Development of irrigation financing facility for Tanzania underway
DAR ES SALAAM, April, 2016 — A first-ever blended finance forum on financing irrigation development in Tanzania was recently held in Dar es Salaam. The forum marks the first step in developing financing solutions and to reach an agreement to develop an irrigation financing facility for Tanzania. The forum was a collaboration between the National Irrigation Commission, the Financial Sector Deepening Trust, and the Tanzania 2030 Water Resources Group partnership and focused on how to develop more efficient irrigation solutions.
The concept for the Facility, endorsed following a three day multi-stakeholder workshop in Dar es Salaam from March 30 to April 1, has the ambition to unlock $100 million dollars in new financing. The facility will achieve this by mobilizing finance for existing and developing water saving and irrigation projects with a goal to expand access to new efficient technologies for Tanzanian farmers.
The collaboration supports the new mandate of the National Irrigation Commission to strengthen private sector engagement in in irrigation through financing, equipment-supply, and co- investment. Head of the Commission, Eng. Seth Lusemwa, said: “Expanding irrigation is critical for Tanzania to achieve its agriculture and food security targets, but we must do so in a way that is both financially and environmentally sustainable.”
Mobilization of funds
The NIC realizes that there is a significant task ahead and progress will require partnerships with the private sector. Closing the irrigation gap, the difference between the potential for irrigation and the existing irrigation, is a significant challenge for Tanzania which currently only irrigates 1.6% of its potential. The NIC has a goal to increase area under irrigation in Tanzania from the current 460,000 hectares to 1,000,000 hectares over the next five years. This target alone is expected to cost a hefty 6.8 trillion shillings (USD $3 billion) and thus will require mobilization of funds across public and private partners.
Tanzania is endowed with irrigation potential area of 29.4 million hectares whereby 2.3 million hectares is of high potential, 4.8 million hectares is of medium potential and 22.3 million hectares is of low potential. Out of this potential area only 461,326 hectares equivalent to 1.6% of the area is under irrigation and contributes 24% of the national food requirement at present.
Innovative approaches critical
Securing financing for agriculture in Tanzania is however very difficult given the challenges in collateral, productivity, markets, and regulations. Securing financing through innovative approaches that are able to reduce the risks regularly associated with agriculture is critical to closing the financing gap for irrigation. According to Mwombeki Baregu, Head of Agriculture and Rural Finance at the Financial Sector Deepening Trust: “The importance of crowding in private finance to achieve our agricultural ambitions in Tanzania cannot be overstated. Public funds are a vital component, but ultimately a large share of the finance must come from private and commercial sources. This however will require more innovative ways of structuring and financing agriculture projects so that more funds can be mobilized from a wider spectrum of stakeholders. The effort to establish facilities is an important and innovative step in this direction.”
Participants at the workshop emphasized the need to develop irrigation in Tanzania in a way that maximizes not only limited public funds, but also the country’s limited fresh water resources. Onesmo Sigalla, country representative for the Tanzania 2030 Water Resources Group partnership, explains: “There is often a misconception that agricultural growth and sustainable water management are conflicting objectives. In fact, we can do a lot to improve both existing and new irrigation systems such that they increase agricultural productivity without negatively impacting, and in some cases even reducing, the amount of water that is extracted from the environment”. The Tanzania 2030 Water Resources Group is a partnership launched in 2014 to bring together the government, private sector and civil society to find solutions to the gap between water supply and water demand.
About the National Irrigation Commission
The National Irrigation Commission (NIC) is a semi-autonomous Government Department established under section 3 (1) of the National Irrigation Act No. 5 of 2013, under the Ministry responsible for irrigation. The Commission is mandated for coordination, promotional and regulatory functions in the development of the irrigation sector in the country. NIC in collaboration with various stakeholders, envisages to improve the traditional irrigation schemes and expand the area under irrigation from 461,326 Hectares up to 1,000,000 Hectares by 2020/21. Effective and efficient achievement of this target calls for more sustained investments and concerted efforts between various players (public and private) in the irrigation sector.
About the Financial Sector Deepening Trust
The Financial Sector Deepening Trust (FSDT) was incorporated in Tanzania on 1 July 2004 with an overall aim to develop a deeper financial system that can provide greater access to finance to more Tanzanians. FSDT mission is to generate sustainable improvements in the livelihoods of poor households through reduced vulnerability to shocks, increased incomes and employment achieved through providing greater access to financial services for more men, women and enterprises. FSDT vision is to achieve improved capacity and sustainability of the financial sector to meet the needs of MSMEs and poor men and women and to contribute to economic growth. To unlock greater access, volume, and quality of financial services to the agriculture sector and to rural economies in Tanzania, FSDT is addressing constraints to deeper financial sector engagement in the agriculture sector and tackling the issues contributing to high transaction costs for financial services in rural markets.
About the 2030 Water Resources Group
The Tanzania 2030 Water Resources Group Partnership is a unique public-private-civil society collaboration launched in 2014. The partnership facilitates open, trust-based dialogue processes to drive action on water resources development and reform, with the aim to close the gap between water demand and supply by the year 2030. The partnership is supported by the 2030 Water Resources Group, which emerged in 2009 through a collaboration between the IFC, the World Economic Forum, multilateral and bilateral agencies (Swiss and Swedish Development Cooperation), private sector companies (Nestlé, PepsiCo, Coca-Cola, SABMiller), and other organizations such as the World Wildlife Fund.