Tanzania - Rural and Micro Financial Services Project

Overall, the project outcome is satisfactory, sustainability highly likely, and the institutional development impact substantial. Lessons suggest the following. The project was designed as a Learning and Innovation Loan (LIL), meant to be executed fast, so that outputs could be applied to the rural, and microfinance industry, reapplying lessons to the industry, so as to catalyze further development, seemingly, an ambitious target for a reform-oriented project. A number of activities, such as reviewing and amending laws, involved consensus building among stakeholders which takes a long time. In the end, this project turned out to be like a normal investment project. A LIL was thus not the right instrument to carry out some of the envisaged long term reforms. For a policy-oriented operation, benefits can best suit the industry participants provided close collaboration between the implementing agency, and other stakeholders in the industry occurs. At the preparation stage, the wide collaboration led to a good design, but there was limited collaboration during implementation between the implementing agency and other interested parties, such as within the Government itself, development partners, and umbrella associations, which led to delays and lack of clear channels of communication with the practitioners. The project showed however, that a suitable enabling environment is essential for a sustainable rural and microfinance system. The adoption of the National Microfinance Policy at an early stage, brought order into the Tanzania system, and ensured Government did not get involved in the provision of subsidized, directed microfinance lending, which undermines the operations of microfinance institutions (MFIs). The project did raise the profile of rural and microfinance in Tanzania, and attracted a number of development partners into the sector.