How to Promote Local Economic Development in Tanzania? – Creating Opportunities Through Investing in Small and Medium Size Infrastructure Projects
  • August 22, 2014

With the objective to promote Local Economic Development through investments in essential small and medium size infrastructure projects in Tanzania, UNCDF is implementing the Local Finance Initiative (LFI) Programme in partnership with the Prime Minister’s Office – Ministry of Regional Administration and Local Governments (PMORALG).

This initiative is an innovative investment instrument of the UN Capital Development Fund (UNCDF) designed to unlock the flow of capital in developing countries for financing small and medium-sized infrastructure projects that are needed to accelerate local economic and private sector development. Currently implemented in Tanzania and Uganda, and being expanded to Senegal, Benin and Bangladesh, the LFI global programme is providing a niche to stimulate the mobilization of the private sector in fostering economic growth, poverty reduction and the attainment of the Millennium Development Goals.

The LFI approach is applied to a variety of investment modalities including structured project finance, SME finance, municipal finance and public private partnerships. It is designed to mobilize private sector capital for the development and financing investment ready local infrastructure projects. The goal is to advance economic development at both the national and district levels, engage private sector financial institutions, and to stimulate the identification, development, and finance of projects in order to achieve a systemic change in local business practices and strengthen the country’s regional and global competitiveness. Hence, through economic multipliers, the project improves local living standards in the communities.

The LFI approach is unique in implementing diverse project finance practices and risk mitigation strategies in developing and financing small and medium-sized projects. The innovation lies in the introduction and application of a wide array of risk mitigation approaches and instruments, leveraging both project structuring techniques and the full spectrum of instruments and credit enhancement options.

Tanzania has successfully implemented LFI’s underlying tool set throughout the year 2013/2014. The country has different types of projects at different stages of implementation, ranging from those that have reached an advanced stage in their development cycle to others that are still in their early development stages.

These LFI projects support specific needs such as the provision of technical expertise, required to realize infrastructure projects like building a Modern Bus Terminal or a Modern Market. These projects require different investment leverages ranging from 3.5 million USD to 7.3 million USD. Other types of projects require the technical expertise and/or grants to build a sustainable system for service delivery such as Hydro Power Generation, agro processing, industrial infrastructure etc., requiring an investment leverage ranging from 0.9 million USD to 12 million USD.

The Annual Progress Report 2013/2014, approved and adopted by the Government, contains an overview of the expected outcomes, annual targets, lessons learned and forward discussion on the programme implementation and progress for the period of July 2013 to June 2014.