The EU ambassador to Tanzania, Mr Manfredo Fanti. PHOTO | FILE
Dar es Salaam. The European Investment Bank (EIB) has agreed to pump 270 million euros (about Sh675 billion) in credit into three major commercial banks to
support small and medium enterprises (SMEs) in Tanzania.The European Union (UN) Head of Delegation to Tanzania, Mr Manfredo Fanti, made the revelation on Wednesday during an interview on the sidelines of the unveiling of an EU report on the investment climate in Tanzania.
He said discussions on the first credit line worth 100 million euros between EIB and a bank he declined to name were at an advanced stage.
Discussions with two other undisclosed banks for the second and third credit lines valued at 150 million euros and 20 million euros, respectively, were progressing well, Mr Fanti added.
“This is meant to ensure that SMEs, which normally encounter problems in getting access to finance, get loans more easily.”
Focus will especially be on SMEs run by women, and those working in the blue economy.
Mr Fanti said the credit lines, which range from ten to 15 years, will be activated according to demand.
“When the commercial banks in Tanzania will receive a certain number of requests from SMEs, then the money will come,” he noted.
“It is not that it (EIB) just transfers the entire amount immediately.”
He said EIB’s decision to open a credit line in Tanzania was prompted by improvement in the business environment.
EIB has two kinds of operations, one being for the private sector where it distributes credit lines to commercial banks to finance SMEs.
The second one is for the public sector, through loans provision to finance public sector projects.
For instance, Mr Fanti said, the bank has been working with the government on water infrastructure in Mwanza for a long time.
However, for around six years now, they have not been working in Tanzania because there were some legal issues that needed to be clarified.
“There were discussions about legal challenges in the past and now they have been clarified. All kinds of obstacles have been removed,” Mr Fanti said.
“And as a result, the bank is starting again its operations both in public and private sector loans.
“When banks operate in a country, they need assurance from the government concerning the legal conditions of their operations.”
Noting that EIB is very active in Africa, Mr Fanti said the bank always wanted to continue working in the country, but to no avail due to legal issues.
EIB has one advantage and that is being AAA rated on the financial market---which is the top rate for the reliability of the bank.
This suggests that the bank is able to find money on the market at a good interest rate and use the same for the operation at a good rate.
“They can offer loans to Tanzania with good interest rates and this is the advantage of working with EIB,” said Mr Fanti.
This comes as good news to Tanzania which is seeking support from the EU investors in the form of win-win to shape its economy.
Speaking on Wednesday at the EU Investment in Tanzania report launch, Investment, Industry and Trade deputy minister Exaud Kigahe said for Tanzania to graduate from a lower middle income status to an upper middle status, it needed a kind of trade partnership which is on a win-win basis.
“We need you (EU) to help us in any way so that we can increase our competitiveness,” said Mr Kigahe.
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