Location of Assignment: Dar es Salaam, Tanzania
Proposed Level of Effort: 3.5 weeks
Anticipated Start Date: August/September 2018
Anticipated End Date: August/September 2018
Objectives of the Assignment: This assignment aims to build the capacity of financial institution staff on the practical skills required to address the unique challenges of lending to SMEs and present international best practices for managing SME loans so that they may change their behavior in ways that lead to an increase in SME lending in Tanzania. Also build the capacity of local banks to introduce sophisticated products and grow their trade finance business, with a focus on Small- and Medium-sized Enterprises (SMEs).
Participants will be provided with concrete case studies, examples and tools to address the need of enhancing/building a solid SME lending process. Participating FIs will come away with:
Skills in structuring working capital lines to meet SME clients’ trade finance requirements.
Problem Statement
The “Tanzania Development Vision (TDV) 2025” highlighted small and medium-sized enterprises (SME) sector as one important contributor to the country’s long-term development. It is estimated that Tanzania’s SME sector consists of more than 3 million enterprises which contribute to 27% of overall GDP and employing more than 5.2 million people. However, the inability of SMEs to access financing remains one of the most frequently cited constraints to business growth in the country.
On the other hand, Financial Institutions find managing SME lending portfolio challenging since majority of SMEs in Tanzania are micro-enterprises. There are several constraints to SME lending in Tanzania such as: lack of expertise and mindset to SME lending, most FIs lack the systems, delivery network and skills to appraise and manage credit to SMEs especially as the latter lacks credit history and reliable financial statements required. Also, high Transaction Costs, limited delivery mechanisms, culture of non-repayment and lack of effective credit reference systems in the country are some of the core constraints facing lenders in Tanzania.
Lending to SME customers presents one of the greatest opportunities for commercial banks to pursue growth and profitability; at the same time, it ties up a large amount of economic capital and represents substantial credit risk. Therefore, better understanding of MSME characteristics, adjusting lending methodology as well as automating the lending process and promoting trade finance can significantly reduce overheads while managing risk, hence increase SME lending in Tanzania.
Anticipated Tasks
The Expert Volunteer will complete the following tasks:
Prior to departure:
Upon arrival in Tanzania:
5. Provide recommendations to the ENGINE program staff on potential follow-up assignment with the hosts
6. Write a final report summarizing observations and recommendations, as well as follow-up plans. The final report is discussed in the section on deliverables below.
7. Attend a debriefing session with ENGINE COP and host organization staff members to provide feedback and discuss the recommended future to follow up on volunteer recommendations and capture impact.
Deliverables
The Expert Volunteer will submit the following deliverables:
i) To be submitted prior to delivering the workshop:
ii) To be submitted after concluding the workshop:
Additionally, the Expert Volunteer will provide exit debriefings to the ENGINE staff.
The International Executive Service Corps is a Washington, DC based not-for-profit that focuses on private sector growth. We support and catalyze the development of private enterprises, business support organizations, financial institutions, and public institutions around the world. Utilizing skilled consultants and expert volunteers, we’ve implemented over 25,000 short-term projects and 200 programs in 130 countries. True to our mission — Promoting Prosperity and Stability through Private Enterprise — we’re proud to have created over one million jobs across the globe.
The Tanzania Enabling Growth through Investment and Enterprise Program (ENGINE) is a four-year, USAID-funded Feed the Future activity awarded through the Volunteers for Economic Growth Alliance (VEGA), that aims to streamline and enhance many of the regulatory, informational and financial channels that encourage domestic and foreign investment in the southern mainland agricultural regions of Mbeya, Morogoro, and Iringa, and in Zanzibar.
ENGINE works at the district level, using a broad-based approach to engage with district Local Government Authorities (LGAs), private sector associations, business development service providers, financial institutions and small and medium enterprises. The program’s activities are divided into three main components: