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The Tanzanian project team with beneficiaries in Ethiopia
The Government of Tanzania launched a knowledge sharing exchange for its rural finance team from 23rd – 27th June 2014, to view successes and lessons learned in Ethiopia’s rural financial services project. Tanzania and Ethiopia both have similar historical contexts; transitioning from a heavily socialist regime – the period of the Derg in Ethiopia and President Julius Nyerere’s African socialism based on Ujamma, a Swahili word and concept of development through the people or community – to a more open financial economy. 

In Tanzania, the Marketing Infrastructure, Value Addition and Rural Finance support programme (MIVARF) aims to enhance the incomes and food security of the rural poor by increasing access to financial services and markets with an investment of  USD 170 million, to benefit 500,000 households by 2018 – IFAD provides USD 90.6 million of this support. The Rural Financial Intermediation Programme (RUFIP) phase II, is an IFAD USD 248 million investment that aims to improve access of financial services of 6.9 million poor rural households in Ethiopia. The project is developing management information systems and undertaking the capacity building of 31 micro-finance institutions (MFIs), 5,500 rural savings and credit cooperatives (RUSACCOs) and 55 Unions. Both RUFIP and MIVARF work with a significant number of partners in the financial sector, and the Tanzanian project team was aiming to gain experiences from the successful implantation of a similar programme. 

 Shubida Masa Adha at her home in 2007
before she joined OCSSCO MFI
Of particular interest to the Tanzanian project team was RUFIP's coordination with the Central bank and other policy bodies. RUFIP has designed a unique mechanism to disburse the IFAD loan. The project has intentionally disbursed the USD209 million in loans through the National Bank of Ethiopia (NBE) in line with NBE’s mandate to develop financial services in rural areas, among other things. Engaging the NBE and having a monthly project steering committee meeting has created platforms for feedback and exchange between financial service providers and the NBE. Financial services and products that meet the rural poor’s demands have been developed; the NBE has deregulated lending & deposit rates and MFIs and RUSSACOs have relaxed single borrower limits and loan ceilings have been eased. 

Shubida Masa Adha talks with the MIVRAF team in front of her home 
which was rebuilt using a loan from OCSSCO MFI. 

Shubida Masa Adha has taken loans totaling
Birr700 (USD704) to invest in her petty-trade business,
rebuilding her home and two milking cows.
     The group from Tanzania traveled to Mojo to meet four women who have taken loans from the Oromia Credit and Savings Share Company  (OCSSCO) a MFI supported by the project. "At the community level, there were visible and progressive impacts; both women and men were able to demonstrate how project support has contributed towards increasing their incomes and  investments, moving them out of poverty. MFIs have totally engaged and taken ownership of the project objective because they are innovating financial products to meet rural peoples’ demands. In this case, OCSSCO is supporting individual borrowers, in the same area, to access group loans. It is a huge benefit that the rural poor are now able to access group loans with interest rates as low as 10-12percent with repayment periods up to 5-7 years. The project’s partnership with MFIs is commendable and the development of such affordable credit and loan services is something we can attempt to develop in Tanzania,” Bernard Ulaya, told us.

      Kaleh Saleh, Programme Coordinator for MIVARF in Zanzibar, was impressed at the NBE’s ownership of the programme and the strength of the Association of Ethiopian Microfinance Institutions (AEMFI), an umbrella organization of 31 MFIs formed to promote information exchange and build the capacity of MFIs. “In Tanzania we are operating in a context where policies for the cooperative sector are only just being developed and implemented, hence it is difficult to ensure that cooperatives are being adequately regulated. It has been helpful to see organizations such as AEMFI, that are well-structured and managed with a leadership with clear responsibilities, and the Federal Cooperative Union that has taken on the significant responsibility of transforming the cooperative sector to take on the provision of financial services, a role that is distinguished from producer cooperatives. We can definitely learn and adopt what has worked; particularly as we are currently supporting the Government of Tanzania to strengthen a newly formed commission that will regulate and strengthen cooperatives,” said Saleh. Since a new Cooperative Act was adopted in Tanzania in 2003, MIVRAF is training cooperative development officers and guiding the development of supervision and regulatory structures.

     The Tanzania team had the opportunity to interact with the, IFAD Representative and Country Director in Ethiopia, Robson Mutandi. The Tanzanian project team learned about the broader Country Programme framework and approach in Ethiopia that revolves around three pillars; rural finance, small holder irrigation development and pastoral community development. With these areas of focus, access to financial is key to the overall country programme and the financial inclusion agenda. 

The MIVARF team speaks with Melkamu Dame, Team leader of
operations of OSCCO at a branch office in Debrezeit
b  Overall, the Tanzania team was impressed and the team noted that the visit provided them some practical examples of how the financial sector can take a lead role in the implementation of project objectives. The Tanzanian team also noted that there is a future opportunity for RUFIP II to address its monitoring and evaluation, and data collection challenges by learning from the Tanzania MIVARF and a similar rural finance project in Zambia. It is hoped that such exchanges will be encouraged within ESA and between projects that have similar objectives as one of the avenues towards improved project performance. The team looks forward to incorporating such best practices and lessons learned especially using the opportunity to catalyze the financial sector with a project supported credit line and strengthen capacity building activities during the upcoming mid-term review due in August this year.