right information at the right time. For example, many youth do not know of the Bank of Tanzania's Small and Medium Enterprises Credit Guarantee Scheme (SME-CGS) that provides credit guarantees in place of collateral when taking loans from commercial banks and Tanzania continues to see a relatively low number of applications to programmes e.g. Women Entrepreneurs for Africa program by the GIZ and Tony Elumelu Foundation.
3. Seek out practical training to build capacity
There is an apparent mismatch between the funding supply and demand with many Financing Institutions reporting not being able to find suitable businesses with the capacity to absorb the funds. This appears to be a challenge across all levels of MSMEs as well as startups. Investing in practical training can improve your business planning, financial controls and compliance which will make you more attractive for funders.
4. Develop alignment with the funders
Different funders have different priorities. Understanding this will help you target suitable financing institutions/products that fit you and develop a strong application by presenting data from your business which aligns with their key metrics. For example, much funding now, including from the European Union, prioritises positive environmental impact which means entrepreneurs would do well to collect and use data about the contribution their business make to climate resilience, adaptation or mitigation.
5. Leverage alternative sources of funding
There is increasing alternative funding in Tanzania that is seeking out innovative (not only limited to technology) businesses. Examples include Serengeti Business Angels Network (SBAN) where private individuals interested in investing in startups (Angel Investors) or the FUNGUO Program under the United Nations Development Program (UNDP) which provides grants with a key criteria being innovation. Furthermore the Capital Markets and Securities Authority (CMSA) confirmed that the Crowdfunding Guidelines have been completed and that soon entrepreneurs will be able to use digital platforms to raise funds from many different individuals and institutions each investing a small amount. This is encouraging for youth to dare to develop new businesses that tackle pressing challenges in our society and in doing so to look beyond traditional banks for potential funding.
Opportunities to look out for this year
- The EU has signed a financial grant agreement with the Financial Sector Deepening Tanzania (FSDT) worth Tsh 11.23 billion. The initiative aims to enhance inclusive finance opportunities for MSMEs led by women and youth through the MSME Impact Fund. Be on the lookout for the call for applications from FSDT.
- FUNGUO’s catalytic funding for startups aims to increase the number of successfully scaled innovative ventures. They fund ventures that are beyond ideation and pilot stage, with a minimum viable product and traction. The fund is usually in the form of an equity-free grant ranging from TZS 50 million to TZS 100 million. Be on the lookout for the next call of application here.
- PesaTech is dedicated to providing grants and capacity building tailored specifically for Financial Technology (FinTech) startups, led by the United Nations Capital Development Fund (UNCDF). The accelerator also provides support in communication and branding, legal and compliance as well as go-to-market strategy. Be on the lookout here for the next round of applications planned in Q4 2024.
