Project Urafiki: EFTA supporting young entrepreneurs in Tanzania with inclusive finance.

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Last summer CFID ran the inaugural Project Urafiki, in Tanzania. The successor to Project Umubano the Conservative international social action project. Twentyone volunteers, including three MP’s, Cllr’s, Candidates and grass root activists took part in three projects in five locations focusing on Education, Business and Health. We were delighted that the then International Development Secretary, Penny Mordaunt MP endorsed the project and visited us in a personal capacity for the last day of volunteering. As we approach the anniversary of the trip we are sharing blogs by our in-county project partners about the amazing work they do.

Equity for Tanzania (EFTA), partnered with us for the Business project. Volunteers ran workshops focusing on business related skills from accountancy to communications and undertook site visits offering tailored advice to EFTA clients. If you are interested in volunteering for the next social action project get in touch.

EFTA Ltd is a Tanzanian finance company specialized in serving small and medium enterprises and farmers. They focus on equipment loans of up to USD 100,000 +, with no collateral except for the equipment itself. EFTA is the first company in Tanzania seeking to employ financial leasing to boost employment levels in the country and bring business growth opportunities to the “missing middle”.

Supporting Young Entrepreneurs in Tanzania with inclusive finance.

By Coy Buckly, CEO, EFTA

Tanzania is a vibrant and culturally diverse country with a population of 55 million people. Covering 900,000 sq. km, Tanzania is the largest country in East Africa and 66% of Tanzanians live in rural areas. Agriculture is vital to the economy: more than 40% receive most of their earnings through agricultural activities, such as farming and fishing. Tanzania hosts a vibrant tourism sector and is increasingly focusing on industrialization and mechanization of its economy.

Despite steady GDP growth over the last decade, almost 60% of Tanzanians still fall under the two lowest economic quintiles, with the majority of those living in rural areas. One means of addressing this income gap is supporting inclusive growth by expanding access to finance, particularly for small businesses and farmers.

In Tanzania, access to finance remains low when compared to other African countries: 25% of the population is excluded from formal finance and financial exclusion is 40% higher in rural than in urban areas. While large businesses and corporations can readily access finance from traditional financial institutions, smaller businesses and farmers struggle to obtain enough finance to support their growth.

Since 2005, EFTA has been providing finance to small businesses and farmers in Tanzania by providing a
sustainable and innovative equipment financing solution. EFTA’s finance supports investment in productive assets, such as tractors, agri-processing equipment, safari vehicles, green houses and many others.

One of the key challenges to accessing credit is asset ownership. Most financial institutions require assets (usually backed by a formal title deed) to secure a loan. As only one third of Tanzanians own their own land and only 3% have a formal title, this presents a significant barrier to inclusive growth.

EFTA addresses this financing gap by focusing on equipment loans with no collateral except for the equipment itself; this removes one of the most significant barriers to accessing a bank loan and allows businesses and farmers to access a wide range of value-adding equipment, such as tractors, carpentry equipment, maize millers and medical equipment. 92% of EFTA customers say they had no other alternative sources of finance. EFTA also offers a longer repayment term than most banks, up to thirtysix months in most cases, which puts previously inaccessible equipment comfortably within reach.

The impact of inclusive finance plus equipment is significant, 85% of customers reported increased revenues. More than 90% report an improvement in their ease of doing business, through higher revenues, higher productivity or increased land under cultivation.

Job creation

In addition to supporting inclusive growth, one of the primary impacts of EFTA’s investment is supporting and creating jobs. Fewer than 7% of Tanzanians are engaged in formal employment; research suggests that formal employment results in higher quality working conditions, increased earnings and higher productivity across the economy. 50% of EFTA’s customers report both an increase in the number of full-time employees and increased wages for employees after investment.

EFTA’s investments have a strong multiplier effect across the economy. More than one third of farmers working with our customers live below $ 2 / day. 95% of farmers who work with EFTA customers say their quality of life has improved as a result of the EFTA investment; most reported increased income, better ability to pay household expenses and increased land under cultivation.

Supporting Young Entrepreneurs: James Rikoyan

James Rikoyan began his brick manufacturing business in January 2012 in the Ngaramtoni area near Arusha. Ngaramtoni is a fast-growing area with high demand for cement blocks to construct residential houses, schools, lodges, and commercial buildings. Prior to starting Lorima Enterprises, Rikoyan worked at his father’s brick making business for three years, where he acted as a supervisor to gain the necessary experience to run his own business. Rikoyan approached EFTA to obtain financing to invest in higher-quality vibrating block machines, cement mixers and molds to improve both the brick quality and volumes for his business.

James Rikoyan and his business, Lorima Enterprises, continue to prosper after EFTA’s investment and is selling high-quality cement bricks to a variety of customers in the Arusha area, including building contractors and individuals. In the words of Rikoyan, “EFTA empowered me to reach my goals and to become my own boss. EFTA empowers entrepreneurs like me.”

To find out more about EFTA visit their website or read The Economist“SMEs in developming countries, caught in the middle”

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