PRIVATE SECTOR FINANCING FOR DEVELOPMENT IN TANZANIA

PRIVATE SECTOR FINANCING FOR DEVELOPMENT IN TANZANIAA PROPOSED SOLUTION FOR ENHANCING PRIVATE SECTORS ROLE IN FINANCING FOR DEVELOPMENT IN TANZANIA

December 9, 2015

FFD MOOC 2015

TARGET AUDIENCEGeneral PublicGovernment OfficialsPolicy MakersBanksPrivate Sector Businesses (E.g. Multinational and local companies, SMEs)International and National NGOs Multilateral Development Banks (MDBs)Colleagues and PeersPhilanthropists

INTRODUCTIONTanzania, East Africas largest and most populous country (51,822,621; World Data Atlas) has been a recipient of Official Development assistance (ODA) from the World Bank Group, mostly from IDA (International Development Agency).Apart from ODA, Public finance (Tax collections by Government) has also been used to finance development projects in the countryHowever several Sub-Saharan Countries (Tanzania included) still mobilise less than 17% of GDP in Tax revenues, implying that despite ODA assistance, the Private sector actively needs to participate in the Financing for Development

Private sector financingPrivate sector firms are risk/return oriented so the more the return and diversification, the more likely private firms will investIn Tanzania, with an ever growing number of private businesses, especially SMEs (Small & Medium scale Enterprises), there is large potential for the private sector to contribute much, much more towards Financing for development.

ISSUE AT HANDThe insufficiency of the private sectors contribution towards financing for development in TanzaniaHow to mobilise the Private sector to not only contribute, but even play a bigger role in funding of development projects

Reasons why government officials & other stakeholders would want to help in solving the problemMore finances and funding of development projects made available through private sectors participationLess reliance on ODA funds from the Multilateral Development Banks (MDBs)Enhanced Domestic Resource Mobilisation (DRM) with private sector empowering other sectors of the economy Private sectors contribution towards financing for development will help Tanzania towards attaining the Millennium Development goals (MDGs) as well as the newly set Sustainable Development Goals (SDGs) and ultimately give rise to overall economic growth and development

OBSTACLES TO PRIVATE SECTOR FINANCING in TanzaniaLack of incentives to private sector towards financing development projectsUnder-developed capital market: Tanzania merely joined the Equity market of the world in the late 90s with the Dar-es-Salaam Stock Exchange (DSE) which is still on the verge of growingInvestment climate infrastructure still not welcoming enough especially to the small scale businesses

Way forwardAs Jay Collins puts it Financial returns and social returns can co-exist. So which way forward to overcoming the obstacles towards Private Sectors Contribution of Financing for Development;Public-Private Partnership highly required for enhancing private development financeMore policy guidance from the MDBs and International Monetary Fund (IMF) towards support of private development financeGovernment should create better incentives as well as better investment climate for private development financing

conclusion

The financing needed to implement the SDGs are huge and therefore will require mobilizing additional private resources domestic and international including foreign direct investment (FDI), international portfolio investment, bank loans, capital markets, domestic financial markets, private transfers (remittances) and private philanthropy.