1. No category

Government of Tanzania
Danish Ministry of Foreign Affairs
Danida
TANZANIA
Business Sector Programme Support – Phase III
BSPS III
2008 – 2013
COMPONENT C
DEVELOPMENT OF MICRO, SMALL AND MEDIUM ENTERPRISES
(MSMEs)
C.1: Private Agricultural Sector Support (PASS)
C.2: Enterprise Development
C.2.a: Improved Market Access of Small and Medium Enterprises
C.2.b: Enterprise Competitiveness Programme
C.3: Tanzania Pro-poor Financial Sector Deepening Programme
Appendix C
Component Description Document
MFA Ref.No. 104.Tanz.809-300-3
January 2008
Cover Page
Country
Sector
Title of SPS document
Title of Component C
Tanzania
Business Sector
Business Sector Programme Support, Phase III
Development of Micro, Small and Medium Enterprises (MSME
Development)
National Implementing Partner Agencies:
The PASS Trust Agency
Sub-Components:
C.1 Private Agricultural Sector Support
(PASS) – DKK 140 million
C.2 Enterprise Development (DKK 74.2 million)
C.2.a Improved Market Access of Small and
SME Competitiveness Facility (SCF) – initially a project
Medium Enterprises (DKK 44.2 million)
organisation, but during implementation institutionalisation is
anticipated
C.2.b Enterprise Competitiveness
Tanzania Private Sector Foundation (TPSF),
Programme (ECP) – DKK 30 million for a
(assisted by international consultancy firms)
basket fund
C.3 Tanzania Pro-poor Financial Sector
Deepening Programme (FSDP) DKK 30 million for a basket fund
Duration
Financial Sector Deepening Trust (FSDT)
Five years: 1 July 2008 – 30 June 2013
Component C, with a budget frame of DKK 244 million, addresses the problems that MSMEs and
commercial farmers face in relation to accessing financial services and risk capital, markets, and services
for upgrading their management and technology. It does so by providing budget for four
institutions/programmes.
PASS provides business development services (BDS) and credit guarantees for commercial farmers, agroindustries and agribusinesses to improve their access to credit and their management. PASS is managed by
a Trust which will be assisted in its institutional development and geographical expansion. The Credit
Guarantee Fund will be significantly increased to serve most of Tanzania and clients with need for longer
and bigger loans. At the end of BSPS III, it is expected that PASS will support an active agricultural sector
loan portfolio of DKK 400 to DKK 500 million (~TZS 125 billion).
SCF: The support for SCF comprises financing of a management and technical assistance unit supported
by an international consultancy and supply of specialised business development services (BDS). A
matching grant fund will be established (DKK 25 million) to contract BDS providers that can assist SMEs
with inter alia defining their goals, developing a business plan, upgrading the production process,
upgrading packaging and presentation of their products, introducing proper hygienic and quality
standards, finding the buyers and negotiating the contracts.
ECP: A contribution of DKK 30 million will be made to a new basket fund set up for implementation of
the Enterprise Competitiveness Programme (ECP) which focuses on enabling businesses to start-up,
upgrade, innovate, and improve productivity and sales. Seed capital will be provided to start-ups and
innovators. Within clusters and value chains, linkages will be promoted between large and smaller
enterprises.
FSDP: A contribution of DKK 30 million will be made to an existing basket for the implementation of
the Tanzania Pro-Poor Financial Sector Deepening Programme (FSDP) which supports financial
institutions with enhancing their capacity for delivering services to MSMEs and poor households in rural
and urban areas.
Table of Contents
Abbreviations
Executive Summary
iii
iv
1
1.1
1.2
1.3
INTRODUCTION
Overview of the Component and Sub-components
The Identification and Formulation Process
Achievements and Lessons of Past Support
1
1
2
3
2
2.1
2.2
COMPONENT CONTEXT AND OBJECTIVES
Main Problems to Be Addressed
Component and Sub-component Objectives
5
5
6
3
SUB-COMPONENT C1:
PRIVATE AGRICULTURAL SECTOR SUPPORT (PASS)
Rationale and Justification
Goals and Strategies
Outputs, Deliverables and Inputs
Activities and Support to Address Cross-cutting Issues
Sub-component Budget
Indicators and Monitoring
Organisation and Management
8
8
10
11
12
13
15
15
SUB-COMPONENT C.2:
ENTERPRISE DEVELOPMENT
Improved Market Access of Small and Medium Enterprises (C.2.a)
Enterprise Competitiveness Programme (C.2.b)
17
17
29
5.1
5.2
5.3
SUB-COMPONENT C.3:
FINANCIAL SECTOR DEEPENING PROGRAMME
Background, Rationale and Objectives
BSPS III Contribution
Management
34
34
35
36
6
COMPONENT BUDGET
37
7
7.1
7.2
7.3
COORDINATION AND MANAGEMENT
Coordination and Synergies
Approval of Annual Work Plans and Budgets, and Budget Re-allocations
Financial and Procurement Management
38
38
38
38
8
8.1
8.2
MONITORING, REPORTING, REVIEWS AND EVALUATIONS
Monitoring and Indicators
Reporting, Reviews and Evaluation
39
39
39
9
ASSUMPTIONS AND RISKS
40
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4
4.1
4.2
5
-i-
ANNEXES
Annex C.1
Annex C.2
Annex C.3
Annex C.4
Annex C.5
Annex C.6
Annex C.7
Annex C.8
Annex C.9
Annex C.10
Annex C.11
Annex C.12
Logical Framework Matrix for Support to PASS
Tentative Organisational Chart for the PASS Trust
Projection of need for Credit Guarantee Fund and PASS Income
Output Budgets for PASS
Logical Framework Matrix for C.2.a: SME Market Access
Output Budgets for C.2.a: SME Market Access
Draft Terms of Reference for an International Consultancy for SCF
Assessment of Strategic Options and Direction for SCF
Logical Framework Matrix for the Enterprise Competitiveness
Programme
Logical Framework Matrix for the Tanzania Pro-poor Financial Sector
Deepening Programme
Description of the Tanzania Enterprise Competitiveness Programme (in
separate volume)
Description of the Tanzania Pro-poor Financial Sector Deepening Programme
(in a separate volume)
- ii -
Abbreviations
ASPS
BDO
BDS
BSPS
CGF
CSR
Danida
DFID
DKK
ECP
FCM
FSDP
FSDT
GDP
GoT
HQ
JPO
MD
MFI
MSME
PASS
PSCP
RDE
SACCOS
SCF
SIDO
SME
TPSF
TZS
Agriculture Sector Programme Support
Business Development Officer
Business Development Services
Business Sector Programme Support
Credit Guarantee Fund
Corporate Social Responsibility
Danish International Development Assistance
UK Department for International Development
Danish Kroner
Enterprise Competitiveness (Development) Programme
Faculty of Commerce and Management (University of Dar es Salaam)
Financial Sector Deepening Programme
Financial Sector Deepening Trust
Gross Domestic Product
Government of Tanzania
Head Quarter
Junior Professional Officer
Managing Director
Microfinance Institution
Micro, Small and Medium Enterprises
Private Agriculture Sector Support
Private Sector Competitiveness Project
Royal Danish Embassy
Savings and Credit Cooperative Societies
SME Competitiveness Facility
Small Industries Development Organisation
Small and Micro Enterprises
Tanzania Private Sector Foundation
Tanzania Shillings
Exchange Rates:
USD 1.00 = DKK 6.00
DKK 1.00 = TZS 250
- iii -
Executive Summary
MSMEs – Challenges and Opportunities
Most Tanzanian enterprises, whether large or
small, face problems of unreliable and costly
electricity supply and high costs of transport.
However, micro, small and medium
enterprises have particular problems related to
skills, know how, and access to capital.
equitable growth, exports, employment and government
revenue.
The Private Agricultural Sector Support
(PASS) was introduced in the Danida
Agricultural Sector Programme Support
(ASPS) as a pilot intervention to improve the
access of commercial agriculture to business
development services (BDS) and credit,
through guaranteeing bank loans.
Tanzania has some 2.7 million micro, small
and medium enterprises (MSMEs), of which
the majority is micro enterprises operating
informally. Though Tanzanian small and
medium enterprises (SMEs) provide one third
of GDP and employ 20 per cent of the labour
force, they are mostly producing for the local
markets within Tanzania and have limited
capacity and experience for accessing markets
of an international nature, being it export
markets or “international markets” within
Tanzania, such as supermarkets, hotels or large
(international) companies buying inputs and
parts from smaller domestic producers. For
this, they need not only capital for upgrading
their production apparatus, but also
knowledge, information and networks.
The SME Competitive Facility (SCF) was
introduced as a pilot intervention during the
implementation of BSPS II. SCF is managed
as a stand-alone project organisation and
implemented by an international consultancy
firm. Organisationally, SCF is de facto the
contracted consultancy firm though it is
guided by an Advisory Board. In BSPS III, the
strategy will be to develop a small national
entity, assisted by a consultancy firm, and then
explore ways of institutionalising the national
entity - through either integration in an
existing organisation or establishment of a
new organisation. However, by the nature of
its services, SCF has no prospects of fully
financing its costs from its income, and
therefore the continuation of SCF will depend
partly on public funding.
Only about 15% of the MSMEs access formal
sector credit, and among micro enterprises
only 6%. Commercial farmers, who in this
component are covered by the “MSME
support”, face particular problems. They often
live far away from the nearest bank, and the
banks generally perceive that rain-fed
agriculture has too high an inherent risk.
While MSMEs may have access to shortterm finance for working capital, often at
very high rates of interest, very few have
access to affordable long- and medium-term
investment finance for capital equipment or
livestock that have long repayment periods.
For MSMEs, risk capital for financing startups, innovations, and major expansions
hardly exists.
The Enterprise Competitiveness Programme
(ECP) was a component of a World Bank
project but has been enhanced in scope and
re-designed to create the basis for a basket
fund supported by several development
partners (DPs). Implementation of the
Financial Sector Deepening Programme
(FSDP), initiated in 2005, is managed by the
Financial Sector Deepening Trust (FSDT). A
basket fund supported by several DPs,
including Danida/BSPS II, is used to enhance
the capacity of the financial sector to serve
MSMEs and poor households.
The objectives of the support interventions
are:
Overview of Proposed Support
Component C comprises three subcomponents but four budgets supporting four
programmes/institutions (PASS, SCF, ECP
and FSDP). The four budgets are provided for
the following common objective: “Enhanced
contribution of MSMEs and commercial agriculture to
PASS: Acceleration of investments, financing
and growth of commercial agriculture,
agribusiness and agro-processing.
SCF: Improved international competitiveness
of food processing and marketing SMEs to
access and exploit new markets
- iv -
Executive Summary
The major BSPS III contribution is for the
CGF (DKK 126 million) which is required to
expand the geographical coverage, serve agroindustries and agribusinesses, and support
longer term loans to finance the investments
of commercial farmers (e.g. livestock,
irrigation, tree and perennial crops).
ECP: Increased enterprise creation and growth
FSDP: Expansion of private sector financial
services for micro, small and medium
enterprises and poor rural and urban
households
C.1: PASS (DKK 140 million)
There has been a strong and rapidly
accelerating demand for the services of PASS,
and the Credit Guarantee Fund (CGF)
provided in ASPS has been insufficient to
meet the demand. Four cooperating banks
have extended loans primarily to commercial
farmers which they would not have done
without the PASS guarantee and feasibility
study. Losses have been negligible. In 2007 the
PASS project organisation in Morogoro was
institutionalised as a Trust and it was decided
to continue Danida support under BSPS III as
the ASPS comes to an end in June 2008.
The budgeted increase in the CGF will allow
the Trust to support a total agricultural loan
portfolio of some DKK 400 to DKK 500
million by the end of the third phase. The
actual amount will depend on the guarantee
policy and composition of the portfolio (the
percentage of loans guaranteed and the terms
of the loans). It will also depend on the
leverage or gearing of the guarantee funds that
the financial sector institutions will accept.
Following negotiations with RDE regarding
the BSPS III contribution to the annual
budget, the Trust management will present
annual budgets for approval by the Board of
Trustees. The financial transfers for general
budget support will be made for the general
operational account of the PASS Trust while
special accounts will be opened for the
earmarked budget support, at least the CGF.
Financial reporting will be done based on the
PASS “Company Accounts”, and audited
annual financial statements of the PASS Trust
will be the basis for ensuring accountability.
The PASS strategy in BSPS III includes: (i)
establishment of an efficient headquarter
organisation in Dar es Salaam and four zonal
branch offices covering the major part of
Tanzania; (ii) expansion of the BDS and credit
guarantee services to cover the complete
agricultural value chains, including agroprocessing and agribusiness; and (iii)
introduction of new BDS and guarantee
products that meet the needs and demand of
the target group.
C.2.a: SCF (DKK 44.2 million)
Within a short period of time SCF has assisted
a number of SMEs in different sectors with a
wide range of services: training in market
regulations (traceability), market and feasibility
studies, participation in trade fairs etc. While
many of these services have been appreciated,
the focus and strategy will be modified in
BSPS III. The support will be concentrated on
food processing and marketing SMEs,
assisting them over a longer period of time
with adding value to food commodities and
products and accessing food product markets
of an international nature. The SME food subsector is characterised by being rural-based
and having high participation of women.
It is anticipated that the Trust by the end of
BSPS III will be able to finance all operational
costs from the income it generates from BDS
fees, bank commissions on guarantees, and
interest on the CGF, which will be the
property of the Trust. However, during the
expansion phase there will be a financing gap
which will be covered by BSPS III in the form
of general “organisational budget support”
(DKK 4 million). Secondly, there is a need for
external capacity development support which
BSPS III will provide in the form of a Danida
Agribusiness Adviser and earmarked budget
support to allow the Trust to contract an
internationally recruited Deputy Manager to
support the Tanzanian Managing Director and
the development of corporate policies and
systems.
“SMEs” may include private enterprises in
different forms of registration, formal and
informal groups of producers, e.g.
-v-
Executive Summary
cooperatives or clusters, and also commercial
farmers who wish to add value to their
commodities. “Food” is here understood to
comprise all edible products for human
consumption, - crops, fruits and vegetables,
livestock products, herbs and spices, and
beverages (coffee, tea, and coco). “Adding
value” may range from simple sorting and
bulking of a food crop to more advanced food
processing activities. “International markets”
comprise export markets as well as
international markets within Tanzania such as
supermarkets and hotels which have demands
on quality and hygienic standards similar to
those in export markets.
of SMEs to assess their support needs, and
identify and contract BDS providers on their
own (once the SCF support ends).
Through international tender, a contractor will
be employed to provide (i) a limited core of
contracted national staff; two professional
staff will be out-posted to work with the
selected geographic areas with the selected
products; (ii) an international adviser to
provide capacity development support; and
(iii) specialised BDS that is not available in
Tanzania. Around 2011, a decision will be
made on the institutionalisation of SCF,
which, therefore, during the last year most
likely will operate in a different institutional
framework.
Based on mapping and baseline studies, some
focus areas and products/sub-sectors will be
selected, and within these, SCF will assist the
SMEs with business development and other
services. Such may include: development of
business plans, feasibility studies, facilitating
an SME or a group/cluster of SMEs with
defining their goals and identifying the process
and inputs required to achieve the goals,
upgrading of enterprise management, advice
on production technology, processing
methods and quality control to meet standards
of the markets, market studies and promotion,
identification of buyers and assistance in
negotiating with buyers, and linking the SMEs
to financial institutions.
C.2.b: ECP (DKK 30 million)
ECP has four components: A) Cluster
competitiveness and international business
school linkage; B) a SME business
development scheme with matching grants for
TA and training; C) a business development
gateway with seed capital matching grants for
SMEs; and D) a technical innovation scheme
with support to pre-investment feasibility
studies and capacity development support for
technical and vocational training and
education institutes.
ECP focuses on enabling businesses to
upgrade, innovate, and improve productivity
and sales. Based on cluster and supply/value
chain analyses, clusters and chains will be
selected, and linkages will be promoted
between large and smaller enterprises, thereby
increasing local supply and value addition. In
particular MSMEs will be supported with
matching grants to develop their capacity to
supply products according to export market
requirements.
Some services (e.g. training) are provided
more cost-effectively when delivered to
groups, formal or informal, and therefore in
the selected areas, the SMEs will be facilitated
to form formal or informal groups if they do
not already exist. Also for the purpose of
creating sufficient volume, as required by the
buyers, it may be necessary for SMEs to join
hands.
While SCF staff will have a pro-active “handholding role” during the process, many of the
specialised services will be contracted to
providers of Business Development Service
(BDS). Most BDS can be contracted in
Tanzania, but there may be cases where
regional and international expertise is required.
For the purpose of contracting BDS
providers, the budget includes a matching
grant fund of DKK 25 million. Part of this
fund will also be used to develop the capacity
Matching grants will be used for: (i)
establishment of a business linkage
programme to improve technology and skills
development; (ii) an internship programme for
school leavers; and (iii) a business
development gateway for the innovation and
research and entrepreneurship training. Seed
capital (up to USD 10,000 per entrepreneur)
will be provided to help entrepreneurs and
innovators realise their ideas.
- vi -
Executive Summary
It should be highlighted that ECP also
includes support for vocational education and
training system, an area in which Danida and
Tanzania have cooperated for many years until
Danida‟s support was phased out in BSPS II.
financial services and new financial products.
Support will also be provided for improving
market integration, and the policy and
regulatory framework.
The 2003 Strategy Document outlines the
strategies and targets but the logical
framework has recently been revised and
includes targets such as: (i) the volume of
credit provided by a cross section of
microfinance providers to MSMEs and poor
people, and the volume of deposits mobilized
by a cross section of microfinance providers
from MSMEs and poor people are increased
by four times the baseline; (ii) the proportion
of investment financed by the formal financial
sector is increased from 2% to 4% in the case
of micro enterprises, and from 5% to 10% in
the case of small enterprises; and (iii) female
micro entrepreneurs constitute 30% of all
micro entrepreneurs with investments at TZS
5 million assisted by microfinance providers.
A new strategy and business plan for the next
five years was prepared in 2007.
Apart from the World Bank and
Danida/BSPS III, it is anticipated that other
DPs will contribute to this new basket,
including DFID, SIDA and the Netherlands,
and that the total basket resources will be
about USD 50 million. The BSPS III
contribution of DKK 30 million (~USD 5
million) will thus correspond to about 10% of
the resources. The World Bank has made a
commitment to serve as financier of last resort
if required.
ECP will be implemented by the Tanzania
Private Sector Foundation (TPSF) which is a
relatively small unit with limited capacity.
However, contractors will be employed for the
implementation of the different components,
which will be subject to World Bank
procurement rules and oversight. Governance
will be provided by a Joint Review Forum of
the DPs which will follow and review
progress, approve work plans and budgets,
and decide on semi-annual disbursements.
Implementation only started in 2005 with
appointment of a Technical Manager. A part
of the initial support focused on converting
microfinance NGOs into microfinance
companies. Currently there are discussions
with CRDB Bank regarding support for its
activities to develop the capacity of Savings
and Credit Cooperative Societies. CRDB Bank
has taken the lead in micro and rural finance,
partly with support of Danida/BSPS.
C.3: FSDP (DKK 30 million)
After the collapse of the state-managed
financial sector in the late 1980s, a private
financial sector, with multiple players, is
emerging and gradually moving outwards from
the main towns to the rural areas and
downwards to the poorer segments of
households and enterprises. However, in spite
of this positive trend, coverage remains
limited. Pro-poor financial sector deepening,
i.e. giving poor households and MSMEs access
to formal sector financial services, has
demonstrated a high impact on poverty
reduction, which was the background for
development of the FSDP.
The international Technical Manager is
contracted to implement FSDT‟s operations
and manage the basket fund, which initially
was supported by DFID, Canadian CIDA,
Swedish SIDA and the Netherlands. Danida
joined in 2005. Recently, also the World Bank
has joined while SIDA may withdraw. The
Technical Manager is responsible and
accountable to a Programme Investment
Committee (PIC). An international auditing
firm is contracted to audit the accounts. One
of the bi-lateral donors serves as lead partner
on a rotating basis. Sida, succeeding CIDA, is
lead partner in 2007/08. RDE will be an active
partner in FSDT.
The Trust Deed (2004) establishes the legal
foundation for the FSDT as well as the
framework for its operations. The focus of the
support is on capacity development, not
provision of capital/loan funds. It is envisaged
that FSDT by grants and contracting of
service providers will assist financial sector
institutions with developing their pro-poor
As FSDP is a new and a demand-driven
facility, projections of future disbursements
- vii -
Executive Summary
are connected with uncertainty, and so is the
estimate of the required or appropriate level of
funding for the next five years. Furthermore,
there is also some uncertainty about
commitments of the DPs and GoT. Thus, it is
not possible to establish a “funding gap” that
BSPS III should cover. It is instead estimated
that the FSDT expenditure in the BSPS III
period will be in the area of +/-USD 50
million of which the BSPS III contribution
should cover 10 percent, which would suggest
an amount of USD 5 million or DKK 30
million.
Component C Budget
Sub-component/Item
C.1 PASS
Of which: Credit Guarantee Fund
C.2.a SCF
C.2.b ECP
C.3 FSDP
TOTAL COMPONENT C
Component Coordination
Each of the implementing partners has its own
oversight and coordination structure and
therefore no component steering committee
or similar will be established. Rather the
Programme Coordination Unit of the RDE
will promote and facilitate concrete
cooperation where relevant and needed. The
clearest common interests are probably
between the ECP and the SCF. It is an
element of ECP to promote market access
which is the exclusive focus of SCF. Also,
PASS and SCF have common areas, i.e. the
food sub-sector, and potential for synergies
and cooperation.
Already they have
cooperation, but it is expected that this
cooperation may take a more concrete form
during BSPS III. Opportunities include that
the new zonal branches of PASS may host the
out-posted business managers of SCF and that
PASS facilitates SCF clients with accessing
credit while SCF facilitates PASS clients with
accessing markets.
Component Budget
The total budget is DKK 244 million
corresponding to USD 41 million or TZS 61
billion. More than half of the budget is for the
Credit Guarantee Fund (CGF) of PASS (DKK
126 million). A significant contribution for the
CGF is planned to be made during 2008/09 to
address the accumulated unmet demand, and
therefore the budget for the first year is
relatively high.
- viii -
DKK million
140
126
44.2
30
30
244.2
1
INTRODUCTION
1.1
Overview of the Component and Sub-components
1.
Component C: Development of Micro, Small and Medium Enterprises (MSMEs), or for
short “MSME Development”, focuses on: (i) raising the knowledge and skills of MSMEs,
whether related to technology or management; and (ii) enhancing their access to capital for
operations and investments. It comprises three sub-components but four interventions/budgets:
C.1: Private Agricultural Sector Support (PASS) which provides DKK 140 million (USD
23.3 million) for the PASS Trust Agency to enhance its credit guarantee and business
development services (BDS) for commercial farmers, agribusinesses and agro-processing
enterprises (see chapter 3 and Annexes C.1-C.4).
C.2: Enterprise Development (DKK 74.2 million) comprising two interventions:
C.2.a: Improved Market Access of Small and Medium Enterprises (DKK 44.2 million)
continues a pilot intervention of BSPS II, but with a focus on assisting food
processing/marketing SMEs add value to food commodities and access markets of an
international nature, within and outside Tanzania. It also supports the institutionalisation of
the temporary project organisation, the SME Competitiveness Facility (SCF). A detailed
description is presented in Chapter 4.
C.2.b: Enterprise Competitiveness Programme (ECP) with a budgeted BSPS III contribution
of DKK 30 million for a joint baket fund financing various types of technical services and
risk capital for MSMEs and vocational education and training (see chapter 4 and the ECP
programme document presented in Annex C.11 in a separate volume)
C.3: Tanzania Pro-poor Financial Sector Deepening Programme supported by a BSPS
IIIA contribution of DKK 30 million (~ USD 5 million) for the joint basket fund, which is
managed by the Financial Sector Deepening Trust (FSDT), see chapter 5, and Annex C.12 in
a separate volume.
2.
PASS was started in 2000 as a pilot intervention (with a budget of DKK 20 million) in the
first phase of the Danida-financed Agricultural Sector Programme Support (ASPS I) and
continued (DKK 43 million) in the second phase (ASPS II) which ends 30th June 2008. In
compliance with the Joint Assistance Strategy for Tanzania (JAST), Danida decided in 2006 to
concentrate its cooperation with Tanzania on the business, environment and health sectors and
phase out the cooperation in transport and agriculture. However, it was at the same time
recognised that PASS was delivering important services for the agro-based business sector and it
was therefore decided to continue and expand the support for PASS under BSPS III.
3.
The SME Competitive Facility (SCF) was introduced as a pilot intervention during the
implementation of BSPS II. SCF is managed as a stand-alone project organisation and
implemented by an international consultancy firm. Organisationally, SCF is de facto the
contracted consultancy firm though it is guided by an Advisory Board. In BSPS III, the strategy
will be to develop a small national entity, assisted by a consultancy firm, and then explore ways of
institutionalising the national entity - through either integration in an existing organisation or
establishment of a new organisation.
-1-
4.
ECP is a new element in the BSPS context and in Danida‟s country programme. In 2006,
the World Bank approved an IDA credit of SDR 65 million (~USD 95 million) for the Private
Sector Competitiveness Project (PSCP), which has three components. Component 1 (IDA: USD
41.4 million) provides support for the BEST Basket; Component 2 (IDA: USD 36.4) is the
Enterprise Competitiveness Component while Component 3, titled “Improving Access to
Financial Services”, will provide about USD 12 million for the FSDT.
5.
During 2006, the World Bank initiated discussions with DFID and Danida about the
possibility of establishing co-financing or basket fund arrangements for financing the second
component, i.e. the ECP, on the understanding that the World Bank would serve as lead but in
the role of funding agency of last resort. Since then, also other bilateral donors have expressed an
interest in providing financial support for ECP.
6.
FSDT was created in 2004 to manage a basket fund supported by Canada (CIDA), Danida
(BSPS II), DFID, the Netherlands and Swedish SIDA which have made a combined
commitment of about USD 36 million of which CIDA accounts for 41%, DFID 31%, and
Danida (BSPS II) 4% only. SIDA may decide to withdraw in 2008, while the World Bank has
decided to join with an allocation of USD 12 million from the budget of PSCP. GoT has made a
commitment of USD 12 million but has so far not disbursed any amount into the basket.
1.2
The Identification and Formulation Process
7.
While the Danish financial support for the ECP and FSDT will be in the form of a
financial contribution to two basket funds, a new and an existing one, the support for PASS and
SCF will be provided as direct support, with Danida being the only/major donor. The
formulation processes have therefore been different. For ECP, a consultant was contracted by
the development partners (DPs) to formulate the programme document on an enhanced
programme that will serve as the basis for establishing a basket fund supported by several
development partners (DPs). The basis for the future support for FSDP comprised FSDT‟s
business plan and budget projections as well as the 2003 Strategy Paper on the Tanzania Propoor Financial Sector Deepening Programme and the Trust Deed of 8th June 2004 between
DFID (the Founder) and Epitome Advocates (the “Trustee”).
8.
In the case of PASS, the project organisation and the process consultants worked jointly on
the formulation. However, during the formulation, PASS was established as a Trust Agency (May
2007), directed by a Board of Trustees, and managed by a new team that at the time of
formulation was in the process of being recruited. For this reason, the design includes an
inception review during the first year (2008/09) when the Board of Trustees and the new
management team are in place and have formulated and agreed on the strategic directions. An
up-dated strategic plan for PASS will be available in 2007/08.
9.
During the identification mission in January 2007, the PASS Project Organisation was
asked to complete questionnaires on: (i) lessons learnt (from ASPS); (ii) its policies, strategies and
measures for dealing with the cross-cutting issues of gender equality and HIV/AIDS; and (iii) the
external support required to achieve its strategic and institutional goals. In March 2007, PASS
was asked to prepare more detailed proposals, using the logical framework as the structure.
During the formulation mission 7-25 May 2007, a 2-day working session was implemented with
PASS to discuss the submitted proposals and develop a consensus on the structure and content
of the cooperation as well as detailed output-budgets. Subsequently, a sub-component working
paper was prepared and discussed with PASS and the RDE. This provided the major input to
preparing the first draft Component Description, which was assessed by and discussed with the
-2-
PASS Board and staff, in August 2007, and then subsequently revised to become a final draft in
September 2007.
10. In the case of SCF, where the project organisation de facto was identical with the contracted
international consultancy, it was decided to contract an independent consultant to assist with
identifying the future strategic vision and the support required. This consultant was fielded
together with the formulation mission during 7-25 May 2007 to map what is being done to assist
SMEs with accessing markets, and assess the development potential and problems of different
SME sub-sectors. This involved meetings with institutions providing similar services. Following a
proposal on niche, strategy and approach, including the implications for organisational structure,
a sub-component working paper was prepared and discussed.
11. Following the observations and recommendations of the Appraisal Mission in November
2007, PASS and SCF, together with the Royal Danish Embassy, prepared revisions to the final
draft which have been included in this final version.
1.3
Achievements and Lessons of Past Support
12. PASS has by far surpassed the targets for BDS and credit guarantees defined in ASPS II. A
significant jump in the demand for PASS services was recorded in 2007-2008. However, it took
until 2007 before another important objective was achieved, i.e. transforming PASS from a
“Danida project” into a separate legal entity in the form of a Trust which has an important
influence on the sustainability. PASS receives income from its BDS and credit guarantees, while
the interest income on the Credit Guarantee Fund (CGF) was returned to Danida as long as
PASS was a project organisation. With the conversion to a PASS Trust, the CGF and the interest
income becomes the property of the PASS Trust which creates good prospects that the PASS
Trust will become a financially self-sustaining entity.
13. The lessons learned, according to the PASS Project Organisation, are overall positive but
there is some criticism related to an unrealistic design objective (financial self-reliance while
meeting all Danida‟s social and environmental goals), procurement procedures, and too frequent
change of staff/advisers. Also the wish is expressed to have “much more/full degree of
autonomy from the Danida”, a “professional board”, and “technical assistance in specific areas”.
Finally, it is highlighted as constraints that the banks are slow to approve loan applications and
reluctant to provide long-term loans for commercial agriculture; it is proposed that the Credit
Guarantee Fund may guarantee loans from USD 4,000 up to USD 2.4 million with a term of up
to 10 years.
14. SCF started late in BSPS II but has delivered a wide and diverse range of services,
supported by matching grants, including: (i) traceability and ICT training; (ii) training of 160 SME
food processors; (iii) two organisations supported in Effective Trade Fair Participation; (iv) a
feasibility study related to the manufacturing of a medicinal soap from Jatropha oil; and (v)
roundtable discussion of options for promoting smallholder cattle for export.
15. In May 2007, the RDE and SCF commissioned a tracer study to assess SCF‟s achievements
during BSPS II and provide recommendations for BSPS III. The overall assessment was that
SCF most likely would beat most of its BSPS II targets. Furthermore, respondents praised the
SCF staff for its responsive attitude and highlighted that SCF stimulated enthusiasm and
confidence of SME owners.
16.
For BSPS III, the study offered the following recommendations:
-3-
1) SCF‟s interventions should be more sector focused, selecting potential high-impact areas,
and cover the value chain as a whole
2) There should be more follow-on activities to grantees to enable them maximize their
potential. SCF should work with the client SME clusters/associations to develop strategic
long-term plans and help their members with implementing the plans
3) SCF should work more to encourage large enterprises that have downstream and
upstream linkages and can be partners in public/private partnerships
4) SCF should consider outreach to more rural SMEs that are less able to benefit from SCF
(based in Dar es Salaam) and to provide the current level of match to obtain a grant
5) SCF should be a private sector organisation - mainstreaming it into public or donor
contexts would make it less dynamic
6) SCF should ensure that SME associations and clusters develop effective monitoring and
evaluation functions to help them track their members‟ progress (indicator and outcome
orientation at SME association and cluster level)
7) SCF should do more to develop the capacity of BDS providers as a link to market
development, both locally and for export.
The above recommendations have been taken into consideration in the process of deciding
SCF‟s future strategic direction.
17. FSDT effectively started operations in May 2005 with the appointment of a Technical
Manager. A Strategic Review was undertaken in 2006, only about one year after start of
operations. A number of the early projects were related to assisting microfinance NGOs
transforming themselves into microfinance companies. The Review made a number of
observations, including: (i) moving projects from the pipeline to active partnerships has been
slower than projected; (ii) 80% of the allocated funds (USD 5 million) have gone to three large
retail financial institutions and one network of Saving and Credit Cooperative Societies
(SACCOS) which combined have increased the number of borrowing clients by over 15,000 and
loan volumes by 27% but with “a disappointing decrease in average portfolio quality”; and (iii)
“FSDT‟s ability to respond quickly and flexibly to project opportunities is hampered by its
current “one-size fits all” project investment cycle”. The recommendations included that (a)
FSDT should develop a ten-year vision, beginning 2008, supported by 5-year business plans; and
(b) FSDT should focus on “capacity building and agricultural finances in the coming year”.
-4-
2
COMPONENT CONTEXT AND OBJECTIVES
2.1
Main Problems to Be Addressed
18. Tanzania has some 2.7 million micro, small and medium enterprises (MSMEs), the majority
being micro enterprises operating informally without registration or licence. It is estimated that
the informal sector accounts for some 70 per cent of employment and 58 per cent of gross
national income while the SME sector provides one third of GDP and employs 20 per cent of
the labour force. In addition to “enterprises”, the support under this component also focuses on
commercial farmers, whether individuals or groups. Therefore, in the following the concept
“MSMEs” also refers to commercial farmers.
19. In spite of their importance to income and employment, SMEs play a limited role in
exports. SMEs mainly produce for the markets within Tanzania and have limited capacity and
experience for accessing markets of an international nature, be it export markets or “international
markets” within Tanzania, such as supermarkets, hotels or large international companies in
Tanzania buying inputs and parts from smaller domestic producers.
20. Apart from their problems with regulations (addressed in Component A), MSMEs are
constrained by insufficient management skills and technical know-how of entrepreneurs as well
as limited education and skills of the workers, problems of accessing affordable formal sector
credit and other financial services, non-availability of risk capital for start-up and innovations,
inadequate networks that may assist them with inputs and marketing, and generally a limited
support in the form of business development services (BDS).
21. After the collapse of the state-managed financial sector in the late 1980s1, a private financial
sector has developed and is rapidly expanding its outreach and depth. Yet, an estimated 85% of
Tanzanian MSMEs do not access any formal sources of credit and only some 6% of micro
enterprises have loans from microfinance institutions (MFIs) or banks. Instead many MSMEs
have to rely on much more costly informal sources. Rural areas and commercial farmers are in
particular disadvantaged. Credit delivery costs are high in sparsely populated areas and lending for
rain-fed agriculture has high inherent risks. Land is seldom registered and can therefore not be
used as collateral.
22. While MSMEs may have access to short-term finance for working capital, often at very
high rates of interest, very few have access to affordable long- and medium-term investment
finance and risk capital for financing the start-up, innovations, capital equipment or livestock that
have long repayment periods.
23. Workers in Tanzanian enterprises have lower levels of education and training than workers
in for example Uganda and Kenya and less than half of the enterprises invest in training of their
employees. In spite of the fact that a percentage of workers‟ salaries is allocated for the public
vocational education and training system, the private sector faces problems in recruiting workers
with specific skills and qualifications in certain areas.
24. Tanzania‟s second generation Poverty Reduction Strategy Paper, the National Strategy for
Growth and Reduction of Poverty (NSGRP or MKUKUTA) emphasises pro-poor growth
driven by private sector development. The strategies focus on technology/skills-driven
productivity dynamics, increasing efficiency, product differentiation, national/regional/global
1
The state-managed financial sector, linked with cooperatives, probably had more width and depth in the early
1980s than in the 1990s. However, it was not sustainable.
-5-
connectivity and structural transformation of the physical and institutional infrastructure of the
economy. Cluster 1 of the MKUKTA focuses on essential measures that may accelerate growth,
e.g. reducing costs of doing business, responsive financial services, a trained workforce, improved
public and corporate governance, and business development services to entrepreneurs and
agricultural producers.
2.2
Component and Sub-component Objectives
25. The overall component objective, i.e. one of the three immediate objectives of BSPS III, is
defined as
“Enhanced contribution of MSMEs and commercial agriculture to equitable growth, exports,
employment and government revenue”
At micro-level, this may be monitored through the before-/after-support data on the enterprises
supported by the sub-components while at macro-level indicators such as sales, employment and
tax payments of MSMEs may serve as proxy indicators. The Ministry of Industry, Trade and
Marketing (MITM) plans to establish (with support of the BEST Programme) an SME database
which could be the source of monitoring such indicators.
26. The objectives of the four supported interventions are in the case of the two baskets given
by the objectives defined in the programmes that the baskets are supporting, while for PASS a
definition is introduced that may reflect the vision and goal of the new PASS Trust Agency. For
SCF, the definition reflects the agreement with the management and board following a facilitated
strategy development process.
C.1 - Private Agricultural Sector Support
“Acceleration of investments, financing and growth of commercial agriculture, agribusiness and
agro-processing”
C.2.a - Improved Market Access of Small and Medium Enterprises
“Improved international competitiveness of food processing and marketing SMEs to access and
exploit new markets”
This definition excludes micro enterprises as it is considered that micro enterprises only in
exceptional cases will have the potential to access markets of an international nature.
Furthermore, it limits the target group to those SMEs that are engaged in food processing and
marketing. The rationale of this prioritisation is elaborated upon in Chapter 4.
C.2.b – Enterprise Development Programme
”Increased enterprise creation and growth”
C.3 – Financial Sector Deepening Programme
“Expansion of private sector financial services for micro, small and medium enterprises
and poor rural and urban households”
-6-
FSDP will support this expansion through support for “improved capacity of Tanzania‟s financial
sector to meet the needs”.
-7-
3
SUB-COMPONENT C.1:
PRIVATE AGRICULTURAL SECTOR SUPPORT (PASS)
3.1
Rationale and Justification
27. The collapse in the late 1980s of the agricultural marketing parastatals, the state-managed
financial sector, and the state-directed agricultural cooperatives left a vacuum and created major
obstacles to small- and medium-sized commercial farmers in terms of reduced access to input
and investment finance, and disruption of linkages between primary production and
processing/marketing. Since the early 1990s, this vacuum has gradually but only partly been filled
by the emergence of a private banking sector and private processing/marketing firms as well as
new forms of organisations, such as outgrower schemes and various (voluntary) types of small
farmer organisations, e.g. outgrower associations and Savings and Credit Cooperative Societies
(SACCOS). Since 2000, PASS has played an important role in this development by assisting
individual farmers and agribusinesses as well as organisations of small farmers with development
of business plans and access to credit through provision of credit guarantees and financial linkage
services. PASS has also supported small farmers with establishment and development of their
organisations.
28. At present, only about 10% of rural households have access to formal or semi-formal
sector credit; among rural Tanzanians who currently have a loan, 84% have obtained the loan
from informal sources while SACCOS account for 8%, MFIs for 3%, business loans for 3% and
individual personal bank loans for only 2%2. And, more than 50% of rural households are
excluded from financial services, whether formal or informal.
29. During ASPS, PASS has clearly demonstrated that there is a strong (commercial) demand
for its business development and credit guarantee services. Targets were surpassed, and many
commercial farmers (including smallholders) and agro-industries have thanks to the support of
PASS accessed loans and improved and increased their production. Without a convincing
feasibility study or business plan and the credit guarantee, they would not have been able to
access a loan from a bank. Regulations of the Bank of Tanzania require that agricultural loans are
supported by collateral worth 125% of the value of the loan which few farmers and emerging
agribusinesses can provide. Also among
Business plans submitted and approved
commercial banks there is an increasing Tshs (billion)
interest in cooperating with PASS. This is 25
Business plans
not only due to the feasibility study and
submitted Tshs (billion)
20
risk reduction that PASS offers but also
Business plans
due to the fact that PASS physically 15
approved Tshs (billion)
deposits an amount corresponding to the
full value or part of the value of its 10
guarantee with the banks (in fixed
deposits or similar), which raises the 5
liquidity of the banks as well as their trust
0
Year
in the guarantee. Due to Tanzania‟s
2002/03
2004
2005
2006
Jan-Sep 2007
history there is probably among banks still
some scepticism about public non-funded guarantee commitments, in particular when it comes
to medium- and long-term lending. These positive experiences provide the justification for rolling
out, institutionalising and consolidating the pilot project.
2
FinScope Survey 2006
-8-
30. Since its inception in 2000, PASS has become more and more known and the demand for
PASS services is now accelerating. However, due to limited guarantee funds, PASS is at present
unable to meet this demand though the coverage of PASS is concentrated in the areas around its
headquarters in Morogoro. The accelerating demand is also due to the fact that the financial
sector provides negligible services for agriculture. In the long-term, this could change as
competition pushes banks into rural areas and agriculture and if GoT should establish an
agricultural development bank. However, most likely there will always be segments of the sector
that would need the services of PASS. Initially, banks may be willing to cover an increasing part
of the short-term borrowing need for working capital but may be reluctant to enter into mediumand long-term investment financing without the support of loan guarantees.
31. The feasibility studies and business plans, prepared by PASS, assess issues of financial
viability and technical feasibility but do also attempt to estimate developmental indicators related
to generation of employment and income, poverty reduction, and gender and environment. With
respect to employment and income, it is major challenge to capture and attribute the more
dynamic chain and multiplicator effects, e.g. the cash created by outgrower schemes may have
many indirect effects in the local economy. So far, the monitoring system has focused on
financial indicators and therefore, there is no systematic information available on the before-andafter situation with respect to employment and income, and poverty reduction. As mentioned in
section 3.6, the PASS management is planning to address this gap by organising beneficiary
surveys followed up by repeat surveys.
32. An attempt to assess the socio-economic impact was made in 2006 through contracting of
a national consultancy which interviewed a sample of PASS clients, using the business
plans/feasibility studies as baseline. Though the study was unable to fully capture the long term
dynamic multiplicator effects, and fully document the before and after situations, the study did
provide important insights. The clients of PASS comprise individuals (41%), farmers‟ groups
(32%), business firms (24%), SACCOS (2%) and Associations (1%). Initially, the main clients
were groups/associations which however more recently have been outnumbered by
individuals/companies The groups are often organised around outgrower schemes, and though
currently fewer in number than the individual clients, the groups/associations comprise many
smallholders of whom the majority are women and classified as “poor” as compared to “nonpoor”. However, it should also be highlighted that support for one agro-processing enterprise
may create a market outlet for thousands of smallholders which is a development that the Study
was unable to fully capture.
33. The major sub-sector has been sugarcane (31% of clients), an important economic activity
around Morogoro, followed by tea (19%), coffee (16%), agribusiness and agro-processing (16%),
and livestock (7%). Based on the limited sample interviewed, the Study found that “there is a
tremendous increase in terms of production and productivity of PASS clients after receiving loans”. With respect
to employment, the Study found that 69% of the employees were casual labourers but the Study
was unable to assess changes in permanent and temporary employment.
34. PASS clients are however not only those who obtain a loan with a PASS credit guarantee.
Many clients are supported with business development services (BDS) and are facilitated with
accessing finance without a credit guarantee. For example, while PASS in 2006 issued 84 credit
guarantees, it prepared business plans and provided financial linkage services to 163 clients,
assisted 69 groups to form partnerships and provided marketing services to 26 partnerships.
35. The income of PASS, from fees and commissions, appears sufficient to cover variable
operational costs. This income will significantly increase, after registration of PASS as a Trust and
-9-
the transfer of ownership of the Credit Guarantee Fund (CGF) to the Trust. The income from
interest on the CGF will then belong to the PASS Trust. Though part of this income would need
to be allocated to cover for inflation and losses, a significant amount will remain to cover
organisational costs. In the past, PASS has managed to maintain a negligible default rate (<1%)
on the loans guaranteed. Thus, it appears highly feasible that the PASS Trust within the next 5
years can operate without any external support.
36. However, financial self-reliance and sustainability requires that the Trust gives much more
attention (than the PASS project organisation) to the income side of its business, human resource
management, financial management and governance. In these areas, there have been serious
deficiencies which need to be effectively addressed in the roll-out and consolidation phase,
supported by BSPS III. The Trust needs to improve not only the collection of and accounting for
income but also the deals it has with the banks. There appears to be a potential for: (i) obtaining
higher returns on credit guarantee funds; (ii) reducing the risk sharing; and (iii) raising the
leverage so that one Danish kroner or Tanzanian shilling in the CGF supports more than one
kroner/shilling guaranteed.
3.2
Goals and Strategies
37. The strategic goals of PASS for the next five years include: (i) an expansion of the
geographical coverage, through zonal branches supported by a new Headquarter organisation to
be established in Dar es Salaam; (ii) expansion of the target group to cover all players in the
agricultural value chain, i.e. commercial farmers, agro-processing industries, input suppliers, and
other agribusinesses; and (iii) development and introduction of new guarantee and BDS products.
Achievement of these goals will result in a major increase in the volume of business and thus a
significant increase in agricultural sector credit.
38. The process of achieving these goals will be stepwise and gradual. During 2008/09, the
new Headquarters in Dar es Salaam will be established and concurrently the Morogoro office will
be converted into a zonal branch office. During 2009-2010, the first new zonal branch will be
established. Currently, it is being considered to establish branch offices for the Lake Zone
(Mwanza), the Northern Zone (Arusha) and the South Western Zone (Mbeya), in addition to the
Morogoro branch. Baseline surveys etc will be undertaken to inform the decision process. Branch
number 3 and 4 will be established in 2010/11 and 2011/12 respectively.
39. The functions of the new Headquarters will include capacity development, backstopping
and supervision of the branches, assessment and approval of investments above a certain size,
cooperation with participating banks, cooperation with organisations and initiatives that
complement the support of PASS, and ensuring satisfactory corporate governance and
management. A proposal for the future Headquarter is currently being discussed, see Annex C.2.
The structure may not be static but evolve as the Trust expands its programme. However, for the
purpose of estimating operational costs, a relatively large and complete structure has been used.
40. Headquarters will be managed by a Tanzanian Managing Director, MD (recruited in
August 2007). The MD will be supported by an internationally recruited Deputy MD who will be
a PASS Trust Staff Member with a clear line management function, paid for by the PASS Trust
but through a BSPS III contribution earmarked for that purpose. Thus, this “earmarked budget
support” provides a frame which the Trust may use for having the expenses for the Deputy MD
reimbursed.
“Internationally recruited” implies that the position will be advertised
internationally, while the selected candidate may have Tanzanian or other nationality but a first
class international background.
- 10 -
41. At Headquarters, there will be three Business Development Officers (BDOs) to support
and develop the capacity of BDOs in the zonal branches, undertake quality assurance and analyse
proposals above a certain size. The BDOs will primarily have experience and qualifications in
financial and investment analysis but will be assisted by a Danida Adviser with experience in
agriculture and agribusiness. However, one Adviser is not sufficient for the expanded sub-sector
coverage (various primary, agro-processing and agribusiness sub-sectors) and PASS cannot
develop the technical expertise in-house for all of these areas. Therefore, it will be necessary to
establish cooperation with external service providers, including research institutions, to meet the
need for specialised technical expertise.
42. The structure for the zonal branch will be light and flat. It will comprise three BDOs of
whom one would serve as branch manager, devoting part of his/her time to branch management
and part to providing BDS to clients. However, there will be variations between branches
according to the volume of business. For example, initially the Morogoro branch will have a
capacity and volume corresponding to about two “model branches”, and the operational budget
is therefore designed accordingly.
43. The PASS Project Organisation has in the past benefited from Danida Junior Professional
Officers (JPOs) with a background in agriculture. However, given the recently announced
changes in costs and financing of JPOs, PASS is considering to recruit a Technical Advisor only.
3.3
Outputs, Deliverables and Inputs
44. The outputs are related to the organisational goals of the new PASS Trust. The activities
and inputs required for achieving these outputs and goals are partly financed by PASS Income
and partly by Danida. Thus, the basis for deciding Danida‟s contribution becomes the “company
budget” and the projected income.
45. An opening balance sheet and a first-year budget will be established for the new
“company”, and Danida‟s support will be for “a company budget” and not for a “project
budget”. The “company budget” will cover the entire Trust operation, and comprise numerous
recurrent expenditure items (salaries, rent, vehicle O&M etc.) and minor investment items (PCs,
vehicles, etc.). These items will primarily be financed from the income of the PASS Trust but in
the expansion phase, the income may not be fully sufficient, and therefore, “general Danida
budget support” may be required to cover the financing gap. In addition, there are two separate
expenditure items in the “company budget”, where Danida “earmarked budget support” would
be relevant, i.e. (i) Danida‟s contribution to increasing the size of the CGF; and (ii) the salary of
the international Deputy MD. Outside the company budget, but inside the BSPS III budget,
there will be provision for an International Danida Adviser (Agribusiness Technical Expert) to be
stationed at Headquarters. And if possible, one or two JPOs will be provided for the branches,
financed from a separate Danida HQ account, thus outside the company and BSPS III budgets.
46. Four outputs have been defined and the related budgets for these outputs have been
estimated (please refer to Annex C.4). Combined these budgets are supposed to constitute a
guesstimated proxy for the cost side of the “company budget” (when deducting the Danida
Adviser). However, output budgets C.1.1 and C.1.2 are not the budgets for Danida‟s contribution
in BSPS III since a significant part will be financed by the income of PASS. The outputs are:
- 11 -
Output C.1.1: An efficient, effective, and sustainable PASS Trust (DKK 31.2 milion)
This is basically the establishment and operation of a new PASS Trust Headquarters in Dar
es Salaam. It will have sufficient capacity for financial management, human resource
management and supervision, capacity development and quality assurance of the branches.
In order to undertake baseline and feasibility studies for the establishment of zonal
branches, the budget includes four person-months international and four person-months
national short-term consultancies. For establishment and operation of the M&E system
including repeat surveys and impact studies, the budget provides two person-months
international consultancy and 10 person-months national consultancy.
Output C.1.2: Enhanced geographical coverage (DKK 21.8 million)
This involves establishment of zonal branches (3 new branches and conversion of the
Morogoro office to a branch) as well as the efficient operation of these branches.
Output C.1.3: Expanded range of products and services (DKK 2.8 million)
This output involves contracting of national and international expertise to develop new
BDS and guarantee products. A study tour is also included for the management/board to
visit and study innovative models.
Output C.1.4: Increased Lending for Commercial Agriculture, Agribusiness and
Agro-processing (DKK 126 million for the CGF)
The Danida contribution is estimated based on the planned expansion of geographical and
sub-sector coverage and enhancement of capacity to attain its core objective of supporting
smallholder commercial agricultural entities through farmer groups and models such as
contract farming.. New clients within livestock, agri-business and agro-processing increase
the demand for guarantee funds because of larger loan sizes and longer terms.
The budgeted increase in the CGF will allow the Trust to support a total agricultural loan
portfolio of some DKK 400 to DKK 500 million by the end of the third phase. The actual
amount will depend on the guarantee policy and composition of the portfolio (the
percentage of loans guaranteed and the terms of the loans). It will also depend on the
leverage or gearing of the guarantee funds that is possible, - that is, will the financial sector
institutions accept that the Trust can commit guarantees for more than the funds available
considering that it is unlikely that the entire guaranteed portfolio is lost at the same time, or
will they require that one shilling guaranteed is supported by one shilling in the CGF3.
3.4
Activities and Support to Address Cross-cutting Issues
47. Though the PASS Trust has to strive for financial self-reliance, it needs to demonstrate
Corporate Social Responsibility (CSR) by having strategies and measures that promote gender
equality, address the HIV/AIDS issue and safeguard the environment. Many private, for-profit,
companies, also in Tanzania, apply good policies and practices in the areas of gender, HIV/AIDS
and environment not only for altruistic reasons. Furthermore, many measures may not imply a
cost or a loss of profit.
48. The main challenge for PASS is insufficient in-house expertise in cross-cutting issues
(CCIs). The organisation has yet to conduct gender awareness or HIV and AIDS training to its
staff. Training in CCIs is judged as crucial to PASS, especially if it enlightens staff on how to
manage CCIs. PASS sees a need to ensure that all its clients check on possibilities for instituting
CCIs in their implementation. PASS intends to implement HIV and AIDS code of practice
3
Due to its long relationship with PASS, the CRDB Bank Ltd accepts a leverage of 1:2.
- 12 -
among its staff, e.g., establishing and operationalising a work place HIV and AIDS code of ethics,
prevention and mitigation measures, and expanding intervention areas to cover its clientele.
Measures in environmental management and protection include obligatory environmental
screening in all projects and where necessary, environmental impact assessments, management
plans and monitoring. Within gender, PASS will promote women‟s employment and womenowned projects. These interventions will be made possible through: (i) capacity building of PASS
staff in how to link CCIs to agricultural finances, marketing and processing; (ii) manuals and
guides for mainstreaming of CCIs; and (iii) improving reporting on CCIs.
3.5
Sub-component Budget
49. The future income of PASS Trust constitutes a major uncertainty when estimating the
Danida support required under BSPS III to cover the operational financing gap. PASS has
developed various income projections based on the current characteristics of the operation and
the projected increase in demand and service delivery, please refer to Annex C.3. In addition to
the current situation, income from the CGF is included. It is assumed that the CGF can be
placed in Treasury Bills (in TZS) currently providing 16% interest p.a., that six percentage points
have to be allocated to cover for inflation and maintain the real value of the CGF (in TZS), and
that five percentage points have to be allocated to cover losses. This leaves an income of 5% of
the value of the CGF, which contributes to financing the operational costs. If part of the CGF is
invested in foreign exchange assets, a lower return would be obtained but also less will need to be
allocated for inflation. The assumption regarding the obtainable return on funds may be on the
optimistic side. However, it should be highlighted that past losses have been at a level of 2-3%
and if this continues, the above assumptions do provide a buffer. Furthermore, if guarantee
funds can be leveraged the income will increase. Based on this income projection and the output
budgets, a base case scenario for the BSPS III has been developed below.
BASE CASE SCENARIO
in DKK'000
2008/09
2009/10
2010/11
2011/12
2012/13
TOTAL
1. TOTAL COST EXCL CGF,
DPTY MD, Tech Adviser
8,105
7,872
9,684
11,256
9,074
45,991
2. TOTAL PASS INCOME
6,000
7,500
9,000
10,200
11,200
43,900
3. SURPLUS/DEFICIT (-):
FINANCING GAP = 2-1
-
2,105
-
372
-
684
-
1,056
2,126 -
2,091
4. Danida General Budget
Support to Cover Gap (3)
2,105
372
684
1,056
-
4,217
5. Dpty MD~Earmarked Budget
Support
1,008
1,008
1,008
1,008
1,008
5,040
6. Danida Adviser/International
Agribusiness Adviser
960
960
960
960
960
4,800
34,000
23,000
23,000
23,000
23,000
126,000
38,073
25,340
25,652
26,024
24,968
140,057
7. CGF~Earmarked Budget
Support
TOTAL BSPS III (4+5+6+7)
50. In this base case, the total BSPS III support comes to DKK 140 million of which DKK
126 million is for the CGF. The annual cost of the PASS Trust is estimated based on the output
budgets (see Annex C.4) which in turn are based on estimated investment and operational costs
of the Headquarters and zonal branches. It is positive to note that an operational surplus is made
in the last year, and most likely before then since the cost projection is based on the assumption
- 13 -
that all positions of the organisational headquarter structure will be filled from day one though it
is anticipated that the staffing of the headquarter organisation will be more gradual. Furthermore,
though PASS is currently negotiating tax/duty exemptions with the Tanzania Revenue Authority,
it is assumed that the Trust will not be exempted from any duties and taxes, and therefore higher
unit costs than applied elsewhere in BSPS III have been used. For example, a 4-wheel drive
vehicle is budgeted at USD 50,000 instead of USD 30,000.
51. The needed expansion of the CGF is influenced by a number of factors. If the CGF can
be leveraged, less will be needed to meet a given level of demand. However, a significant increase
in guarantee funds is required because of: (i) the expansion of geographical coverage; (ii) the
inclusion of agro-processing and agribusiness; and (iii) higher loan sizes and longer terms.
Moreover, the recent history does support that demand is rapidly increasing. PASS has become
well known and banks and clients appreciate its services. As PASS at present is only working with
four banks, there is an undiscovered business area with other banks such as the NMB (Rabo
Bank), NBC, Standard Chartered, and Stanbic. Given these considerations and the fact that
PASS‟ implementation capacity will be significantly expanded, it does seem realistic that PASS
will be able to fully activate the proposed addition to the CGF of DKK 126 million. The
relatively high increase in the CGF in the first year could be questioned but it is based on the
considerable increase in demand during 2007-2008 which PASS has been unable to meet because
of limited guarantee funds4.
52. If, for some reason, the income flow is only 80% of the projected flow in the base case, the
need for general Danida budget support increases to DKK 10 million. This could be the case if
PASS is unable to obtain the assumed return on the CGF and/or if losses and loan terms
increase beyond what is assumed. However, on the other hand, the projected income will
increase if PASS succeeds in leveraging the CGF, which does seem to have high probability. A
leverage of 1:2 would significantly raise the income from commitment fees, business plan fees
and in particular the banks‟ risk sharing fees.
53. Given these uncertainties and different outcomes, it is found prudent to allocate DKK 4
million for general budget support, however setting the ambitious target that the PASS Trust will
be able to cover its operational costs from its operational income in the fourth and fifth year,
though the expansion phase only ends in 2011/12 where PASS plans to establish its fourth
branch.
C.1: PASS
Budget by Item and Year (in DKK'000)
Contribution to the Credit Guaranteee Fund
(earmarked budget support)
2008/09
2009/10
2010/11
2011/12
2012/13
TOTAL
34,000
23,000
23,000
23,000
23,000
126,000
International Deputy Managing Director
(earmarked budget support)
1,000
1,000
1,000
1,000
1,000
5,000
International Danida Adviser - Agribusiness
(outside the budget of the PASS Trust)
1,000
1,000
1,000
1,000
1,000
5,000
General Budget Support
(to cover operational financing gap)
2,000
1,000
1,000
-
-
4,000
38,000
26,000
26,000
25,000
25,000
140,000
TOTAL BUDGET FOR C.1
TOTAL BUDGET ACCORDING TO THE
DANISH FISCAL YEAR
2008
19,000
2009
32,000
4
2010
26,000
2011
25,500
2012
25,000
2013
12,500
TOTAL
140,000
The PASS projection of ”CGF need” is based on a period of six years, 2008-2013, which here has been
converted to a 5-year period, 2008/09 – 2012/13.
- 14 -
The projected high growth in income is based on the current favourable agricultural prices and
the high demand in the local and export market following high economic growth in Tanzania and
globally. It is realised that the economic situation could change and adversely affect PASS
performance. Therefore PASS plans to diversify investments into sub-sectors that have relatively
more stable demand, better prices and wider economic impact. In particular this includes
supporting investments in agro processing of primary products into finished products, PASS will
also focus on production of higher quality products that have a niche in the market e.g. specialty
coffee, organic tea etc as these do command a premium and stable prices. The expansion of
PASS into more agro climatic zones will allow PASS to diversify crop coverage from the present
three to five or six that will cover against failures in any one zone
3.6
Indicators and Monitoring
54. The PASS Trust has an established monitoring and reporting system. Quarterly, half-yearly
and annual reports are prepared. The reporting format is comprehensive and provides financial
data as well as raises issues of concern for the reporting period and pointers towards the coming
period. A more detailed M&E system as well as the new Business Plan will be discussed at a
Board Corporate Seminar planned for January 2008. The existing system will be maintained, but
strengthened through reporting on additional indicators and cross cutting issues. Some indicators
will be identified by the Board of Trustees according to the information the Board wishes. Some
key socio economic indicators have already been identified and included in the updated LFA
(Annex C.1). The LFA will be further detailed by the PASS management and additional
indicators added as required for management purposes (e.g. indicators on staff performance).
55. PASS will develop a robust M&E system which will receive high priority when developing
the 2008-2013 Business Plan, - an exercise that will start immediately after the approval of BSPS
III. This will include a further advanced LogFrame template. Management and the Board will
work to put in place a medium term monitoring and evaluation system, including impact
assessment. The areas of focus for impact would be: growth in agribusiness; growth in
employment; improved quality of products; returns to investments (loans) guaranteed; graduating
beneficiaries. PASS will establish benchmarks while moving into new zones that will allow
assessment before and after PASS support. Business plans developed by PASS from now on will
also collate information to be archived as benchmarks. These will be used to undertake before
and after assessments of all investments. All the above will improve the M&E system of PASS.
3.7
Organisation and Management
56. Organisational Structure: A tentative organisational structure of headquarters and branches
is presented in Annex C.2. It is envisaged that some positions only will be filled as and when the
need arises. It is envisaged that the Trust will make use of outsourcing for some of its technical
services but also for some governance issues. At present PASS has engaged services of auditing
companies and law firms to advise on tax issues, accounting standards as well as best practices on
corporate issues particularly Code of Conduct for the Board to avoid any conflict of interest
amongst board members. In addition PASS will formalise current procedures for processing of
Credit Guarantee applications whereby three different officers have to give their approval. This is
to ensure adherence to quality standards and transparency.
57. Governance: Initially, the RDE and the Ministry of Finance (MoF) will be actively engaged
in governance issues and be members of the Board of Trustees. At a later stage, RDE and MoF
may decide not to be directly represented (by their own staff members) in the Board. A law firm
has been engaged to assist in these matters.
- 15 -
58. Financial Management: While the Board of Trustees will be responsible for Trust policies
and operational strategies, the Trust‟s operations are initially partly financed by the annual
contributions from Danida. Therefore, the management will present proposals on the annual
budget to the RDE and negotiate with the RDE the BSPS III contribution to the annual budget
before the budget is presented for review and approval by the Board. The financial transfers for
general budget support will be made to the general operational account of the PASS Trust while
special accounts will be opened for the earmarked budget support, at least the CGF. Financial
reporting will be done based on the PASS “Company Accounts”, and the audited annual financial
statements of the PASS Trust will be the basis for ensuring accountability.
59. Transition Issues: The registration of PASS as a Trust in May 2007 raises a number of
issues related to the transition from a project organisation under ASPS to a “free-standing” Trust.
Amongst others, the CGF and other assets need to be transferred and the opening balance for
the new Trust needs to be established. The transfer of the CGF requires a legal document
stipulating inter alia the general conditions for the transfer and use of the CGF as well as what will
happen to the funds in the case that the PASS Trust is dissolved. For this purpose, the RDE
engaged in 2007 a law firm to prepare the legal documents and it is anticipated that all assets and
funds will have been transferred not later than June 2008. As soon as the transfer is made, the
Trust will be the owner of the interest income generated by the CGF.
60. Inception Review: As mentioned, the new management team and Board should have time
and opportunity to develop and adopt the strategic directions for the Trust, which in turn may
influence the design of the Danida support. Therefore, an inception review is proposed for
2008/09 to determine the concordance between design and strategy, and if necessary introduce
the needed amendments. The inception review may also advise the Trust on its proposals for a
business plan, a guarantee/risk policy, a service fee policy, a target group policy, and various
other corporate policies.
- 16 -
4
SUB-COMPONENT C.2: ENTERPRISE DEVELOPMENT
4.1
Improved Market Access of Small and Medium Enterprises
This sub-component includes two budgets: C2.a: Improved Market Access of Small and Medium Enterprises,
see section 4.1; and C.2.b: Enterprise Competitiveness Programme, see section 4.2
4.1.1 Background and Rationale
61. This sub-component focuses on enhancing the capacity of small and medium enterprises
(SMEs), engaged in food processing and marketing, to add value to food commodities and access
international food product markets. The term “SMEs” is here understood to include individual
enterprises in the usual sense, commercial farmers who produce and sell for the market,
cooperatives and other groups of commercial farmers or SMEs, and SME exporters and
wholesalers. In some cases there would already be a well-defined chain, e.g. a group of small
commercial contract farmers producing commodities according to the specifications of a
processing company which in turn has a contract with a wholesale buyer who sells to
supermarkets or exporters. In other cases, one may start with SMEs that produce and sell for
consumers “next-door”.
62. “Food commodities” and “food products” is used in its widest interpretation and includes all
edible items for human consumption; in addition to food and oil seed crops and livestock, it
includes beverages (e.g. tea, coffee, coco), fruits and vegetables, nuts, and spices, herbs and
aromatic plants. “Adding value” should here be understood as comprising a wide range of
activities such as: certifying the organic nature and origin of a commodity; sorting/grading and
bulking food crops, spices or fruits and vegetables; milling of grains; packaging of fruits and
vegetables or other food commodities, e.g. honey; dairy processing to produce milk products; oil
extraction to produce vegetable oils; processing and packaging of livestock products; processing
of fruits into marmalades and juices; or more advanced types of processing and packaging. Thus,
value addition and processing does not necessarily have to be highly sophisticated; it could for
example be supply of organic herbs and spices – bundled and packaged to sell to
domestic/international hotels and restaurants, and upmarket retail stores. It will, however, over
time be or become technologically more sophisticated and target higher end markets.
63. The term “international food product markets” is here understood to comprise markets outside
Tanzania but also markets inside Tanzania that have demand and standard specifications that are
similar to those in international markets. For example, there are several foreign supermarket
chains and tourist hotels that operate in Tanzania and their hygiene requirements and other
standards are usually the same in Tanzania as they are abroad. Gradually Tanzanian standards are
converging with international standards5.
64. The focus is on enhancing the capacity in terms of the knowledge, skills, information and networks of
the entrepreneurs. As a general principle, no investment or operational capital is provided but the
sub-component will facilitate that the beneficiaries are linked to financial institutions, e.g. the
PASS Trust which is supported under Component C of BSPS III.
65. Compared to the coverage of the SME Competitive Facility (SCF) in BSPS II, the coverage
in BSPS III will be more limited, excluding small scale mining, handicrafts and manufacturing,
5
While Kenya has an active consumer‟s interest organisation, Tanzania does not yet have one. A consumer‟s „voice‟
would hasten the process of improved quality and standards in Tanzania. While not an SCF priority, SCF could
supply concrete examples for use in campaigns.
- 17 -
and non-food agro-based SMEs. Though these sub-sectors do have growth potential, it is found
in the strategy assessment (please refer to Annex B. 10) that the efficiency and effectiveness of
this relatively small intervention would be enhanced through a more focused and in-depth
approach covering the food-based sub-sectors.
66. The focus on food commodities and products has potential to address some of Tanzania‟s
main challenges and opportunities. The majority of the population (some 26 million out of 40
million), many of them poor, live in rural areas and are engaged in some form of production of
food commodities from which they obtain a limited income. The majority of the about one
million young people who enters the labour market each year also lives in rural areas, but their
choice is often limited to staying in the village surviving on traditional agriculture or migrating to
the slums of the cities. Unlike some Asian economies, there are few rural non-farm enterprises in
Tanzania. Agricultural commodities leave the rural areas without much value addition. However,
at the same time urban markets are growing rapidly, in particular markets for livestock products,
fruits and vegetables, as well as the markets for the “new” staples in the urban diet, i.e. wheat and
rice which are replacing maize. Furthermore, urban consumers are increasingly demanding food
in a processed form and of a certain quality, but unfortunately a significant part of this demand is
satisfied by imports. Tanzania‟s total food import is increasing and reached USD 277 million in
2004.
67. In addition to import substitution, Tanzania does have potential to exploit certain niches in
international markets for food products. These could, amongst others, be certified organic
products such as honey and coffee, spices, vegetables, and nuts. Initially, the degree of processing
and value addition may not be very high, but as farmers and SMEs manage to move up the value
addition ladder in the domestic market, they may develop the capacity to capture foreign markets
for products in a more advanced processed state.
68. Thus, the potential exists to expand value addition and non-farm employment in rural areas
through food-based SMEs. However, at present many SMEs find it difficult to satisfy the
sanitary and phyto-sanitary standards, the quality and packaging requirements, the certification
processes, as well as the requirements for a continuous, timely and reliable supply of a certain
volume. Though the situation is highly diverse, with some SMEs in a more advanced state and
others having “kitchen-type” operations, a major long-term effort is generally required to bring
food processing and marketing SMEs to a level where they become permanent suppliers to
domestic supermarkets, hotels etc. or to international buyers abroad. This effort does not only
involve investments. It is equally important to raise the capacity of management and workers to
manage technology and production processes, hygienic and other quality standards, and to
develop the marketing skills and networks necessary for accessing the markets. This will be the
focus of sub-component B.3, - a focus which is fully in line with the strategic priorities of the
MKUKUTA.
69. In the MKUKUTA, GoT prioritises private sector development as the vehicle for
economic growth and poverty reduction. One of the strategies for sustainable and broad-based
growth is to promote increased participation of the informal sector and SMEs including
cooperatives. Domestic firms, including SMEs, will be supported and encouraged to be
innovative, pay attention to product development, quality and appropriate marketing strategies
that make them competitive and capable of responding to global market conditions. In order to
reduce income poverty in rural areas, priority will be given to off-farm income generating
activities and improved marketing of agricultural products, promoted inter alia through value
addition schemes, SMEs and cooperatives.
- 18 -
70. Also GoT‟s Private Sector Development Strategy gives high priority to improved market
access and value addition, stating that this requires effective support services such as training,
consultancy and advisory services, marketing services, technology services, information
dissemination and promotion of business linkages.
71. Thus, the proposed focus and support under this sub-component is relevant to Tanzania‟s
real challenges and opportunities and fully in line with the national policy framework. The
expected impact is that food processing and marketing SMEs will add higher value to their
products, capture new and bigger markets and increase their volume of business, thereby
contributing to economic growth, job creation, public revenue, and reduction of poverty. On the
micro- and meso-economic levels - households and enterprises - the outcomes will be improved
turnover and profit for enterprises resulting in better incomes for enterprise owners and
employees.
4.1.2 Vision, Objectives and Strategies
72.
The support for SCF is provided with the following objective:
“Improved international competitiveness of food processing and marketing SMEs to access and exploit new
markets”.
73. At the “organisational level”, the vision of SCF is: “SCF will enable Tanzanian food processors
and marketers to access local and international markets on a sustainable basis.” And SCF defines its mission
statement as: “SCF is a pioneer in providing Tanzanian food processing and marketing SMEs throughout the
value chain with services that enable them to add value to food commodities and access international food product
markets”.
74. Thus, the overall goal and objective of SCF is to increase growth of production, sales and
exports of food products, from a low base. For this, SCF needs to become specialised in
supporting the SME food processing and marketing sector, applying a refined methodology to
transform SMEs from selling often commodity based products for local markets to producing
value-added products supplied to national, regional, and especially international markets. Given
SCF‟s limited resources and the enormous challenge of these objectives, a more pro-active
strategic approach is required. While the starting point always will be the demand and the market,
SCF will need to select areas and products that have a promising market potential. Also, SCF will
select clients who are committed to and have capacity for a longer term change process. This
implies that SCF will not be able to accommodate demand from SMEs that is outside the
selected areas of priority and where the requested support has the character of being one-off spot
interventions. SCF‟s support for SMEs is envisaged to be both technical and professional in
nature and include:
1) facilitation of cooperation between similar SMEs in a cluster or area to develop a
sufficient volume and a uniform quality as required by the market; in addition, the use of
informal or formal groups will also provide economies of scale in the support, e.g.
training can be conducted for a group of SMEs, a specialised consultant can visit and
advise all members of a group; however, there will also be cases where specific support
for one individual enterprise will be justified and relevant
2) various services for improving product quality and for positioning the SMEs as suppliers
on either domestic or international markets.
- 19 -
75. The interventions can be related to e.g. processing techniques, technology, packaging,
certification, product quality and product marketing but also general enterprise and group
management. SCF will be a catalyst by facilitating the process, i.e. guiding, mentoring, advising,
“hand holding”, and overall pointing and leading the food processing/marketing SMEs in the
right direction. This methodology entails first and foremost the capability and capacity of SCF
professional staff to:
o Facilitate a business plan for each SME food processing or marketing group
identifying the base-line as well as the shortcomings and constraints as the basis
for recommending interventions to be initiated over a defined period of time
o Be a knowledge centre with in-house know-how and information which food
processing/marketing SMEs can tap into, e.g.:




Information on demand for the products from domestic and international
markets and customers
Market assessments and recommendations for the most potential export
markets for specific product categories within processed food
Information on other sources of support relevant to SMEs, e.g. PASS,
FCM and UDEC, EDP and PSCP/WB supported under BSPS III but
also on other Tanzanian or donor supported SME programmes and
services (e.g. the Tanzania Gatsby Trust, TechnoServe, SIDO)
An active web-site with export tools, data bases, information, and links to
important institutions and sources of information, i.e. an export
information centre.
o Assist SMEs with meeting standards and requirements of specific export markets,
and
o Facilitate contacts in export markets to importers, traders, retailers and partners
and investors.
76. Through a matching grant scheme, SCF will finance the contracting of private service
providers who will contribute to improvements in: (i) general business management, e.g. training
in business management, accounting; (ii) production and processing, e.g. application of new or
different production and processing technologies; (iii) food processing, e.g. training in handling
hygiene and food safety; (iv) product quality, i.e. upgrading quality and appearance; (v) marketing
such as packaging and marketing tools; and (vi) export sales including negotiations with potential
buyers to obtain premium prices in export markets.
77. Organisational Strategies: SCF was introduced in BSPS II as a pilot intervention and was
established as a small project organisation based in Dar es Salaam in the form of a contracted
international consultancy firm, fully financed by Danida. The objective for BSPS III is to
consolidate and institutionalise SCF. The targets include that by the end of BSPS III, SCF will
have developed organisationally in the following ways:
1) SCF has expanded its capacity by employing additional professional staff
2) SCF has achieved better outreach in the form of two branch offices
3) SCF has been fully institutionalised to ensure its continuation. .
- 20 -
It needs to be recognised that SCF, with its type services and target group, has no prospects of
becoming commercially viable, i.e. covering all costs from fees paid by clients for its services. To
ensure its continuation, SCF will need to raise grant funds from development partners,
government, business associations, charities and private sponsors in the corporate sector. In turn,
this requires that SCF clearly demonstrates that it delivers value for money. During BSPS III
different options will be considered, decided and implemented. The most probable option for
institutionalisation is that another institution servicing SMEs takes over SCF and integrates SCF
into its structure.
4.1.3 Cross-cutting Issues and Priority Themes
78. During BSPS III, SCF will be more focused on cross-cutting issues (CCIs), and especially
gender equality. The targeting of SME food processing groups will by default result in the
majority of project portfolio and beneficiaries being women. This will in a number of cases make
it preferable to give priority to female BDS providers who are in better position to communicate
with female entrepreneurs than their male colleagues. Other provisions include support and
encouragement for women‟s economic groups and their links to markets. - SCF currently
provides health care coverage to its staff, and will not fire an employee found being HIV positive.
SCF will do whatever that is required to make sure that their staff members have access to ARVs.
As a matter of fact, SCF has engaged International Service Corps to incorporate their BizAIDS
training into the SCF grant sponsored training for organisations, associations and clusters where
appropriate. The SCF web site and the BizAIDS web sites have links to each other. The
HIV/AIDS issue will thus be high on the agenda in SCF‟s dialogue with SMEs since the survival
and sustainability of many SMEs is highly dependent upon how they avoid the pandemic. - SCF
will from the outset of BSPS III be establishing an M&E system that incorporates CCI indicators
and generates the information required to monitor value changes in the indicators. Baseline and
monitoring data will be gender disaggregated. SCF is also keen on finding better ways on
designing the following measures: how to integrate HIV-AIDS in the criteria for grants; how to
create awareness on the impact of HIV-AIDS to businesses and the economy; and, on how to
keep talking about HIV-AIDS within the organization and support relevant events.
4.1.4 Outputs
79.
The outputs are:
Output Output
no.
C.2.a.1 Food processing and marketing SMEs have increased value addition and sales and
volume of food products
C.2.a.2 Food processing and marketing SMEs have improved utilisation of technology
C.2.a.3 SME food processing and marketing representatives strengthened to disseminate
information on their export products
C.2.a.4 Enhanced capacity of food processing and marketing SMEs to use appropriate BDS
providers
C.2.a.5 A specialised national organisation effectively improving the access to international
markets of food processing and marketing SMEs
While the two first outputs focus on specific needs of individual SMEs or clusters of SMEs,
output three and four are partly of a generic nature in the sense that it is a type of capacity and
support that all will need, and therefore group training could be the methodology. The logical
- 21 -
framework matrix is enclosed in Annex C.5 while the main deliverables under each output are
summarised below.
C.2.a.1: Food processing and marketing SMEs have increased value addition and sales
of food products
Initially, SCF will work with the enterprises and groups to facilitate their definition of
their strategic goals and a business plan, which will also identify the support that the
group or enterprises require in order to approach their strategic goals. Based on the
identified needs, SCF will negotiate a support frame for the enterprises and groups for a
2-4 year period. Matching grants will then be provided to finance BDS and other
service providers that can assist the SMEs in the areas that have been identified, for
example: enterprise management, segregating and grading of agricultural food products
into different quality categories for different customers, technological transformation,
negotiations with potential buyers or importers of food products, quality management
and certification of product quality. Progress and impact will be measured in terms of
both volume and value of sales to larger clients and to markets applying international
standards.
Where the SME or group has no experience and capacity for contracting service
providers, the grants will not be paid out directly to the SME food processing or
marketing group but be administered by SCF to finance the required and agreed upon
interventions such as training, consultancies, visits to potential buyers and certification
of product quality. However, where the SME or group is legally registered and has
capacity, the grant will be transferred to the SME or group which then will undertake
the procurement and contracting. Over time, the latter model will become more
common, also as the delivery of output B.3.4 (training of SMEs in the use of BDS)
achieves it impact.
Tanzania‟s BDS sector is not well developed and the quality of services varies
considerably. In some areas, there is a lack of specialised BDS providers why it will be
necessary for SCF to contract regional and international experts as well. However,
efforts will be made to match the international expert with a local BDS provider in
order to develop the capacity of the Tanzanian BDS sector. Regional and international
expertise is likely to be required for interventions related to the technological
transformation of food products, e.g. technologies to increase shelf life, improve
retention of nutritive values, etc.
C.2.a.2: Food processing and marketing SMEs have improved utilisation of technology
One of the key constraints for SMEs is access to and utilisation of technology in all
areas of the business. Technology may comprise processing equipment or ICT for
obtaining the necessary market information. SCF will assist SMEs in this area through
advice and training, but not though capital investments. However, SCF will facilitate
linkages to financial institutions. The deliverables for this output is for interventions
having taken place on-site for each individual SME group either in the form of experts
assessing the technology need and identifying the gaps or in the form of training in
utilising or accessing the technology. The expected impact is for the SME processors
and marketers having acquired and become familiar with new technology to enhance
productivity of their processing operations.
In this field, SCF will seek cooperation with bodies such as the Centre for Agricultural
Mechanisation and Rural Technology (CARMATEC), the Tanzania Industrial Research
- 22 -
Organisation (TIRDO), the Small Industries Development Organisation (SIDO), the
Food Technology Department at the Sokoine University of Agriculture (SUA), the
Tanzania Food Processors Association (TAFOPA), the College of Engineering and
Technology, University of Dar es Salaam (CoET) and the Council for Scientific and
Industrial Research (CSIR) in South Africa. Cooperation will also be promoted with the
Enterprise Development Programme (sub-component C.2), in particular its Technical
Innovation Applied Research Scheme (TIAS) supporting improved technical capacity
of public technical institutions and vocational schools.
C.2.a.3: Enhanced capacity of SME food processing and marketing representatives to
disseminate information on their export products
Many SMEs need to market their products in a more professional way. Through a
matching grant SCF will organise generic training sessions for all SME food processing
and marketing SMEs approved as eligible within the selected focus areas. In the
beginning SCF will act as the mentor throughout the process of approaching and
penetrating new markets; however the food processing SME representatives will
through this particular intervention acquire the necessary knowledge and methodology
to market their own products systematically. The deliverables of this output are for
these SMEs to be trained thoroughly in how to market their products themselves using
various tools such as printed material, internet, promotions, campaigns and trade fairs,
personal sales meetings with potential interested buyers and importers. The goal is for
SMEs to become fully capable of marketing their products to buyers applying
international standards, which in turn will result in increased sales.
C.2.a.4: Enhanced capacity of food processing and marketing SMEs to use appropriate
BDS providers
Food processing and marketing SMEs or their representatives will be trained
thoroughly in how to assess capacity building needs and in how to select, contract and
manage BDS providers so that the SME groups, independent of SCF or other donors,
are capable of obtaining the necessary expertise at all times.
C.2.a.5: A specialised national organisation effectively improving the access to
international markets of food processing and marketing SMEs
During the course of BSPS III, probably around 2012, SCF is to be institutionalised as
a knowledge centre with in-house expertise and capacity for supporting the
development of food processing and marketing SMEs. During the first years (2008-11),
the SCF capacity and coverage will be developed, with employment of new professional
staff and establishment of two branch offices. Concurrently, options for an institutional
host will be explored, e.g. through cooperation with different institutions in the
implementation of the sub-component. However, it is envisaged that it will be around
2011/12 before a decision is made and the institutional transformation can be
implemented.
The decision on location of the SCF branch offices will be based on a spatial analysis of
where groups or clusters of SME food processors are located, as well as an assessment
of the potential of different sub-sectors and clusters which inter alia will be based on an
assessment of market potential and the interest and commitment of the SMEs. Each
branch office will have a Business Manager. When the branches are established, the Dar
es Salaam head office will reduce its number of business managers from three to one –
transferring two project managers to the branches.
- 23 -
As part of the organisational development process, budget is also provided to allow
SCF to move its head office to the centre of Dar es Salaam, from its current, difficult to
find, address in a residential suburb of Dar es Salaam.
At present it seems unlikely that SCF can become financially self-sustainable and
therefore the option of establishing an autonomous SCF standing on its own feet seems
highly theoretical. The most likely option is that an existing organisation absorbs SCF
into its structure, while mobilising public funds to finance part of the costs.
4.1.5 Processes and Milestones
80. Sub-component activities will be outlined in the annual work plans. The most important
processes and milestones for SCF during BSPS III are the following:
1. Establish a fully fledged project organisation with employment of new staff (2008)
2. Develop a methodology that allows SCF to be an effective and efficient facilitator for
food processing and marketing SMEs (2008)
3. Decide on location of branch offices and their business plans (2008 – 2009). Assess
possibilities to liaise with PASS.
4. Establish two branch offices, one in 2009, the other in 2010
5. Assess options for institutionalisation (2009 – 2011)
6. Decide on institutionalisation (2012)
7. Implement institutionalisation (2012-2013) in order to ensure the continuation of SCF
services with grant funding from different sources.
4.1.6 Inputs
81.
BSPS III will provide support for:
1. A matching grant scheme to contract BDS providers and other service providers to
mentor, facilitate and assist food processing and marketing SMEs with accessing
international markets. The matching grant will be allocated to food processing and
marketing SMEs and groups meeting the selection criteria and with ambition and
commitment to expand production and sales. There will be no pre-determined upper
limit but for each group or cluster a frame for assistance will be negotiated based on an
assessment of needs. During the inception phase, SCF will develop the criteria for
allocation and for the matching of the clients. It is expected some matching contributions
will be in kind and not in cash, most likely a combination.
2. Organisational Development of SCF: In BSPS II, SCF was identical with the contracted
international consultancy firm. In BSPS III, SCF will also be managed by a contractor
which preferably will be a consortium (joint venture, association or similar) of an
international firm and a Tanzanian consultancy firm, NGO or similar. Preferably, the
Tanzanian partner will provide the national SCF staff, comprising a Director, three
Business Managers and support staff. It is basically this national unit that will be sought
- 24 -
institutionalised. The international firm will provide interval inputs, in total 24 personmonths over five years of an International Advisor, to support the capacity development
of SCF, based on best international practices. The international partner will also have a
budget for short-term consultancies to support base line surveys, the M&E system,
training needs assessments, the institutionalisation etc. Finally, the international firm will
provide a pool of specialists that may assist SMEs with specialised BDS when no national
expertise is available (Annex B.9 includes draft TOR for this TA input).
3. Expanded outreach: Working with SME food processing and marketing groups requires
physical presence and hence support will be needed to establish two SCF branch offices
in Tanzania. The exact location of the two offices will depend on a mapping of where
food processing/marketing clusters with export potential are situated. Budget is provided
for two low-cost branch offices, each staffed with a Business Manager. Co-location with
organisations, that have activities complementing those of SCF, will be explored. Possible
cooperation with PASS will be assessed.
4. Institutionalisation of SCF: Support is provided for consultancies to assess, initiate and
finalise institutionalisation of SCF within the BSPS III period (2008-2013). Already in
2009 SCF management should start considering how best to institutionalise SCF before
the end of BSPS III. Various options should be re-visited and assessed based on the new
key competences of SCF as an SME support facility. It could be ideal if a strategic
partnership could be tested and developed before final institutionalisation takes place.
4.1.7 Sub-component Budget
82. The total budget is DKK 44.2 million (USD 7.4 million) of which the majority is for
matching grant fund of DKK 25 million to be split between four outputs (C.2.a.1 – C.2.a.4),
while DKK 17.9 million is for establishing and running the SCF organisation and delivering
capacity development support for SCF.
SCF - Budget by Output and Year (in DKK '000)
Output Budgets excluding Contingencies
C.2.a.1 Food processing/marketing SMEs have
increased sales of value added products to
export markets or domestic customers with
international standards
C.2.a.2 Food processing/marketing SMEs have
improved utilization of technology
C.2.a.3 Food processing/marketing SME
representatives strengthened to
disseminate information on their export
products
C.2.a.4 Food processing/marketing SME
representatives strengthened to use
appropriate BDS providers
C.2.a.5 A specialised national organisation
effectively improving the access to
international markets of food processing
and marketing SMEs
Total Contingency for all output budgets
TOTAL BUDGET FOR C.2.a
TOTAL FOR C.2.a
ACCORDING TO DANISH FISCAL YEAR
2008/09
2009/10
2010/11
2011/12
2012/13
TOTAL
3,400
3,400
3,400
3,400
3,400
17,000
1,000
1,000
1,000
1,000
1,000
5,000
300
300
300
300
300
1,500
300
300
300
300
300
1,500
4,855
3,746
3,089
3,180
3,030
17,900
308
266
245
239
239
1,297
10,163
9,012
8,334
8,419
8,269
44,197
2008
5,082
2009
9,588
- 25 -
2010
8,673
2011
8,377
2012
8,344
2013
4,135
Total
44,197
4.1.8 Management and Organisation
83. The chart below illustrates the organisational structure until SCF is institutionalised which
is likely to have implications for the structure and the management. Within SCF, the two regional
branches are introduced and an Administrative Officer is added to assist the Director and
Business Managers with managing and keeping track of the grants and contracts.
84. The current Board, which has an advisory role only, is continued, but is given a more
decision-making role. The future Board will decide on location of branch offices, selection of
priority areas, matching grant modalities, and cooperation agreements with clusters and groups.
The Board will also approve annual work plans and budgets, following the endorsement by the
RDE of the management‟s proposal on work plan and budget. Membership of the Board may be
revisited, but it is expected that SMEs, the “food industry”, other organisations supporting SMEs
and/or food product exports, and the Ministry of Industry, Trade and Marketing (MITM) will be
represented. MITM is the key government agency responsible for issues related to SMEs and
market access.
85. The SCF Director will be responsible for handling the daily operations within the
guidelines, criteria and procedures approved by the Board. National staff in SCF will report to
and be directed by the SCF Director who will decide upon operational issues while the
International Advisor will provide advisory services.
SCF Organisation in BSPS III
(before institutionalisation)
SCF Board
MITM, SMEs, TGT, etc
RDE
budget and work plan endorsed
SME Competitiveness Facility
SCF
Director
Business Manager
Head Office
Admin Support
Administrative Officer
Accountant, Office
International
Consultancy
TA for capacity
development
Assitant, Driver
Specialised
technical BDS
Business Manager
Business Manager
Branch
Branch
86. The consultancy contract, preferably with a consortium of an international firm and a
Tanzanian firm/NGO, will comprise the national staff for SCF and a pre-determined input of an
International Adviser of 24 person-months distributed over five years, with the major part of the
input in the first years. Secondly, there will be a pre-allocated budget frame for baseline studies,
- 26 -
M&E system development, TNA, etc. In addition, it is anticipated that SCF will use up to 15% of
the matching grant fund for international BDS expertise (~DKK 3.75 million) where there is no
national expertise available or where it is more cost-effective to use international expertise. This
could be on certain technology aspects in the processing, establishing contacts to buyers in
international markets and advice on import regulations and standards (e.g. SPS regulations) in a
foreign market The selected international contractor, supplying the International Adviser, will
supply this expertise on a case-by-case basis, based on detailed Terms of Reference provided by
SCF. Though the exact level and content of this input cannot be defined in advance, general
conditions including fee level for different categories of consultants, and reimbursable expenses
will be defined the contract. Where relevant, SCF may also contract regional BDS expertise
directly.
4.1.9 Synergies and Cooperation with Other Organisations and Interventions
87. There are number of agencies and donor supported programmes with similar or
complementing interventions. Since SCF has relatively limited resources and only covers some of
the elements of what is required for SMEs to improve their market access, it is important that
SCF develop partnerships with other organisations. There are also some useful partners and
interventions that are assisted by BSPS III:
The Private Agricultural Sector Support, PASS (Sub-component C.1 of BSPS III): The PASS
Trust supports private agro-processors, agribusinesses and commercial farmers with credit
guarantees, feasibility studies, business plans and marketing. In BSPS II, PASS and SCF initiated
discussions to explore possibilities of cooperation. In BSPS III, it is expected that the
cooperation will be made operational in the sense that there will be several cases where PASS and
SCF jointly support, but with different services, the same client.
CRDB Bank Ltd: With Danida/BSPS support, CRDB Bank Ltd has established SME- and
microfinance facilities which can be useful to some food processor groups needing finance for
e.g. capital investments.
UDEC (University of Dar es Salaam Entrepreneurship Centre) is supported under subcomponent B.2 to deliver business services and training to SMEs. This could be valuable to SME
food processors supported by SCF.
World Bank Private Sector Competitiveness Project (PSCP): The World Bank expects to launch
its PSCP programme before the end of 2007. A joint donor basket will be established for
implementation of PSCP‟s Component 2 (Enterprise Development Component) and BSPS III
will contribute to this basket under sub-component C.2. The Enterprise Development
Programme has four sub-components where some of the interventions may complement those
of the SCF sub-component and vice versa, in particular:
-
Cluster competitiveness and business school linkage
o Cluster competitiveness programme (cluster strategies)
-
Tanzania Business Development Scheme (TBDS)
o Matching TA grants for SMEs to contract BDS providers to improve their knowhow and expertise
There could also be some synergies and complementarities with PSCP‟s support for technology
(Technical Innovation Applied Research Scheme – TIAS) which aims at improving the capacity
- 27 -
of public technical institutions and vocational schools to provide training and other services to
boost productivity and competitiveness.
88. Outside the group of BSPS III partners, SCF may develop cooperation with a number of
organisations that support SMEs and food processors, including: the Sokoine University of
Agriculture (SUA) which has a capable food technology department; the Faculty of Engineering
in Dar es Salaam which has SME support window (CoET); the National Microfinance Bank
(NMB) or other financial institutions; Tanzania Bureau of Standards ; the public Small Industries
Development Organisation (SIDO) which has branches nationwide supporting MSMEs; the
Technology Development and Transfer Centre (TDTC) under CoET; and the Tanzania Gatsby
Trust. Finally, it is envisaged that SCF‟s cooperation with the Danish Business to Business
Programme (B2B) will be enhanced in order to find concrete cases where the two interventions
can be combined. This could either be that SCF supports a Tanzanian-Danish enterprise
cooperation with marketing services or that B2B makes an effort to attract Danish partners to
work with Tanzanian enterprises in a cluster supported by SCF.
4.1.10 Monitoring and Measuring Impact
89. It is important at this stage to distinguish two types of project evaluation. The first is
concerned with monitoring and measuring progress within the project implementation cycle. This
is an internal process that tracks the progress of the project based on its objectives and will be
reported on in bi-annual progress reports. The second type of evaluation measures positive
results among the beneficiaries of project activities. Some results can be measured during the
project lifetime, and an external mid-term evaluation is an option. Annual reviews from the
Danish Embassy and Ministry of Foreign Affairs also form part of external monitoring activities.
A more comprehensive external impact evaluation is required after the project ends. In order to
feed into effective M & E systems, SCF will capture data in accordance with the sub-component
logical framework and initial baseline studies. Data will also be captured for and by the SMEs
supported by SCF based on easy to complete M & E data formats from the SME grantees.
90. To establish the M & E for SCF, an M & E specialist will be engaged to design a system to
capture economic and social impact resulting from SCF support to food processing and
marketing SMEs. The designing of this system will be done after the DANIDA Board has
approved the BSPS III programme but before the start of BSPS III. Thus, the M &E consultancy
will be carried out between March 2008 and May 2008. The M & E system created prior to the
beginning of BSPS III will be confirmed during the inception period after a high level sub-sector
baseline study and the overall sub-component Logical Framework is completed.
91. A simple M & E system for supported SMEs will be designed by SCF Management with
initial guidance from the international M&E specialist. This will involve a baseline mapping for
each of the selected food processing and marketing SMEs. Subsequently, the selected food
processing and marketing SMEs will be assisted in developing a business plan, which will define
growth targets and areas to be supported through an SCF framework grant. Following the
baseline and business plan data, a simple M & E system for SMEs will be developed to capture
sales, volumes and gender disaggregated employment data following guidance from SCF. The
data captured in these systems will feed into the SCF M & E system. The same M & E system for
SMEs will have a demonstrative effect for beneficiaries‟ future business activities.
- 28 -
4.2
Enterprise Competitiveness Programme
The Programme Document for the Enterprise Competitiveness Programme (ECP) is summarised below
while it is presented in full in Annex C.11 in a separate volume. The logical framework matrix is included
in this volume in Annex C.9.
4.2.1 Background and Rationale
92. The Programme Document provides the rationale for creating a multi-DP basket to
finance an enhanced programme, which includes: higher level of aid effectiveness: reduction of
administration and reporting; complementarities between different programmes, scaling up of successful approaches;
continuity and reliability… reduced transaction costs and the use of country systems.. Based on experiences
from other countries (e.g. Uganda) it is considered feasible to raise the quantitative targets and
thus the budget defined in the original design. Furthermore, the World Bank is committed to take
the role of financier of last resort to provide room for the participation of other DPs.
93. The ECP is designed to address key deficiencies and challenges of many enterprises and
entrepreneurs in Tanzania, including: low levels of technology and capacity utilisation; low
productivity and low value added per worker; low profitability; low levels quality and consistency;
limited innovation, and limited access to risk capital.
4.2.2 Strategy and Objectives
94. ECP focuses on enabling businesses to upgrade, innovate, and improve productivity and
sales. Based on cluster and supply/value chain analyses, clusters and chains will be selected, and
linkages will be promoted between large or exporting firms and smaller enterprises, thereby
increasing local supply and value addition. In particular MSMEs will be supported with matching
grants to develop their capacity to supply products according to export market requirements. The
matching grants may finance: (a) skills development and on-the-job training, (b) business
development services, and (c) certification. The nature of this support has many common
features with the support provided under sub-component B.3 of BSPS III: Improved Market
Access of SMEs, implemented by SCF. It is therefore important that SCF and ECP coordinate
their interventions in this area.
95. Using matching grants, ECP will also; (i) establish a business linkage programme to
improve technology and skills development; (ii) an internship programme for school leavers; and
(iii) a business development gateway for the innovation and research and entrepreneurship
training. Seed capital (up to USD 10,000 per entrepreneur) will be provided to help
entrepreneurs and innovators realise their ideas. Selected financial institutions will administer the
grants and may top up the grants with loans. Finally, it should be highlighted that ECP also
includes support for vocational education and training, an area in which Danida and Tanzania
have cooperated for many years until the Danida support was phased out in BSPS II.
96. ECP has four components: A) Cluster competitiveness and international business school
linkage; B) a SME business development scheme with matching grants for TA and training; C) a
business development gateway with seed capital matching grants for SMEs; and D) a technical
innovation scheme with support to pre-investment feasibility studies and capacity development
support for technical and vocational training and education institutes. A summary of the
components is provided overleaf.
- 29 -
Component
Interventions
A. Cluster
Competitiveness
and Business
School Linkage
A.1 Cluster
Competitiveness
Programme
A.2 Monitoring
and Private-Public
Dialogue
A.3 International
Business School
Linkage
Programme
B. Tanzania
Business
Development
Scheme
(TBDS)
B.1 Matching TA
grants for SMEs
B.2 Matching
grants for training
of microenterprises
C. Business
Development
Gateway
(BDG)
D. Technical
Innovation
Applied Research
Scheme
(TIAS)
D.1 Preinvestment
feasibility studies –
grant of 75% of
direct external
costs
D.2
100% investment
grants for
equipment,
machinery and
tools
Intervention Objectives and
Strategies
Tanzania‟s comparative
competitiveness will be analysed to
identify potential clusters; based on
interest, clusters will be selected,
cluster strategies developed, and
TA support provided for the
implementation and consolidation.
Strengthening TPSF‟s technical
competencies to monitor subsector developments, private sector
and public-private dialogue using
the Investor Round Table
Approach
Strengthen the capacity of
management and financial schools
to deliver world-class
entrepreneurial training reducing
the shortage of local managers
Up to 50% cost-sharing for SMEs
contracting service providers to
improve their know-how and
expertise
Grants to cover about 50% of
costs of training micro-enterprises
in bookkeeping, technology etc.
Seed capital matching grants
($5,000-10,000) will be provided
based on business plan competition
to attract ideas and innovations of
young graduates, encourage spinoffs and specialisation, encourage
formalisation, and create role
models. Special priority to women.
Also support will be provided for
creation of a local mentoring
network.
Based on private sector demand
and feasibility, improve the capacity
of public technical institutions and
vocational schools to provide
training and other services to boost
productivity and competitiveness.
2-year pilot phase with 5
institutions, thereafter broader
coverage.
- 30 -
Executing Agencies and
Partners
Partnership with TPSF,
supervision by Project
Coordinator in MPEE,
employment of contractor
for implementation.
TPSF and its member
associations
TPSF in collaboration
with IFC‟s Global
Business School Network,
the Chief Executive
Officers‟ Group, national
business schools, and
private sector entities. +
Project Manager
Private International
Contractor working under
TPSF with local networks
and associations, e.g.
TCCIA, SIDO etc.
The same International
Contractor as for subcomponent B. BDG
Supervisory Committee to
be established under TPSF
The same contractor as for
B and C.
Eligibility: only institutions
fully registered with the
National Council for
Technical Education
(NACTE)
4.2.3 BSPS III Contribution
97. The total tentative budget is USD 51.8 million of which Danida/BSPS III will finance
about 10% or USD 5 million (DKK 30 million) which will be provided as a non-earmarked grant.
As most of the supported interventions are driven by the demand of enterprises and
entrepreneurs, there could be upwards or downwards changes in the budget, as well as
unforeseen variations from year to year.
4.2.4 Management
98. ECP will be implemented by Tanzania Private Sector Foundation (TPSF) supported by
international consultancy firms which are in the process of being recruited. Governance will be
provided by a Joint Review Forum, with participation of the DPs, which will follow and review
progress, approve work plans and budgets, and decide on semi-annual disbursements.
99. The TPSF will execute the programme but will contract out the financial management and
implementation of sub-programmes. Following successful implementation of a sub- programme,
the sub-programme may continue under the TPSF or an association or private firm capable of
executing the sub-programme successfully.
100. The World Bank will manage all DP funding to the programme along side the funds
committed to the PSCP under the credit agreement with the GoT. Each of the DPs will enter
into a bilateral agreement with the World Bank that reflects this relationship and refers to the
Operations Manual and the joint MOU, which the DPs have signed with TPSF.
101. Disbursements for the programme would be channelled in accordance with WB financial
management procedures to the TPSF account with Bank of Tanzania. With the co-signature of a
selected auditing firm, TPSF will draw down funds from this account and make payments to the
programme sub-contractors. World Bank procurement procedures will be applied and the Bank
will provide oversight.
Flow of Funds
Enterprise Competitiveness Program
SIDA account
DANIDA account
GOT
Treasury
Dutch account
Joint Review Forum
Provides twice annual joint supervision,
revew reports, budget request, make
semi-annual decisions on disbursements
World Bank
administered
Basket
Account
Replenished
cyclically by
DPs
TPSF
BOT
Account
TPSF manages
subcontractors’ budget
DfID account
Output #1
Sub contractor
account
Output #2
Sub contractor
account
Output #3
Sub contractor
account
Outputs #4
Sub contractor
account
The Competitiveness Program Admisory
Committee-CPAC
Reviews Annual Work plan, Annual Budget,
Procurement Plan, Budget request. Monitors
Outcomes & Impact, reviews Outputs.
- 31 -
Outputs #5
4.2.5 Synergies and Complementarities with Other BSPS III Support
102. There are a number of complementarities and potential synergies between ECP and other
sub-components of BSPS III, in particular the SME Competitiveness Facility (the other
intervention of this sub-component) and sub-component B.2 on Trade and Business Education
implemented by the Faculty of Commerce and Management (FCM). In addition there may be
some potential for cooperation between ECP and PASS.
ECP & SCF
Beneficiaries
Interventions/services
Complementarities
Conflict/areas overlapping
Target group: ECP targets individual firms
directly and focuses specifically on rural and
micro enterprises. It will initially address
opportunities in tourism, construction
industry, mining related industry,
agribusiness in fish, meat and supplies to
local supermarkets. SCF aims to work with
clusters of food processing/marketing
SMEs.
In case ECP wants to pursue
opportunities for identifying
clusters in other sub-sectors of
agribusiness it will be beneficial
for the two sub-components to
coordinate initiatives to avoid
duplication.
Scope: ECP will be supporting a big number
(800) of SMEs with a wide range of
interventions. SCF will be more process
oriented working with fewer clusters of food
processing & marketing SMEs.
The Technical Innovation Applied Research
Scheme (TIAS) aims at improving the
capacity of public technical institutions and
vocational schools to provide training and
other services to boost productivity and
competitiveness. SCF could choose to use
the matching grant for training of some
food processing & marketing SMEs by these
particular technical institutions. One
advantage would be that these institutions
are likely to have acquired some of the latest
available technology through TIAS‟ 100%
investment grant for equipment, machinery
and tools.
ECP‟s International Business School
Linkage Programme will strengthen the
capacity of management and financial
schools to deliver world-class
entrepreneurial training reducing the
shortage of local managers. SCF could
decide to contract the involved management
and financial schools to train managers or
representatives of food processing &
marketing SMEs or SME clusters.
- 32 -
Both ECP and SCF will be
working with matching grant
funds and BDS providers will be
the delivery mechanism of
interventions and support. E.g. a
SME firm could in principle
apply for a matching grant for
capacity building (training etc.)
services from both ECP and
SCF.
ECP & FCM (B.2)
Complementarities
Conflict/areas overlapping
Beneficiaries
ECP‟s Technical Innovation Applied
Research Scheme (TIAS) will target five
technical institutions and vocational schools.
The university of Dar es Salaam
Entrepreneurship Centre (UDEC) in
collaboration with College of Engineering
and Technology (CoET) could possibly
benefit by upgrading their machinery to the
latest available technology through TIAS‟
100% investment grant for equipment,
machinery and tools.
Interventions/services
UDEC could possibly benefit from the
interventions offered by ECP. The
Technical Innovation Applied Research
Scheme (TIAS) provides grants of 75% for
pre-investment feasibility studies as well as
100% investment grants for equipment and
machinery. The latter could complement the
interventions under SC B2 with UDEC
receiving support for internal capacity
building as well as for offering courses in
entrepreneurship. However linkage to
technology and engineering disciplines could
be beneficial for both sub-components.
Target groups: Through the
International Business School
Linkage Programme ECP will
strengthen the capacity of
management and financial
schools. This could be similar to
what SC B2 will be supporting
FCM and UDEC to achieve i.e.
enhance competencies of the
private sector (including
entrepreneurs) in business
management, international trade
and entrepreneurship.
Both ECP‟s International
Business School Linkage
Programme and the FCM and
UDEC SC aim at strengthening
the capacity of business
management schools to deliver
tailor made courses and training
for entrepreneurs. FCM and
UDEC should therefore not be a
part of the International Business
School Linkage Programme.
- 33 -
5.
SUB-COMPONENT C.3:
TANZANIA PRO-POOR FINANCIAL SECTOR DEEPING PROGRAMME
This chapter provides a summary. A logical framework matrix is presented in this volume in
Annex C.10 while the updated Strategy and Business Plan is presented in a separate volume in
Annex C.12
5.1
Background, Rationale and Objectives
103. Pro-poor financial sector deepening implies increasing the access of the poor to (formal)
financial services, credit as well as savings services. Various studies have found that financial
sector deepening makes an important contribution to poverty reduction. In several countries with
high financial sector depth, incomes of the poorest 20 percent grow faster than the average. This
and the wish to reduce transaction costs and promote a level playing field was the rationale for
several DPs (DFID, Danida, CIDA and SIDA) to join efforts and provide support for the
Tanzania Pro-poor Financial Sector Deepening Programme.
104. The basket fund, managed by FSDT, provides matching grants for:
1) Training and education to enable institutions serve low-income groups and MSMEs
2) Developing new financial products that address the needs of poor households and micro
and small enterprises
3) Improving the policy, legislative and regulatory framework for delivery of financial
services
4) Improving market integration so that institutions, especially microfinance institutions
(MFIs), providing financial services to poor households and micro and small enterprises,
can better access capital on a wholesale basis from banks and other institutions
5) Enhancing the supply of business services to financial service providers
6) Providing research and information in order to enhance the understanding of best
practices in the Tanzanian context.
105. The World Bank‟s recent decision to participate was inter alia based on the assumption that
FSDT in the next years will work on the following priorities: (i) strengthen the banks‟ SME
departments. e.g. better operating systems, and introduce new SME finance products not only for
banks but also for finance and insurance companies; (ii) strengthen micro and rural finance by:
helping NGO/MFIs to transform into formal MFIs or banks; supporting the development of
new MFIs; and linking formal sector financial institutions to MFIs, creating opportunities for the
MFIs to obtain loan funds for on-lending.
106. The Logical Framework Matrix for FSDP was revised in 2007, please see Annex C.10.
Some of the specific indicators/targets include:
o The proportion of the adult population using formal financial sector services is increased
from 9% to 18%
- 34 -
o Volume of credit provided by a cross section of microfinance providers to MSMEs and
poor people is increased by four times the baseline
o Volume of deposits mobilized by a cross section of microfinance providers from MSMEs
and poor people is increased by four times the baseline.
o The proportion of investment financed by the formal financial sector is increased from 2%
to 4% in the case of micro enterprises, and from 5% to 10% in the case of small
enterprises.
o Female micro entrepreneurs constitute 30% of all micro entrepreneurs with investments at
TZS 5 million assisted by microfinance providers.
107. One of the purposes of introducing the FSDT was to promote a level playing field among
all agencies providing SME finance and micro and rural finance so as to avoid that some
development partners provided favourable treatment of some agencies, creating market
distortions. This has created special challenges for Danida in managing its successful engagement
with CRDB Bank Ltd, generally and within micro and rural finance in particular. Though CRDB
Bank has turned its SME and microfinance into a healthy business, CRDB Bank does have a
justified need for support for its programmes to develop the capacity of grassroots organisations
such as the SACCOS, and provide permanent supervision and support. However, it would be
preferable if such support were provided through FSDT. During the formulation process,
negotiations of substance was ongoing between FSDT and CRDB Bank and it is therefore
expected that CRDB Bank, being the leading agency in promotion of micro and rural finance,
will obtain support to partly finance some of its activities for development of the capacity of
SACCOS and other grassroots financial institutions. This is why Danida‟s direct support for
CRDB‟s micro and rural finance activities will not be continued in Phase III. Instead an increase
in the contribution for the FSDT basket is included.
5.2
BSPS III Contribution
108. FSDT came into full operation only recently and probably for this reason, FSDT finds it
difficult to project the demand and the budget requirements for the next 5-year period. FSDT‟s
5-year business plan is therefore based on assumptions about future demand and disbursements.
109. FSDT expects that the annual level of disbursements will approach about USD 10 million
by 2008/09. While the future expenditure side is somewhat uncertain, so is also the income side.
The World Bank has allocated USD 12 million from the PSCP; Canadian CIDA has made a new
tentative commitment of about USD 18 million; there is a commitment by GoT of USD 12
million but there are some doubts as whether it will materialise; SIDA may decide to leave the
basket while the future commitment of DFID and the Netherlands is yet to be made.
110. In this situation, the size of the Danida contribution cannot be determined through an
exact “funding gap analysis”. It is instead estimated that the FSDT expenditure in the BSPS IIIperiod will be in the area of +/-USD 50 million of which the BSPS III contribution should cover
around 10 percent, which would suggest an amount of USD 5 million or DKK 30 million.
- 35 -
5.3
Management
111. The Financial Sector Deepening Trust (FSDT) was formally founded by DFID and legally
established in 2004 as a trust by way of a Trust Deed (8 June 2004). FSDT‟s activities are guided
by the Trust Deed, the Strategy Paper (a new strategic plan for 2007-2013 will be completed
before the end of 2007 ) and annual business plans. An international Technical Manager is
contracted to implement FSDT‟s operations, and is responsible and accountable to a Programme
Investment Committee (PIC). One of the participating bi-lateral donors acts as lead development
partner (DP) on a rotating basis. In July 2007 Sida took over after CIDA. An international
auditing firm is contracted to audit the accounts. CIDA (or DFID) is expected to serve as lead
DP in the BSPS III period while RDE will be an active partner.
- 36 -
6
COMPONENT BUDGET
112. The total budget for Component C is DKK 244 million (or USD 41 million or TZS 61
billion). More than half of the budget is for the Credit Guarantee Fund (CGF) of PASS (DKK
126 million). As a significant contribution for the CGF is planned to be made during 2008/09,
there is (unusually) budgeted for a high level of disbursement in the first year.
COMPONENT C: MSME DEVELOPMENT
BSPS III Budget in DK'000
Sub-components
2008/09
2009/10
2010/11
2011/12
2012/13
SUB-COMPONENT C.1: PASS
38,000
26,000
26,000
25,000
25,000
140,000
SUB-COMPONENT C.2: ENTERPRISE DEVELOPMENT
16,163
15,012
14,334
14,419
14,269
74,197
C.2.a
Improved Access to Markets of SMEs
10,163
9,012
8,334
8,419
8,269
44,197
C.2.b
Enterprise Competitiveness Programme
6,000
6,000
6,000
6,000
6,000
30,000
4,000
7,000
7,000
7,000
5,000
30,000
TOTAL COMPONENT C
58,163
48,012
47,334
46,419
44,269
244,197
TOTAL COMPONENT C
ACCORDING TO DANISH FISCAL YEAR
29,082
SUB-COMPONENT C.3: FSDT
2008
- 37 -
2009
53,088
2010
47,673
2011
46,877
2012
45,344
TOTAL
2013
22,135
Total
244,197
7
COORDINATION AND MANAGEMENT
7.1
Coordination and Synergies
113. There are a number of complementarities and potential synergies between the ECP, SCF,
PASS, FSDT and FCM. The clearest common interests are probably between ECP and SCF, and
between PASS and SCF. Already cooperation has been established between PASS and SCF, but it
is expected that this cooperation may take a more concrete form during BSPS III. Opportunities
include that the new zonal branches of PASS may host the out-posted project managers of SCF
and that PASS facilitates SCF clients with accessing credit while SCF facilitates PASS clients with
accessing markets.
114. The Programme Coordination Unit at RDE will facilitate and promote such concrete
cooperation between the BSPS partners of the different components and with institutions which
are not implementing partners in BSPS III. This is done more effectively on a case-by-case basis
rather than by having a Programme Steering Committee or Component Steering Committee.
There is potential for synergies with several non-BSPS partners, including the Danish Business to
Business Programme (B2B) that supports various forms of cooperation between Tanzanian and
Danish enterprises. For example, PASS could facilitate credit access of the Tanzanian partner in a
B2B supported project, or if the Tanzanian partner is “an innovator or start-up” there might be
possibilities of accessing seed capital from ECP.
7.2
Approval of Annual Work Plans and Budgets, and Budget Re-allocations
115. For the two baskets, RDE will coordinate with the other DPs, which support the baskets,
and decide on the annual contribution for financing the proposed annual budget and work plan.
With respect to PASS, RDE will negotiate directly with the Trust Management. In case of reallocations between sub-components or use of the unallocated programme budget, RDE will
enter into an agreement with the involved parties, adhering to current Danida guidelines for such
re-allocations.
7.3
Financial and Procurement Management
116. Financial and procurement management will follow the systems established for such by the
implementing partners. There is only one exception in Component C and that is the Danida
Adviser for PASS who will be recruited through Danida procedures. The PASS Trust Agency will
have to develop a financial reporting system that satisfies the Board of Trustees and the law
under which it is registered. SCF will have annual audits contracted by the RDE.
- 38 -
8
MONITORING, REPORTING, REVIEWS AND EVALUATION
8.1
Monitoring and Indicators
117. Logical frameworks and indicators to monitor outputs, outcome and impact of the
interventions are in place for all sub-components. It is expected that consistent and regular
reporting takes place against the indicators. PASS has an established monitoring and reporting
system. The indicators agreed in the Logical Framework may be supplemented with indicators
that satisfy the requirements of the Board. Specific developmental indicators that are important
to RDE‟s reporting will also be included, e.g. gender disaggregated data, data on employment
creation etc. The existing monitoring system is likely to be supplemented with beneficiary surveys
to provide information on the socioeconomic benefits of the interventions.
118. For the two baskets, the indicator and monitoring systems of FSDT and TPSF/ECP will
be applied. The details of the TPSF/ECP monitoring system are yet to be developed as part of a
Programme Implementation Manual. However, the broad outline indicates a comprehensive
system, with a good mix of progress and outcome monitoring. The Logical Framework includes a
number of indicators and consistent reporting on these alone will provide insight on the impact
and outcome of the interventions.
119. FSDT has recently developed a comprehensive monitoring and reporting manual and
improved its Logical Framework. The indicators in the Logical Framework and the monitoring
system are ambitious. Although means of verification are provided, data availability and
monitoring capacity could constrain full compliance with the Manual. However, overall, reliable
progress and output monitoring is expected.
8.2
Reporting, Reviews and Evaluation
120. In the case of PASS quarterly, half-yearly and annual progress and financial reports are
prepared. Reporting against the LF and its indicators will take place on a yearly basis, which will
provide an input to the BSPS III Reviews. The existing report format for FSDT will be followed.
For TPSF/ECP the mentioned Manual will be reviewed and feedback provided together with the
other DPs to ensure the system in practice is adequate. Reviews and evaluations of the basket
supported programmes will be undertaken as joint exercises with the other DPs and GoT.
However, Danida may include a basket supported programme in a (bilateral) country programme
evaluation or a thematic evaluation.
SCF will, until it is institutionalised undertake financial and progress reporting according the
systems defined by the RDE. When institutionalised, RDE will agree with the new institution on
reporting and other matters.
- 39 -
9
ASSUMPTIONS AND RISKS
121. The three sub-components of Component C are all based on and driven by the demand of
private enterprises which can only be projected or guesstimated. However, in the case of PASS
and FSDT demand has recently accelerated. It apparently takes some time before a new
organisation or facility becomes known and an exponential process seems to be involved. In the
case of ECP, the experiences from similar programmes in neighbouring countries have been used
to guide the projections of demand.
122. The other key assumption relates to the supply side, i.e. the capacity of the BDS providers
to deliver the services for which financing now becomes available. All three sub-components, but
also SCF and programmes outside the BSPS-context, depend on contracting BDS providers to
work with the target groups. There is at the moment no exact assessment of the capacity of the
“BDS sector” to deliver and, therefore, the risk is that it may constitute a bottleneck, at least
temporarily. However, experiences from other countries indicate that the BDS sector does
respond to an increased demand for its services through investing in expansion of its capacity.
- 40 -
ANNEXES
Annex C.1
Annex C.2
Annex C.3
Annex C.4
Annex C.5
Annex C.6
Annex C.7
Annex C.8
Annex C.9
Annex C.10
Annex C.11
Annex C.12
Logical Framework Matrix for Support to PASS
Tentative Organisational Charts for the PASS Trust
Projection of need for Credit Guarantee Funds and PASS Income
Output Budgets for PASS
Logical Framework Matrix for C.2.a: SME Market Access
Output Budgets for C.2.a: SME Market Access
Draft Terms of Reference for an International Consultancy for SCF
Assessment of Strategic Options and Direction for SCF
Logical Framework Matrix for the Enterprise Competitiveness
Programme
Logical Framework Matrix for the Tanzania Pro-poor Financial Sector
Deepening Programme
Description of the Tanzania Enterprise Competitiveness Programme (in
separate volume)
Description of the Tanzania Pro-poor Financial Sector Deepening Programme
(in a separate volume)
- 41 -
Annex C.1/
Logical Framework Matrix for C.1: PASS
Sub-component C.1: Private Agricultural Sector Support – PASS
(DKK 140 million)
Objectives and Outputs
Objectively Verifiable Indicators
Sub-component Objective: Acceleration of
investments, financing and growth of
commercial agriculture, agribusiness and
agro-processing
a) Increase in lending from financial institutions to commercial agriculture and agribusiness (sample of 4 banks;
e.g. CRDB, FBME, Exim and ACB - % of total portfolio lent for commercial agriculture and agribusiness)
b) Improved business and socio economic status of beneficiaries: Returns on Investments; Growth in
employment; Enhanced productivity i.e. increase in yield levels; Increased number of commercial women
owned agri-businesses; and number of successful graduating farmers and agribusiness entities.
Output C.1.1:
An efficient, effective, and sustainable PASS
Trust
a Income sufficient to cover operational costs of the new branch after 1 year of operation;
b) Income sufficient to cover all operational and investment costs in 2012;
c) Corporate policies reflecting high CSR standards operationalised:
- Gender awareness training undertaken & operational strategy mainstreamed
- Number of IV/AIDS awareness training undertaken
- Capacity building to link gender and HIV/AIDS in business plans prepared by PASS undertaken
- Corporate governance audit rating increased from satisfactory to excellent;
- Corporate Social Responsibility Rating increased to above Good
Means of
Verification
Assumptions
a) Information from
three sample banks
b) Zonal Baseline
Surveys and M&E
Reports
PASS financial
statements and annual
reports
Corporate governance
audits done by e.g.
IFM
d) Real value of CGF maintained above 97% of its original real value
Output C.1.2:
Enhanced geographical coverage
a) HQ in DSM, and 4 zonal branches established covering the major part of Tanzania ;
b) Growth rate of business plans approved for loans at 30% annually for zonal branches;
c) CCI pursued as part of enhanced geographical coverage:
- Number of training (Capacity building) of staff on linking agricultural finance & gender undertaken
- Guidelines to link gender and address HIV/AIDS in business plans in place
- Guidelines and manuals on how to address environmental aspects in business plans in place
PASS financial
There is sufficient
statements and annual business volume in
reports
new zones to justify
establishment of
branch offices
Output C.1.3:
Expanded range of products and services
a) At least two new credit guarantee and/or BDS products introduced;
b) % of credit guarantee fund portfolio provided to new products e.g.:
i) input delivery and ii) agro processing; increasing over time
c) Number of external business development service provides collaborating with PASS: 10 in 2008, 14 in 2010
and 16 in 2013 (Monitor the rate of expansion of business services provided to target groups beyond business
plans and credit guarantee to financial institutions)
d) Expanded products address gender, HIV/AIDS and Environmental issues adequately:
- Number of disadvantaged groups as beneficiaries of new products: women, youth, the poor
- Number of new products having positive environmental impacts
e) Number of smallholder commercial agriculture: contract farming and farmer groups
PASS reports
- 42 -
Output C.1.4:
Increased Lending for Commercial Agriculture,
Agribusiness and Agro-processing (CGF
increased by DKK 126 million)
a) By year 2013, PASS is supporting a total investment portfolio of +DKK 300 million (~USD 50 million); b)
Volume of credit guarantee portfolio increased to Tshs 17 Billion in 2008, Tshs 27 billion in 2010 and Tshs 39
billion in 2013
The above remains a framework to be consolidated and further developed together with the PASS 2008-2013 business plan and the comprehensive M&E.
- 43 -
PASS financial
Banks are willing to
statements and annual increase their lending
reports
for commercial
agriculture,
agribusiness and
agro-processing if
supported by credit
guarantees. The
targeted sectors wish
to increase
investments through
loan-financing.
ANNEX C.2
TENTATIVE ORGANISATIONAL STRUCTURE FOR THE PASS TRUST AGENCY
- 44 -
PASS Headquarters Structure
The Board of Trustees
Internal Auditor
Managing Director
The Chief Executive
Deputy Managing Director
Internationally Recruited
Finance and Administration
Manager
Treasury
Manager
Operations and
Marketing Manager
3 BDOS
Accountant
Secretary
Danida
Advisor
Drivers
Branch
Branch
- 45 -
Branch
Branch
PASS Zonal Branch Office Structure
BDO
With
Branch Manager
Responsibilities
Head of Accounts and
Administration
BDO
BDO
- 46 -
Annex C.3
Projected CGF Needs and Income of PASS
- 47 -
BASE CASE SCENARIO
CG tied up on loans: 48% of loan
Year
2006
2007
2008
2009
2010
2011
2012
2013
in Tsh million
2006
4,600
2007
5,600
2008
6,800
2009
9,000
2010
11,000
2011
12,000
2012
13,000
2013
14,000
Needed CG per year Tsh million
USD1.0=Tsh1,500 Needed CG per year USD' 000
DKK1.0=Tsh250
Needed CG per year DKK' 000
CGF avalailable from ASPS II - DKK' 000
4,600
4,600
4,600
5,600
5,600
5,600
6,800
6,800
9,000
6,800
9,000
9,000
11,000
11,000
11,000
12,000
12,000
12,000
13,000
13,000
14,000
4,600
10,200
17,000
21,400
26,800
32,000
36,000
3,067
6,800
11,333
14,267
17,867
21,333
24,000
39,000
26,000
18,400
40,800
68,000
85,600
107,200
128,000
144,000
156,000
25,000
39,000
39,000
39,000
39,000
39,000
39,000
39,000
Incremental CGF Needed in phase III - DKK'000
1,800
29,000
46,600
68,200
89,000
105,000
117,000
Incremental CGF Needed in phase III - USD'000
326
5,254
8,442
12,355
16,123
19,022
21,196
9,583
11,667
14,167
18,750
22,917
25,000
27,083
29,167
38,333
46,667
56,667
75,000
91,667
100,000
108,333
116,667
New Loans Approved million
New Loans Approved DKK'000
INCOME
Business plans approved
Tsh
192
233
283
375
458
500
542
583
PROJECTION
Commitment fee - Tsh
5,750,000
7,000,000
8,500,000
11,250,000
13,750,000
15,000,000
16,250,000
17,500,000
1.00% Business plan fee - TSh
95,833,333
116,666,667
141,666,667
187,500,000
229,166,667
250,000,000
270,833,333
291,666,667
1.20% Business plan fee - Tsh
115,000,000
140,000,000
170,000,000
225,000,000
275,000,000
300,000,000
325,000,000
350,000,000
1.40% Business plan fee -Tsh
134,166,667
163,333,333
198,333,333
262,500,000
320,833,333
350,000,000
379,166,667
408,333,333
191,666,667
233,333,333
283,333,333
375,000,000
458,333,333
500,000,000
541,666,667
583,333,333
850,000,000
1,070,000,000
1,340,000,000
1,600,000,000
1,800,000,000
1,950,000,000
2% Risk sharing fee from banks -Tsh
5% CGF interest - Tsh
TSH Total using 1.2% B.P fee
312,416,667
380,333,333
1,311,833,333
1,681,250,000
2,087,083,333
2,415,000,000
2,682,916,667
2,900,833,333
USD Total using 1.2% B.P fee
208,278
253,556
874,556
1,120,833
1,391,389
1,610,000
1,788,611
1,933,889
Source: PASS, however with revised exchange rates
Note: This scenario is assumes that loan terms average 3 years and existing overdrafts are renewed
Income
in DKK
2008
5,247,333
2009
6,725,000
2008/09
5,986,167
- 48 -
2010
8,348,333
2009/10
7,536,667
2011
9,660,000
2010/11
9,004,167
2012
10,731,667
2011/12
10,195,833
2013
11,603,333
2012/13
11,167,500
Annex C.4
PASS Output Budgets
Note: The Output Budgets do not represent the budget for Danida’s contribution which is determined after
deducting projected income of PASS
- 49 -
Output C.1.1: An efficient, effective, and sustainable PASS Trust
Expenditure Accounts
I
Unit
Unit Price
in DKK'000
2008/09
No
Units
Budget
DKK'000
Budget
DKK'000
No
Units
2011/12
Budget
DKK'000
No
Units
2012/13
Budget
DKK'000
No
Units
Budget
DKK'000
TOTAL
BUDGET
OUTPUT
C.1-1
DKK'000
1. Equipment and Materials
ls year
238.0
1
238
-
-
-
-
238
2. Vehicles (incl tax)
4-wheel drive
300.0
3
900
-
-
-
-
900
3. HRD (Training and Education)
ls year
90.0
1
90
90
450
-
1
90
1
90
1
90
1
4. Investment and Development Funds
-
-
-
-
-
5. Civil Works
-
-
-
-
-
-
1,228
90
90
90
90
1,588
TECHNICAL ASSISTANCE COSTS
1. International Deputy Managing
Director
person-month
84.0
12
1,008
12
1,008
12
1,008
12
1,008
12
1,008
5,040
2. International Technical Danida
Adviser (Agribusiness)
12
960
12
960
4,800
person-month
80.0
12
960
12
960
12
960
3. International Short-term Consultants
(baselines and M&E)
person-month
200.0
4
800
1
200
1
200
-
-
1,200
4. National Long-term Advisers
person-month
10.0
-
-
-
-
5. National Short-term Consultants
(baselines and M&E)
person-month
40.0
4
160
3
120
3
120
2
80
2
80
560
6. Software Support Services
ls/year
40.0
1
40
1
40
1
40
1
40
1
40
200
2,088
11,800
12,154
-
Sub-total Technical Assistance Costs
III
No
Units
2010/11
INVESTMENT AND DEVELOPMENT
COSTS
Sub-total Investment and Development
II
2009/10
-
2,968
2,328
2,328
2,088
OPERATIONAL AND RECURRENT
COSTS
2. Vehicle O&M
Total Year
4-wheel
dr/year
3. Office O&M
LS per year
4. Audit
5. Travel and Allowances/see note
1. Contracted National Staff
Sub-total Recurrent Costs
Contingencies
2,532.0
0.8
2,026
1
2,532
1
2,532
1
2,532
1
2,532
40.0
3
120
3
120
3
120
3
120
3
120
600
500.0
0.8
400
1
500
1
500
1
500
1
500
2,400
LS per year
40.0
1.0
40
1
40
1
40
1
40
1
40
200
LS per year
144.0
0.8
115
1
144
1
144
1
144
1
144
691
2,701
3,336
3,336
3,336
3,336
16,045
393
343
343
343
343
1,763
TOTAL BUDGET FOR OUTPUT C.1.1
EXCL. CONTINGENCY
6,897
5,754
5,754
5,514
5,514
29,433
TOTAL BUDGET FOR OUTPUT C.1.1
INCL. CONTINGENCY
7,290
6,097
6,097
5,857
5,857
31,196
- 50 -
Output C.1.2: Enhanced geographical coverage (through establishment of zonal branches)
Expenditure Accounts
Unit
Unit Price
in DKK'000
2008/09
No
Units
I
2009/10
2010/11
Budget
DKK'000
No
Units
Budget
DKK'000
No
Units
183.0
-
1
183
300.0
-
2
600
2011/12
2012/13
Budget
DKK'000
No
Units
Budget
DKK'000
TOTAL
BUDGET
OUTPUT
C.1.1
DKK'000
Budget
DKK'000
No
Units
1
183
1
183
-
549
4
1,200
6
1,800
-
3,600
INVESTMENT AND DEVELOPMENT
COSTS
1 Equipment and materials
package for 1
1. Office Equipment for 3 zonal offices zonal office
4-wheel drive
2. Vehicles
3. HRD (Training and Education)
-
-
-
-
-
-
4. Investment and Development Funds
-
-
-
-
-
-
5. Civil Works
-
-
-
-
-
-
-
783
1,383
1,983
-
4,149
Sub-total Investment and Development
II
TECHNICAL ASSISTANCE COSTS
person-month
80.0
-
-
-
-
-
-
2. International Long-term Consultants person-month
3. International Short-term Consultants person-month
115.0
-
-
-
-
-
-
200.0
-
-
-
-
-
-
4. National Long-term Advisers
person-month
10.0
-
-
-
-
-
-
5. National Short-term Consultants
person-month
40.0
-
-
-
-
-
-
6. Other National Technical Services
person-month
40.0
-
-
-
-
-
-
-
-
-
-
-
-
1. International Danida Advisers
Sub-total Technical Assistance Costs
III
OPERATIONAL AND RECURRENT
COSTS (see note)
1. Contracted National Staff
LS/year/branch
2. Vehicle O&M
2 per branch
3. Office O&M
one branch
4. Travel and Allowances/see note
LS/year/branch
Sub-total Recurrent Costs
Contingencies
821.0
2
1,642
2
1,642
3
2,463
4
3,284
4
3,284
12,315
40.0
4
160
4
160
6
240
8
320
8
320
1,200
140.0
2
280
2
280
3
420
4
560
4
560
2,100
6.0
2
12
2
12
3
18
4
24
4
24
90
2,094
2,094
3,141
4,188
4,188
15,705
209
288
452
617
419
1,985
TOTAL BUDGET FOR OUTPUT C.1.2
EXCL. CONTINGENCY
2,094
2,877
4,524
6,171
4,188
19,854
TOTAL BUDGET FOR OUTPUT C.1.2
INCL. CONTINGENCY
2,303
3,165
4,976
6,788
4,607
21,839
Note: In 2008/09, the Morogoro Office will be the only branch office. However, it will initially have the capacity and coverage of 2 "model branch offices".
- 51 -
Output C.1.3: Expanded range of products and services
Expenditure Accounts
Unit
Unit Price
in DKK'000
2008/09
No
Units
I
No
Units
Budget
DKK'000
No
Units
2011/12
Budget
DKK'000
No
Units
2012/13
Budget
DKK'000
No
Units
Budget
DKK'000
TOTAL
BUDGET
OUTPUT
C.1.3
DKK'000
-
-
-
-
-
-
180.0
-
-
-
-
-
-
60.0
-
-
-
-
-
-
4. Investment and Development Funds
-
-
-
-
-
-
5. Civil Works
-
-
-
-
-
-
-
-
-
-
-
-
-
2. Vehicles
4-wheel drive
3. HRD (Training and Education)
course pers
Sub-total Investment and Development
TECHNICAL ASSISTANCE COSTS
person-month
80.0
-
-
-
-
-
2. International Long-term Consultants person-month
3. International Short-term Consultants person-month
115.0
-
-
-
-
-
-
2
400
2,000
4. National Long-term Advisers
person-month
10.0
-
-
5. National Short-term Consultants
person-month
40.0
2
80
400
6. Other National Technical Services
person-month
40.0
1. International Danida Advisers
200.0
Sub-total Technical Assistance Costs
III
Budget
DKK'000
2010/11
INVESTMENT AND DEVELOPMENT
COSTS
1. Equipment and Materials
II
2009/10
2
400
2
80
2
400
2
80
-
2
400
2
80
-
2
400
2
80
-
-
-
-
-
-
-
-
480
480
480
480
480
2,400
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
90
360
OPERATIONAL AND RECURRENT
COSTS
1. Contracted National Staff
2. Vehicle O&M
4-wheel
dr/year
40.0
3. Office O&M
4. Travel and Allowances
Study tour
90.0
-
1
90
1
90
1
90
1
Sub-total Recurrent Costs
-
90
90
90
90
360
Contingencies
-
9
9
9
9
36
TOTAL BUDGET FOR OUTPUT C.1.3
EXCL. CONTINGENCY
480
570
570
570
570
2,760
TOTAL BUDGET FOR OUTPUT C.1.3
INCL. CONTINGENCY
480
579
579
579
579
2,796
- 52 -
Output C.1.4: Increased Lending for Commercial Agriculture, Agribusiness and Agro-processing
Expenditure Accounts
Unit
Unit Price
in DKK'000
2008/09
No
Units
I
Budget
DKK'000
No
Units
2010/11
Budget
DKK'000
No
Units
2011/12
Budget
DKK'000
No
Units
2012/13
Budget
DKK'000
No
Units
Budget
DKK'000
TOTAL
BUDGET
OUTPUT
C.1.4
DKK'000
INVESTMENT AND DEVELOPMENT
COSTS
1. Equipment and Materials
2. Vehicles
4-wheel drive
3. HRD (Training and Education)
-
-
-
-
-
-
180.0
-
-
-
-
-
-
50.0
-
-
-
-
-
-
34,000
19,000
23,000
23,000
17,000
116,000
-
-
-
-
-
-
34,000
19,000
23,000
23,000
17,000
116,000
4. Investment and Development Funds CGF see note
5. Civil Works
Sub-total Investment and Development
II
2009/10
TECHNICAL ASSISTANCE COSTS
person-month
80.0
-
-
-
-
-
-
2. International Long-term Consultants person-month
3. International Short-term Consultants person-month
115.0
-
-
-
-
-
-
200.0
-
-
-
-
-
-
4. National Long-term Advisers
person-month
10.0
-
-
-
-
-
-
5. National Short-term Consultants
person-month
40.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40.0
-
-
-
-
-
-
100.0
-
-
-
-
-
-
-
-
-
-
-
-
Sub-total Recurrent Costs
-
-
-
-
-
-
Contingencies
-
-
-
-
-
-
TOTAL BUDGET FOR OUTPUT C.1.4
EXCL. CONTINGENCY
34,000
19,000
23,000
23,000
17,000
116,000
TOTAL BUDGET FOR OUTPUT C.1.4
INCL. CONTINGENCY
34,000
19,000
23,000
23,000
17,000
116,000
1. International Danida Advisers
Sub-total Technical Assistance Costs
III
OPERATIONAL AND RECURRENT
COSTS
1. Contracted National Staff
2. Vehicle O&M
4-wheel
dr/year
3. Office O&M (promotional material)
l/s
4. Travel and Allowances
LS per year
- 53 -
PASS HQ COSTS
Unit
Annual
Operating
Costs
USD'000
Unit Price in Number
USD'000
Units/year
Annual
Operating
Costs
DKK'000
Staff Costs
Managing Director
salary/month
6.7
12
80.0
480.0
Finance and Administration Manager
salary/month
4.0
12
48.0
288.0
Operation and Marketing Manager
salary/month
4.0
12
48.0
288.0
Internal Auditor
salary/month
3.5
12
42.0
252.0
Accountant
salary/month
1.7
12
20.4
122.4
Treasurer
salary/month
4.0
12
48.0
288.0
Business Development Officer
salary/month
3.0
36
108.0
648.0
Secretary
salary/month
1.3
12
15.6
93.6
Driver
salary/month
0.5
24
12.0
72.0
422.0
2,532.0
Sub-total Staff Costs
TA Costs (earmarked Danida budget support)
Deputy Managing Director
Investment Costs 2008/2009
3 vehicles (1 sedan 2 4-wheel)
11 PCs + Printers
Photocopier
Fax
Table + chair + shelves
Mobile and fixed net phones
Sub-total Investment Costs
Sub-total excl vehicles
All inclusive
Rate/Month
14.0
12
168.0
1,008.0
50.0
2.0
8.0
1.0
0.5
0.2
3
11
1
1
11
16
150.0
22.0
8.0
1.0
5.5
3.2
189.7
900.0
132.0
48.0
6.0
33.0
19.2
1,138.2
238.2
100 sq m/
month
2.5
12
30.0
180.0
ls/month
1 veh/year
phone/year
ls/year
0.8
6.7
1.2
24.0
12
3
16
1
9.6
20.0
19.2
24.0 102.8
4 wheeldrive
including tax
one module
one module
O&M Costs
Monthly Rent
Utilities, cleaning, security
Vehicle O&M
Phone and Fax
Domestic Travel and Allowances
Sub-total O&M costs excl salaries
O&M excluding vehicle O&M
54
57.6
120.0
115.2
- 144.0
616.8
496.8
- 55 -
ZONAL BRANCH OFFICE
Unit
Annual
Operating
Costs
USD'000
Unit Price in Number
USD'000
Units/year
Annual
Operating
Costs
DKK'000
Staff cost
1 BDO/ Manager
salary/month
3.5
12.0
42.0
252.0
2 BDOs
salary/month
2.5
24.0
60.0
360.0
Accountant
salary/month
1.5
12.0
18.0
108.0
Secretary/Cashier
salary/month
1.0
12.0
12.0
72.0
Driver
salary/month
0.4
12.0
4.8
28.8
136.8
820.8
Sub-total
Investment costs
Table + chair + shelves
one module
0.5
5
2.5
15.0
PCs + Printers
one module
2.0
5
10.0
60.0
Photocopier
7.0
1
7.0
42.0
Fax
1.0
1
1.0
6.0
10.0
60.0
30.5
183.0
100.0
600.0
Phones and Internet Connection
LS
10.0
1.0
Sub-total Office Euipment etc
Vehicle
4 wheeldrive
including tax
50.0
2
O&M office
rent (50 sqm 8$)
rent month
1.0
12.0
12.0
72.0
Utilities security etc
ls month
0.4
12.0
4.8
28.8
phone commun
pers month
0.1
60.0
6.0
36.0
Total annual O&M Office
136.8
~140
- 56 -
Annex C.5 – Logical Framework for C.2.a: SME Market Access
C.2.a: SME Market Access
(DKK 44.2 million)
Objectives and Outputs
Sub-component Objective: Improved international
competitiveness of food processing/marketing SMEs to
access and exploit new markets
Output C.2.a.1:Food processing and marketing SMEs have
increased sales of value added products to export markets or
domestic customers with international standards
Output C.2.a.2: Food processing and marketing SMEs have
improved utilization of technology
Objectively Verifiable Indicators
volume and value of revenues of SME food
processing/marketing groups (gender
disaggregated data will be provided for the
composition of the groups allowing for a
proportional determination of effect on men and
women respectively)
Means of Verification
Assumptions
a) Order book; b) GoT export
statistics; c) grantee M&E
reports d) impact study
reports
No food safety crisis will occur in Tanzania
a) share or number of SMEs exporting / selling to
supermarkets ; b) % increase in female and male
employment in targeted food processing and
marketing SMEs c) % (define) of accomplished
steps/actions stipulated in business plan of each
food processing/marketing group (to be quantified)
a) SCF Grant files; b) order
book; c) business plan
d)grantee M&E reports
Global prices of target products remain stable
a) % (define) of SME food processing & marketing
groups have acquired and implemented new
technology in their daily processing; b) % of
individual SMEs (men and women) trained in new
technology use (to be quantified)
a+b) SCF Grant files; SCF
progress & monitoring
reports; training reports; site
visits; impact study reports
Infrastructure continues to improve to support new
technology, e.g. broadband
a) Internet search; b) No of
buyers signing up for return
visit or more information
according to visitor’s book; c)
order book and contacting
selected direct marketers
Stability and loyalty of SME food processing
representatives to stay with group or association
Output c.2.a.3: SME food processing and marketing
representatives strengthened to disseminate information on their
export products
a) No of products where information is available
through the internet; b) No of buyer contacts made
by SME food processing groups utilising trade fairs;
c) No of orders subsequent to participating in trade
fairs; d) No of orders from direct marketing (to be
quantified) (define numbers)
Output C.2.a.4:SME food processing and marketing
representatives strengthened to use appropriate BDS providers
a) No of food processing/marketing representatives
(men and women) satisfied with the BDS
intervention; b) of those satisfied (men and
women), percentage implementing new practices in
line with BDS recommendations (to be quantified)
- 57 -
a+b) Evaluations completed
by SME food processing &
Stability and loyalty of SME food processing
marketing group
representatives to stay with group or association
representatives; impact study
reports
Output C.2.a.5: A specialised national organisation effectively
improving the access to international markets of food processing
and marketing SMEs
a) SCF formal and informal collaboration with other
bodies supporting SMEs in Tanzania and the region
to build a foundation for the continuation of SCF
type services b)By 2012, SCF has demonstrated an Progress Reports
impact that convinces government, development
partners and/or the private sector to institutionalise
SCF and provide financial support for its
continuation
- 58 -
Viable options will be available to finance the
continuation of the SCF organisation or services.
SMEs will be willing to and capable of paying fees
that partly cover the costs of SCF services
Annex C.6
Output-budgets for C.2.a. – SME Market Access
- 59 -
Output C.2.a.1: Food processing/marketing SMEs have increased sales of value added products to export markets or domestic customers with international
standards
Expenditure Accounts
Unit
Unit Price
in
DKK'000
2008/09
No
Units
I
Budget
DKK'000
2010/11
2011/12
Budget
Budget
No Units DKK'000 No Units DKK'000
No Units
2012/13
Budget
Budget
DKK'000 No Units DKK'000
TOTAL
BUDGET
DKK'000
INVESTMENT AND DEVELOPMENT
COSTS
1. Equipment and Materials
2. Vehicles
4-wheel drive
180.0
3. HRD (Training and Education)
4. Investment and Development Funds Matching grant
5. Civil Works
Sub-total Investment and Development
II
2009/10
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,400
3,400
3,400
3,400
3,400
17,000
-
-
-
-
-
-
3,400
3,400
3,400
3,400
3,400
17,000
TECHNICAL ASSISTANCE COSTS
person-month
80.0
-
-
-
-
-
-
2. International Long-term Consultants person-month
3. International Short-term Consultants person-month
115.0
-
-
-
-
-
-
200.0
-
-
-
-
-
-
4. National Long-term Advisers
person-month
10.0
-
-
-
-
-
-
5. National Short-term Consultants
person-month
40.0
-
-
-
-
-
-
6. Other National Technical Services
person-month
40.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sub-total Recurrent Costs
-
-
-
-
-
-
Contingencies
-
-
-
-
-
-
TOTAL BUDGET FOR OUTPUT C.2.a.1
EXCL. CONTINGENCY
3,400
3,400
3,400
3,400
3,400
17,000
TOTAL BUDGET FOR OUTPUT C.2.a.1
INCL. CONTINGENCY
3,400
3,400
3,400
3,400
3,400
17,000
1. International Danida Advisers
Sub-total Technical Assistance Costs
III
OPERATIONAL AND RECURRENT
COSTS
1. Contracted National Staff
2. Vehicle O&M
4-wheel
dr/year
3. Office O&M
4. Travel and Allowances/see note
LS per year
40.0
- 60 -
Output C.2.a.2: Food processing/marketing SMEs have improved utilization of technology
Expenditure Accounts
Unit
Unit Price
in
DKK'000
2008/09
No
Units
I
Budget
DKK'000
2010/11
2011/12
Budget
Budget
No Units DKK'000 No Units DKK'000
No Units
2012/13
Budget
Budget
DKK'000 No Units DKK'000
TOTAL
BUDGET
DKK'000
INVESTMENT AND DEVELOPMENT
COSTS
1. Equipment and Materials
2. Vehicles
4-wheel drive
180.0
3. HRD (Training and Education)
4. Investment and Development Funds Matching grant
5. Civil Works
Sub-total Investment and Development
II
2009/10
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000
1,000
1,000
1,000
1,000
5,000
-
-
-
-
-
-
1,000
1,000
1,000
1,000
1,000
5,000
TECHNICAL ASSISTANCE COSTS
person-month
80.0
-
-
-
-
-
-
2. International Long-term Consultants person-month
3. International Short-term Consultants person-month
115.0
-
-
-
-
-
-
200.0
-
-
-
-
-
-
4. National Long-term Advisers
person-month
10.0
-
-
-
-
-
-
5. National Short-term Consultants
person-month
40.0
-
-
-
-
-
-
6. Other National Technical Services
person-month
40.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sub-total Recurrent Costs
-
-
-
-
-
-
Contingencies
-
-
-
-
-
-
TOTAL BUDGET FOR OUTPUT C.2.a.2
EXCL. CONTINGENCY
1,000
1,000
1,000
1,000
1,000
5,000
TOTAL BUDGET FOR OUTPUT C.2.a.2
INCL. CONTINGENCY
1,000
1,000
1,000
1,000
1,000
5,000
1. International Danida Advisers
Sub-total Technical Assistance Costs
III
OPERATIONAL AND RECURRENT
COSTS
1. Contracted National Staff
2. Vehicle O&M
4-wheel
dr/year
3. Office O&M
4. Travel and Allowances (workshop)
LS per year
40.0
- 61 -
Output C.2.a.3: Food processing/marketing SME representatives strengthened to disseminate information on their export products
Expenditure Accounts
Unit
Unit Price
in
DKK'000
2008/09
No
Units
I
Budget
DKK'000
2010/11
2011/12
Budget
Budget
No Units DKK'000 No Units DKK'000
No Units
2012/13
Budget
Budget
DKK'000 No Units DKK'000
TOTAL
BUDGET
DKK'000
INVESTMENT AND DEVELOPMENT
COSTS
1. Equipment and Materials
2. Vehicles
4-wheel drive
3. HRD (Training and Education)
course
-
-
-
-
-
-
180.0
-
-
-
-
-
-
90.0
-
-
-
-
-
-
300
300
300
300
300
1,500
-
-
-
-
-
-
300
300
300
300
300
1,500
4. Investment and Development Funds Matching grant
5. Civil Works
Sub-total Investment and Development
II
2009/10
TECHNICAL ASSISTANCE COSTS
person-month
80.0
-
-
-
-
-
-
2. International Long-term Consultants person-month
3. International Short-term Consultants person-month
115.0
-
-
-
-
-
-
200.0
-
-
-
-
-
-
4. National Long-term Advisers
person-month
10.0
-
-
-
-
-
-
5. National Short-term Consultants
person-month
40.0
-
-
-
-
-
-
6. Other National Technical Services
person-month
40.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sub-total Recurrent Costs
-
-
-
-
-
-
Contingencies
-
-
-
-
-
-
TOTAL BUDGET FOR OUTPUT C.2.a.3
EXCL. CONTINGENCY
300
300
300
300
300
1,500
TOTAL BUDGET FOR OUTPUT C.2.a.3
INCL. CONTINGENCY
300
300
300
300
300
1,500
1. International Danida Advisers
Sub-total Technical Assistance Costs
III
OPERATIONAL AND RECURRENT
COSTS
1. Contracted National Staff
2. Vehicle O&M
4-wheel
dr/year
3. Office O&M
4. Travel and Allowances
LS per year
40.0
- 62 -
Output C.2.a.4: Food processing/marketing SME representatives strengthened to use appropriate BDS providers
Expenditure Accounts
Unit
Unit Price
in
DKK'000
2008/09
No
Units
I
Budget
DKK'000
2010/11
2011/12
Budget
Budget
No Units DKK'000 No Units DKK'000
No Units
2012/13
Budget
Budget
DKK'000 No Units DKK'000
TOTAL
BUDGET
DKK'000
INVESTMENT AND DEVELOPMENT
COSTS
1. Equipment and Materials
2. Vehicles
4-wheel drive
3. HRD (Training and Education)
-
-
-
-
-
-
180.0
-
-
-
-
-
-
50.0
-
-
-
-
-
-
300
300
300
300
300
1,500
-
-
-
-
-
-
300
300
300
300
300
1,500
4. Investment and Development Funds Matching grant
5. Civil Works
Sub-total Investment and Development
II
2009/10
TECHNICAL ASSISTANCE COSTS
person-month
80.0
-
-
-
-
-
-
2. International Long-term Consultants person-month
3. International Short-term Consultants person-month
115.0
-
-
-
-
-
-
200.0
-
-
-
-
-
-
4. National Long-term Advisers
person-month
10.0
-
-
-
-
-
-
5. National Short-term Consultants
person-month
40.0
-
-
-
-
-
-
6. Other National Technical Services
person-month
40.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sub-total Recurrent Costs
-
-
-
-
-
-
Contingencies
-
-
-
-
-
-
TOTAL BUDGET FOR OUTPUT C.2.a.4
EXCL. CONTINGENCY
300
300
300
300
300
1,500
TOTAL BUDGET FOR OUTPUT C.2.a.4
INCL. CONTINGENCY
300
300
300
300
300
1,500
1. International Danida Advisers
Sub-total Technical Assistance Costs
III
OPERATIONAL AND RECURRENT
COSTS
1. Contracted National Staff
2. Vehicle O&M
4-wheel
dr/year
3. Office O&M
4. Travel and Allowances
LS per year
40.0
- 63 -
Output C.2.a.5: A specialised national organisation effectively improving the access to international markets of food processing and marketing SMEs
Expenditure Accounts
Unit
Unit Price
in
DKK'000
2008/09
No
Units
I
Budget
DKK'000
2. Vehicles
2011/12
Budget
Budget
No Units DKK'000 No Units DKK'000
No Units
2012/13
Budget
Budget
DKK'000 No Units DKK'000
TOTAL
BUDGET
DKK'000
LS
4-wheel drive
339
180.0
3
540
1
22
59
-
-
420
180
-
-
-
720
3. HRD (Training and Education)
-
-
-
-
-
-
4. Investment and Development Funds lump sum
-
-
-
-
-
-
5. Civil Works (head office + 2
branches)
lump sum
Sub-total Investment and Development
90
60
-
-
-
150
969
262
59
-
-
1,290
-
-
-
-
-
-
450
3,600
TECHNICAL ASSISTANCE COSTS
1. International Danida Advisers
person-month
80.0
2. International Long-term "Interval"
Adviser
person-month
150.0
3. International Short-term Consultants
(baseline, impact and TNA studies)
person-month
8
LS
1,200
6
900
3
450
4
600
3
579
189
189
189
189
1,335
4. National Long-term Advisers
person-month
10.0
-
-
-
-
-
-
5. National Short-term Consultants
person-month
40.0
-
-
-
-
-
-
6. Other National Technical Services
person-month
40.0
-
-
-
-
-
-
1,779
1,089
639
789
639
4,935
1,113
1,313
1,313
1,313
1,313
6,365
160
760
590
2,910
144
720
Sub-total Technical Assistance Costs
III
2010/11
INVESTMENT AND DEVELOPMENT
COSTS
1. Equipment and Materials (office and Office equip
ICT)
and ICT
II
2009/10
OPERATIONAL AND RECURRENT
COSTS
1. Contracted National Staff (Director,
profesional and support staff)
2. Vehicle O&M
3. Office O&M, including rent
see basis
4-wheel
dr/year
40.0
LS see
lump sum/year "basis"
4. Travel and Allowances for SCF Staff LS per year
144.0
5. Fees and Allowances for Board
184.0
Sub-total Recurrent Costs
LS per year
3
120
4
546
1
1
144
184
160
4
594
1
1
144
184
160
4
590
1
1
144
184
160
4
590
1
1
144
184
1
1
184
920
2,107
2,395
2,391
2,391
2,391
11,675
308
266
245
239
239
1,297
TOTAL BUDGET FOR OUTPUT C.2.a.5
EXCL. CONTINGENCY
4,855
3,746
3,089
3,180
3,030
17,900
TOTAL BUDGET FOR OUTPUT C.2.a.5
INCL. CONTINGENCY
5,163
4,012
3,334
3,419
3,269
19,197
Contingencies
- 64 -
Output Budget Assumptions for C.2.a
Notes on Output Budget C.2.a.1:
The assumption is that there will be no upper limit to the size of the grant. Each SME food processing and marketing cluster will define the
nature and scope of the interventions needed. An example has been calculated landing at approximately DKK 1 million per group i.e. the
matching grant fund can finance up to 25 SME food processing groups.
Notes on Output Budget C.2.a.2:
The assumption is that every individual SME belonging to the food processing clusters will need onsite training on how to apply or use new
technology. The budget has been calculated as follows: 10 groups of each 10 individual SMEs being trained for one week by international short
term consultant for one week (10 x 10 x DKK 50.000 = DKK 5 million). The training does not necessarily require international expertise and
hence the budget is based on “highest cost possible”.
Notes on Output Budget C.2.a.3:
The assumption is that generic training will be organised and conducted by international experts and import agents in the field of export product
marketing and how to expose the products of the SME food processing clusters to international markets. The budget has been calculated as
follows: 3 groups for ten days (e.g. two times five days) each year (3 x DKK 50.000 x 2 per annum x 5 years = DKK 1.5 million). The training
does not necessarily require international expertise and hence the budget is based on “highest cost possible”.
Notes on Output Budget C.2.a.4:
The assumption is that generic training will be organised and conducted by experts in the field of need assessment and contracting BDS providers
to meet specific needs. The budget has been calculated as follows: 6 cluster or group representatives for five days each year (6 x DKK 50.000 per
annum x 5 years = DKK 1.5 million). The training does not necessarily require international expertise and hence the budget is based on “highest
cost possible”.
Notes on Output Budget C.2.a.5:
The budget for the establishing, operating and developing the capacity of SCF is made on the following assumptions:
a) SCF will move to a more central office in Dar es Salaam and occupy 100 m2 at a rate of USD 23 per m2 (including
services).
b) The SCF national team, provided by the Tanzanian partner in the consortium, will comprise: (i) a Director as from 1st of
July 2008; (ii) three new professional staff members (Business Managers) will be employed – two in year one and one in
- 65 -
c)
d)
e)
f)
year two (mid 2009); (iii) an administrative officer and an accountant/monitoring officer; and (iv) an office assistant and
a driver..
The international partner in the consortium will provide:
1. Long term interval Technical Assistance in the form of an International Advisor/Process Consultant for 24 personmonths spread over the BSPS III period.
2. Short-term specialised consultancies (DKK 1.3 million) for baseline studies, M&E system, training needs
assessments and other ad hoc studies
Four project vehicles will be procured for SCF (one for director and three for Business Managers)
The two branch offices will be established year two (2009/10) and year three (2010-11) of BSPS III. The assumption is
that a single office of approximately 25 m2 will be rented at a cost of USD 20 per m2 including services.
A pool for contracting Short Term Technical Advisors has been allocated for e.g. market studies, sub-sector baseline
studies, impact studies, etc.
For further details, please see overleaf.
- 66 -
BASIS FOR CALCULATION OF OUTPUT BUDGET C.2.a - SCF
Unit Price
in DKK'000
2008/09
Budget
No Units DKK'000
2009/10
Budget
No Units DKK'000
2010/11
Budget
No Units DKK'000
2011/12
Budget
No Units DKK'000
2012/13
Budget
No Units DKK'000 TOTAL
Dar es Salaam Head Office and two branch offices (investment costs/civil works)
Civil works for office in Dar es Salaam
90
Civil works for regional branch offices
30
1
90
90
2
Total civil works
90
60
60
60
150
Office Running Costs (Recurrent Costs)
Launch, Marketing & promotion
40
2
80
2
80
1
40
1
40
1
40
280
Head Office rent of 100 m2 (USD 20/m2 per month)
12
12
144
12
144
12
144
12
144
12
144
720
Service charges for 100 m2 (3 USD per month/m2 for cleaning and security)
22
1
22
1
22
1
22
1
22
1
22
108
Utilities (water and electricity)
72
1
72
1
72
1
72
1
72
1
72
360
Running costs for generators and airconditioners
24
1
24
1
24
1
24
1
24
1
24
120
Telephones (land lines and mobile phones)
70
1
70
1
70
1
70
1
70
1
70
350
Broadband internet system
75
1
75
1
75
1
75
1
75
1
75
375
Regional and international air travel
40
1
40
1
40
1
40
1
40
1
40
200
7
1
7
1
7
1
7
1
7
1
7
36
3
-
-
12
36
24
72
24
72
24
72
252
Business meetings costs
Satelite offices (2 to be established in year 2):
-
Satelite office rent of 25 m2 (USD 20/m2 per month including service charges)
Stationary etc (DKK 12,000 per year for head office, DKK 6,000 for branch office)
ls
Total Office Running Costs
Travel and per diems for SCF staff (recurrent costs)
144
1
12
24
24
24
24
108
546
594
590
590
590
2,909
144
720
144
- 67 -
1
144
1
144
1
144
1
NATIONAL SCF STAFF (operational and recurrent costs)
Director
480
1
480
1
480
1
480
1
480
1
480
2,400
3 professional staff
200
2
400
3
600
3
600
3
600
3
600
2,800
2 support staff (administrative officer and financial + M&E)
96
2
192
2
192
2
192
2
192
2
192
960
Driver
26
1
26
1
26
1
26
1
26
1
26
130
Office assistant
15
1
15
1
15
1
15
1
15
1
15
75
1,313
6,365
Total
1,113
1,313
1,313
1,313
SCF Board - fees and expenses (operational and recurrent costs)
184
1
184
1
184
1
184
1
184
1
184
920
International Technical Adviser (long-term with interval inputs)
150
8
1,200
6
900
3
450
4
600
3
450
3,600
Pool of STTA (impact studies etc)
189
1
189
189
945
TNA to determine the most critical skills for SME food exporters
150
1
150
Baseline survey of geographic spread of processing groups
240
1
240
International Short-term Technical Assistance
Total
1
189
1
189
1
189
1
150
240
579
189
48
-
189
189
189
36
-
-
1,335
OFFICE AND ICT EQUIPMENT (investment costs)
Computers (PCs + printer + software)
Server and Software (Anti virus, Accounting, e-room, installation)
12
4
LS
3
120
84
120
AV equipment (3 x LCD projector)
11
1
11
1
11
1
11
-
-
-
-
32
Photocopier (3 x photocopier)
12
1
12
1
11
1
12
-
-
-
-
35
Generator
50
1
50
50
3
7
23
23
Airconditioner
Furniture
LS
75
Total
75
339
22
59
-
-
-
-
419
-
Vehicles @ DKK 180,000 (investment costs)
180
3
540
1
180
-
-
-
-
-
-
720
120
4
160
4
160
4
160
4
160
760
O & M vehicles @ DKK 40,000 per year (recurrent costs)
40
3
- 68 -
Annex C.7
Terms of Reference
For
International Technical Assistance for the SME Competitive Facility (SCF)
- 69 -
Ref.: XXX.Tanz.XXX
xx.xx.2007
TANZANIA
Business Sector Programme Support Phase III
1 July 2008 – 30 June 2013
--------------------------------------------------------------------------------------Terms of Reference
for
International Technical Assistance for the SME Competitive Facility (SCF)
1.
INTRODUCTION
Denmark supports business and private sector development in Tanzania through the Business
Sector Programme Support (BSPS II) which will be extended for another five-year period
starting from 1st of July 2008. The BSPS III is prepared in accordance with the overall
Tanzanian policy framework for the sector and the Joint Assistance Strategy in Tanzania
(JAST) BSPS III is aligned to national systems and harmonised with other donors support to
the business sector.
BSPS III has three components and eight sub-components ref. table below:
Component Level
Sub-component (SC) Level
A.1: BEST – BRU
Component A:
Improved
Business
Environment
A.2: BEST – AC
Component B:
Better
Access
Markets
A.3: Capacity Development of Private Labour Market Institutions
(ATE and TUCTA)
B.1: Enhanced Capacity in International Trade Negotiations
to (MITM)
Component C:
MSME Development
B.2: Trade and Business Education (Faculty of Commerce and
Management – FCM)
C.1: PASS
C.2: Enterprise Development (World Bank)
C.2.a: Improved market access of SMEs (SME Competitiveness
Facility - SCF)
C.2.b: Enterprise Competitiveness Programme (World Bank)
C.3: Enhanced Financial Services – Financial Sector Deepening
Programme
2.
BACKGROUND OF SCF
The SCF was introduced as a pilot intervention in the second phase of the BSPS. It was
managed and implemented by an international consultancy firm. In the third phase, it is
- 70 -
considered preferable that the management is assigned to a consortium of an international
consultancy firm which has entered into an association, joint venture or similar with a
Tanzanian consultancy firm or NGO, which then will supply the national project organisation,
i.e. the SCF. This national unit will be headed by a Tanzanian Director and have
administrative and professional staff, including three Business Managers. The unit will
receive capacity development support from the international partner of the consortium. While
initially the SCF will operate as a “project organisation”, it is the aim to institutionalise it
around 2012. The most likely option is that SCF is integrated into an existing organisation that
provides services to SMEs.
SCF‟s mission is: “SCF is a pioneer in providing Tanzanian food processing and marketing
SMEs throughout the value chain with services that enable them to add value to food
commodities and access international food product markets”.
SCF will need to specialise in supporting groups of food processing and marketing SMEs
applying a refined methodology to transform these SMEs from producing low-key often
commodity based products with limited access to local markets to producing value-added
products to regional, national and especially international markets.
The BSPS III support to the SCF consists of:
1. Support for a matching grant fund to facilitate and financially support interventions to
assist food processing/marketing SMEs to access viable markets applying international
standards.
2. Support for internal capacity building of the SCF organisation in establishing and
strengthening the work methodology and know-how of SCF professional staff.
3. Support for establishing the national unit including two SCF branch offices in
Tanzania. The exact location of the branch offices will depend on a mapping of food
processing and marketing SMEs with growth potential.
4. Support to assess, initiate and finalise institutionalisation of SCF within the BSPS III
period (2008-2013).
SCF will manage a matching grant fund of DKK 25 million which will used to contract
providers of Business Development Services (BDS) to assist food processing and marketing
SMEs on issues related to management, technology, processing, standards and quality, and
marketing. It is anticipated that the majority of the BDS providers will be Tanzanians whom
SCF or the clients of SCF will contract directly using the matching grants. However, it is also
foreseen that in some specialised fields there may not be the necessary capacity within
Tanzania to provide the services of a satisfactory quality. In such cases, regional and
international expertise will be procured. However, regional and international experts will
always work with Tanzanian BDS providers in order to develop the national capacity.
3.
OBJECTIVE AND SCOPE
The key objective of engaging a consultancy consortium led by an international consultancy
company is to provide the necessary expertise for SCF and its interventions to achieve it
- 71 -
objectives and mission and have the maximum impact on its target group. The scope of the
support of the international partner includes:
o Supply SCF with national management and staff members including a Director, three
Business Managers, two support staff (1) an administrative officer and 2) a financial
and M&E clerk), a driver and office assistant.
o Capacity development support and guidance of SCF to ensure satisfactory
implementation and that SCF staff has the capacity to effectively perform their
functions. This will be achieved through interval inputs of an International Adviser
(IA).
o Assist with preparation of baseline surveys, establishment of M&E systems,
institutionalisation etc.
o Upon request from SCF, field short-term regional or international experts to advise
and train SMEs in areas where there is not sufficient expertise within Tanzania.
4.
REPORTING, ROLES, RESPONSIBILITIES AND TASKS
4.1
National Director and Staff
The Director will report to the Advisory Board and be located at the SCF office in Dar es
Salaam, Tanzania. The Director is expected to have some travel activities within Tanzania.
The key roles of the Director are to:
1) Establish a fully fledged project organisation with employment of new professional
and support staff (2008)
2) Ensure that a methodology is developed that allows SCF to be an effective and
efficient facilitator for food processing and marketing SMEs (2008)
3) Expand geographic outreach of SCF by establishing two branch offices in Tanzania
(one in 2009, the other in 2010)
4) Drive the implementation of SCF‟s institutionalisation (2012-2013) in order to ensure
the continuation of SCF services with grant funding from different sources.
The three Business Managers will report to the Director of SCF and initially be located at the
SCF office in Dar es Salaam, Tanzania. However after the second year two of the three
Business Managers will be re-located to two branch offices outside Dar es Salaam. The key
roles of the Business Managers are to:
1) Define a business portfolio selecting areas and products within the food processing
and marketing sector that have a promising market potential and a capacity for a
longer term change process
2) Facilitate business plans including recommendations for interventions required to get
access to new markets
- 72 -
3) Provide the necessary facilitation, mentoring, know-how and information to food
processing and marketing SMEs for these to produce value-added products that can be
supplied in sufficient volumes and uniform quality as required by specific market
4) Contract and coordinate BDS providers to deliver different kinds of services to the
food and marketing SMEs to improve their access to international markets (e.g.
training on processing techniques, technology, packaging, certification, product
quality and product marketing, general management, etc.)
4.2
The International Adviser (IA)
The IA should have a relevant education and experience in management and preferably food
processing. The IA will report to and collaborate with the Director of SCF and be located at
the SCF office in Dar es Salaam, Tanzania. The IA will be expected to have some travel
activities within Tanzania. The key roles of the IA are to:
1) Support SCF Management and Board in pursuing the Vision, Mission, Objectives of
SCF as well as achieving the outputs by means of defined deliverables (ref. SubComponent Description and Log Frame)
2) Act as a change agent throughout SCF‟s organisational development, training, and
mentoring professional staff members. In particular the IA is to assist with the
development of the new working methods and the capacity building of Business
Managers.
3) Ensure that the necessary systems and functions are established, implemented and
maintained i.e. financial management, accounting and reporting (annual and bi-annual)
systems as well as a Monitoring and Evaluation (M&E) system.
4) Act as a general mentor in terms of advice, oversight, and quality control of the SCF
mandate.
The specific tasks of the IA include, but are not necessarily limited to the following:

Develop and present SCF working methodology to SCF Management and Board.

Provide suggestions for SCF promotional activities towards potential beneficiaries as
well as partners and stakeholders.

Propose, as required, adjustments to Manuals, Guidelines, Eligibility and Selection
Criteria for the matching grant fund according to new SCF strategy, and to the
definition of the target group.

Assist the SCF management with preparation of a human resource development plan.

Provide training on project management and work methodology for Business
Managers during first six months of employment including: assessment of food
processing and marketing SMEs‟ growth potential; screening of applications against
the matching grant fund‟s eligibility criteria; submission of application with
- 73 -
recommendations; and notifying of applicants following board decisions.
Subsequently participate in field trips and act as mentor on project portfolio
management.
4.3

Ensure establishment of suitable reporting procedures for SCF monitoring &
evaluation (progress reports, reviews, evaluations, deviation reporting, and impact
assessments) and BSPS III support in terms of M&E indicators. Registration and
reporting procedures for data collection related to SCF‟s impact on poverty reduction
as well as cross-cutting issues (CCI) and priority themes such as gender, HIV/Aids,
environment, and good governance should be developed as an integrated part of the
reporting system and procedures. Regular status reports on the above will be
incorporated into the SCF Management and Board reporting system and disseminated
to stakeholders including the Royal Danish Embassy (RDE).

Give inputs into work plans, budgets and reports.

Bi-annual presentation to SCF Management and SCF Board on the possibilities and
scope for co-operation with and resource mobilisation from other relevant planned and
ongoing private sector development support initiatives. Support generation and
coordination of relevant regional contacts and activities. Contribute to organise
coordination workshops and sessions in which synergy opportunities can be explored
and lessons learnt be shared.

Assist SCF Director in identifying, assessing and presenting suitable co-operation
partners and BDS providers to be included in SCF‟s network supporting its target
group. These include financial institutions, industry experts, training specialists,
educational institutions, government agencies, NGOs and others.

Coordinate mapping of food processing and marketing SMEs in Tanzania and
contribute to formulation of recommendations for establishment of two SCF branch
offices outside Dar es Salaam.

Contribute to preparation and presentation of bi-annual assessments of and
recommendations on matching grant portfolio management to SCF Board and SCF
Management.

Assist with annual review of the Log Frame to fit reality on the ground.

Provide within the SCF reporting system an annual status and assessment to SCF
Board on SCF‟s financial and institutional sustainability based on the assumption that
BSPS III support will come to an end by mid 2013.

Be a resource person in institutionalising SCF and guide the transition or integration
process as SCF becomes either an independent self-sustainable organisation or
integrates into an existing organisation.
Short-term Specialists on Request
The selected consortium is to provide two types of short-term inputs upon request of the SCF
Director:
- 74 -
1. Within a total budget frame of DKK 1.3 million (~USD217.000) short-term inputs are
envisaged for baseline studies, the monitoring system, mapping of food processing and
marketing SMEs, institutionalisation of SCF etc. For each input the SCF management
will define the Terms of Reference.
2. In cases where the required capacity for delivering a specific BDS, the SCF
management will define the exact tasks of the short-term specialists as well as their
qualifications and background. The nature of expertise will vary from case to case. It
could be a specialised food technology expert, e.g. a cheese processing specialist, or a
person with in-depth knowledge about an international market. The total number of
person-months that may be requested can not be foreseen at this stage but it is
anticipated that roughly 10% to 15% of the matching grant fund (DKK 25 million)
will be used for contracting regional and international expertise.
5.
INPUTS
5.1
Input from National Staff
The input of the national staff is as follows:
National staff member
Director
Business Manager Dar es Salaam
Business Manager
Branch office
Business Manager
Branch office
Support
staff:
Administrative
Officer
Support staff: Financial and M&E
clerk
Driver
Office assistant
Total person-years, 2008-2013
5.2
Manyears
5
5
5
Time frame
4
2009-2013
5
2008-2013
5
2008-2013
5
5
39
2008-2013
2008-2013
2008-2013
2008-2013
2008-2013
Input from International Advisor (IA)
The exact input of the IA will be determined in the annual work plans. However, tentatively
the input of the IA is envisaged to take place and focus on the tasks, as illustrated below:
Year
2008/09
Major input from International Advisor

SCF working methodology
- 75 -
Av.
Personmonths
8
Year
Major input from International Advisor
Av.
Personmonths



2009/10
2010/11
2011/12
2012/13
20082013
6.
Grant management
Annual work plan and budgets
Recruitment and training of two new professional staff
members (Business Managers)
 M& E systems established
 Co-operation with other SME/Private sector initiatives
 Capacity building of Business Managers in the field
 Recruitment and training of one new professional staff
member (Business Manager)
 Mapping of food processing and marketing SMEs and plan
for establishment of two SCF branch offices outside Dar es
Salaam
 Capacity building of Business Managers in the field
 Be a resource person in institutionalising SCF
 Capacity building of Business Managers in the field
 Assist with the institutionalisation
Total number of person-months over five years
6
3
4
3
24
BACKGROUND AND PROFILE
The consultancy firm may be an individual firm or preferably a consortium of firms and
expertise centres with technology and know-how in food processing and marketing.
The Director is expected to have experience within:

General management

Business development and export marketing

Programme management and coordination

Organisational development and change management

Portfolio management and risk assessment
The Business Managers and the IA are expected to have experience within:

Project management including monitoring and evaluation

Capacity development including human resource development

Food processing and marketing
- 76 -
In addition the IA needs to have expertise and experience in international best practices
within:
o SME support
o Business development
o Management of contractors/BDS providers
o International marketing and exports of food products
In order to demonstrate that the firm/consortium has capacity or access to specialised
expertise within food processing and marketing, the firm/consortium shall present a pool of
experts and specialist who may background and experience that is relevant to the programme.
For the short-term expertise which will be recruited upon request and according specific
Terms of Reference, the Contractor may occasionally be requested to present more than two
candidates.
7.
TIMEFRAME
The contract will commence on 1 July 2008 and expire on 30 June 2013. There will be biannual performance assessments. If needed, the Contractor will be responsible for replacing
the IA within 60 days.
The commencement of SCF II under BSPS III is July 1st 2008 and the international tender
process is planned to start six months prior to this date.
- 77 -
Annex C.8/
Assessment of Strategic Options and Direction for SCF
SCF STRATEGY – BSPS III
1
BACKGROUND
1.1
Private sector development in Tanzania
The private sector is the engine of economic growth and it facilitates the expansion of the
domestic resource base and thus helps to reduce aid dependence. SMEs in Tanzania play a
substantial role in jobs and incomes creation, in economic growth and poverty alleviation.
According to the National Strategy for Growth and Reduction of Poverty (NSGRP) SMEs
should be supported and encouraged to be innovative, pay attention to product development,
quality and appropriate marketing strategies that make them competitive and capable of
responding to global market conditions. The enabling factors for private sector development
include:
 Addressing entrepreneurship development needs for rural private producers (on farm
and non-farm), agro-based industries, urban-based SMEs, formal and informal
enterprises
 Ensuring access to resources, technological and managerial skills including
marketing, market information and contacts
 Facilitating linking-up of domestic producers with local and foreign R&D institutions
 Creating fair competition to ensure level playing field; a smooth and stable
administrative and regulatory framework, guaranteeing personal and property rights
and security and enforcement of contracts
 Provision of basic infrastructure such as utilities, water, power, transport and ICTs at
competitive prices in rural and urban areas
1.2
Business Sector Programme Support (BSPS) II & III
During BSPS II SME Competitiveness Facility (SCF) has been providing business services in
relation to quality assurance and marketing. Business service support in relation to quality
assurance and marketing is strongly demanded by SMEs, and the support to SCF will be
increased during BSPS III. It is envisaged that SCF will be institutionalised during BSPS III
to ensure long-term sustainability.
1.3
Revisiting SCF’s strategic direction
During the Identification Mission it was recommended that a study should be made to define
more clearly the strategic direction and mandate of SCF as well as its organisational platform.
The facilitation process took place in May 2007 and resulted in a new strategic direction for
SCF to pursue during BSPS III.
Relating to the new strategy it was furthermore discussed if SCF should have a more
appropriate name reflecting the mandate and activity portfolio. However SCF management
78
decided against it as SCF has already managed to build its name and a good image through its
active communication policy.
2
2.1
SCF STRATEGIC DIRECTION
SCF strategic alternatives
Deciding on SCF‟s future strategic direction was based on three considerations: 1) How to
achieve the immediate objective of the sub-component (“improved international
competitiveness of food processing/marketing SMEs to access and exploit new markets”); 2)
The outcome of the impact study and recommendations to obtain improved impact; and 3)
How to position SCF as a SME facilitator amongst all the SME support programmes and
organisations.
Taking all of the three considerations into account SCF has several strategy alternatives of
which three have been discussed in depth by SCF management:
1) Supporting specific sectors of SMEs directly to access new markets and realise
growth and export sales
2) Becoming an information knowledge centre for SMEs to access information on
export markets
3) Building the capacity of BDS providers to support SMEs
SCF in BSPS III
Three strategy alternatives
Strategic considerations
Support specific sectors of SMEs
directly to access new markets
and realise growth and export
sales (niche strategy)
Three strategic
alternatives
Become a information centre for all
SMEs to access information on
export markets
• Is this target group too narrow? What
is the scope of this part of the SME
market?
• Target group compared to other
SME support initiatives?
• Overlapping with other SME support
initiatives also having broad target
groups?
• Will the support and interventions be
effective/focused?
Build the capacity of BDS
providers to support SMEs
• There is a need to develop/upgrade
the segment BDS providers!
• Will SCF be impacting SMEs and
can real impact for SMEs be
measured?
Recommended strategy based on analysis
79
SCF management has decided to pursue the first strategic alternative for the following
reasons:
1) SCF‟s support and interventions can be much more focused if SCF chooses a specific
niche within the total SME sector as its target group and specialises in addressing the
prevailing needs and requirements of a specific target group:
a. Even if SCF is not meant to be industry or sector experts it can build up
know-how on both the supply and demand side of its target group e.g.
identifying business opportunities in export markets and knowing critical
success factors for SMEs to take advantage of these opportunities. In stead of
being industry experts SCF will be process and methodology to address a
wide range of needs in this niche of the SME sector
b. SCF‟s support, services and interventions can be designed and customised to
meet the specific needs of its target group
c. Compared to a situation where SCF supports all SME sectors its learning
curve will be steeper/faster as lessons learnt from one cluster of SMEs can be
directly transferred to the next due to similarities between the beneficiaries. It
will be easier for SCF to develop and apply best practices and replicate
successes once the methodology applied towards the target group has proven
to be effective
2) SCF will position itself and gain a competitive advantage compared to most other
SME support initiatives offering their support to a wide range of SMEs from many
different sectors.
3) The outcome and impact of SCF services and interventions can be expected to be
easier to measure as the support will consist of several interventions and be based on
long term relationships with the same SMEs
Having decided to pursue strategic alternative number one however does not rule out or
exclude incorporating elements from the two other alternatives i.e. becoming an information
centre or building capacity of BDS providers. Instead it will become means to an end. In order
to achieve the immediate objective of the sub-component SCF will need to gain in-house
knowledge on product quality, processing, technology, marketing, and export sales to serve its
target group efficiently. Through the matching grant SCF will contract suitable BDS
providers and in this process contribute to the capacity building of this sector as well.
Especially in cases when either regional or international expertise will be contracted SCF will
have an opportunity to make a linkage to a local BDS provider and hence transfer know-how
to local Tanzanian BDS providers.
2.2
SCF’s strategic approaches
During BSPS II SCF dealt with SMEs approaching the organisation for support and was in
this way demand driven responding to enquiries and applications from SMEs (pull effect).
SCF‟s new strategic direction however entails that it will apply a combined supply-demand
approach (push pull strategy):
Pull approach: On the one hand SCF will actively identify sub-sectors within its target group
having potential for export and thus ensure that a verified demand for the products exists. SCF
will link SMEs to importers, international customers or large domestic enterprises being
willing to work with Tanzanian SME suppliers (pull effect from the market).
80
Push approach: On the other hand SCF will pro-actively seek out SMEs in selected product
categories that it will support to get better access to export markets. SCF will ensure that these
SMEs have the characteristics and growth potential necessary to supply the potential markets
with support from SCF. In this way SCF will apply a push effect all the way through the value
chain.
2.3
Target group/beneficiaries
Considering the size of the SME sector SCF needs to be focused on a specific niche in the
SME sector to have any visible and measurable impact.
A number of sub-sectors have been identified as having export potential. The SME food
processing sector has been identified as having substantial potential both on the supply and
demand side (SME Export Market Prospects Desk Study: 2006). As food processing is still a
broad category of products it is important for SCF to identify, prioritise and have focus on a
number of sub-sectors e.g. fruit and vegetables, honey, organic herbs, fish etc.
Total SME market
2.4
Target niche
market = food
processing &
marketing SMEs
SCF services
and
interventions
Implications of SCF’s new strategic direction
SCF will pro-actively target food processing/marketing SMEs with export potential and
guide, mentor and support these throughout the whole process of enabling them to export
their food products. The mechanisms will be the matching grant fund financing the various
interventions as well as facilitation and coaching/mentoring by SCF professional staff.
The differences from SCF‟s approach during BSPS II are the following:
a. SCF will no longer be offering facilitation and support to SMEs in all sectors.
It will now focus exclusively on targeting food processing/marketing SMEs.
b. SCF will no longer be targeting BDS providers to build their capacity
specifically (i.e. as primary beneficiaries). However SCF will make use of
(and thus finance) numerous international, regional or local BDS providers to
deliver services to food processing/marketing SMEs. In the process of
selecting and utilising BDS providers according to the identified needs, some
BDS providers will over time develop acquired skills and expertise that can
be supplied to other SMEs subsequently.
c. SCF will no longer target individual SMEs but work with clusters or
representatives of food processing/marketing SMEs. Whether these clusters
are formalised or not it will be a more effective mechanism of delivering the
services and interventions to the individual SMEs. Ultimately SCF could
81
even be a catalyst in formalising food processing/marketing SME clusters.
One of the advantages would be that clusters of SMEs would ensure a critical
mass for the SMEs‟ products to reach export markets.
d. SCF will be working pro-actively with food processing/marketing SMEs.
This implies that SCF will play a more outward-going role in selecting and
deciding what clusters of food processing/marketing SMEs should benefit
from the matching grant. It is expected that 80% of SCFs work will be proactive (i.e. making contact to food processing/marketing SMEs and clusters
of SMEs) and 20% re-active (responding to enquiries and applications from
SMEs).
e. The interventions will no longer be one-off support to many beneficiaries. In
stead long term relationships (several years) will be developed with a limited
number of clusters of food processing/marketing SMEs.
f.
2.5
Administratively, the matching grants will no longer be numerous smaller
disbursements but rather a smaller number of bigger matching grants
provided
as
“disposable
pool/framework”
grant
for
food
processing/marketing SMEs. The funds will remain with and be administered
and managed by SCF throughout the duration of the project.
SME support initiatives
There is inadequate government and institutional support to foster SME‟s access to export
markets. The government in general and other institutions (both governmental and nongovernmental) do not provide adequate support for SMEs to be able to access the export
market.
Tanzania has 100.000 SMEs registered. The need for SME support is therefore vast. There is
no real competition between various SME support initiatives. Most organisations, projects or
initiatives are too small (staff wise) and do not have the necessary mechanisms (nature and
scope of interventions) or finance to support SMEs successfully. In addition most SME
support organisations operate only out of Dar es Salaam and with no geographic outreach in
the rest of Tanzania (ref. interview with SIDO).
Today there are numerous on-going SME support initiatives and organisations. However there
are many problems implementing and making these initiatives functionally and operationally
effective (ref. interview with TechnoServe).
The critical success factors for SME development is not only to focus on finance and
marketing but look at the whole value chain to make an impact on SME businesses. Very few
SME support initiatives are really geared to make a real change. Many are just focused on one
thing and do not look at all needs and requirements of SMEs throughout the whole value
chain (ref. interview with CSDI).
Some of the key SME support organisations and projects are described briefly below.
2.5.1 Small Industries Development Organisation (SIDO)
SIDO is the public government agency established to plan, coordinate, promote the
development and offer every form of services to the SME sector. Its objective is to contribute
to value-addition of the productive SME sector. It would like to consider itself as the primary
school for SMEs offering a wide range of services.
82
SIDO‟s vision is to be “A leading business support organisation in Tanzania, providing
efficiently and effectively in a business-like manner quality services that unlock potentials for
growth and competitiveness of SMEs in rural as well as in urban areas”. Its mission statement
reads: “The central purpose and role of SIDO is to create and sustain indigenous
entrepreneurial base through the promotion and support to the development of SMEs by
providing them with Business Development Services and specific Financial Services on
demand. Priority is given to productive economic sectors that contribute to wealth creation”.
The strategies to achieve its vision and mission is to contribute to improving the enabling
environment for SMEs and assist SMEs with growth potential becoming more competitive in
terms of producing bigger volumes of a better quality and exporting these products. SIDO‟s
target market is very wide ranging over many and diversified sectors: handicraft, light
engineering, agro-food processing, metal works.
The geographic outreach of SIDO is extensive. It has a regional office in each of the 21
regions, employing a total of 400 staff hence being the biggest SME support organisation by
far. SIDO‟s annual budget is in the range of USD 4 million of which 50% is financed by
government funds. The other half of its costs is financed by SIDO itself by means of various
revenues.
SIDO‟s main strength is its regional infrastructure and good services. Its main weakness is its
leadership and management regarding micro-finance.
Benchmarking – SCF vs SIDO
SIDO
LO
SCF
ME
HI
LO
ME
HI
Facts from interview with SIDO
May 2007
Target market (narrow-wide)
SIDO’s target market is very wide with focus on 5 different
subsectors
Range of services (narrow-wide)
SIDO can facilitate a wide range of services
Degree of geographic outreach
(limited – extensive)
SIDO has regional offices in 21 places; one in each region
Degree of financial support (smallbig)
Limited – only working with linkages
Degree of donor funding (smallbig)
SIDO is funded by general budget support from Government
of Tanzania (GoT)
Conclusions on SIDO:
Strengths:
1) Big organisation with substantial geographic outreach
2) Supporting many sectors with a big variety of services
Weakness: Microfinance facilities
2.5.2 Tanzania Gatsby Trust (TGT)
TGT is an independent NGO. It perceives itself as a charitable organisation committed to
alleviate poverty in Tanzania through credit provision, marketing development, training and
technology transfer. TGT‟s vision is to work in partnership with other striving towards an
enterprising Tanzania in which prosperity is widely distributed.
Its mission statement is for TGT to “harness, channel and unleash human energy to build
Social, Financial and Physical Capital through Entrepreneurship Development”.
TGT‟s target market is very wide and is often targeted and focused on supporting women
entrepreneur projects. The strategy is to provide services in the form of credit, training,
marketing and technology to SMEs in Tanzania.
83
Loans: Loan activities cover a wide range of activities: loans to women groups; loans to
individual entrepreneurs and food processors; credit lines for creating entrepreneur
associations; FINCA and micro-finance institutions; Presidential Trust Fund; SEDA credit
lines; and rural financial commercial banks.
BDS training: BDS providers are trained in various disciplines enabling them in turn to train
SMEs. The biggest challenges for SMEs besides lack of adequate infrastructure are 1) limited
capacity of individual SMEs; 2) limited resources; and 3) limited marketing knowledge on
how to expose products to the market (ref. interview with TGT).
Even though TGT is only established with offices in Dar es Salaam and Zanzibar respectively
it has some geographic outreach due to co-operation with local partners and stakeholders
throughout Tanzania.
TGT employs a total of six staff members of which four are professional staff. TGT is funded
75% by funds from the Gatsby Trust Charitable Foundation of the United Kingdom and by
fundraising from and co-financing with other sources (e.g. donors). In addition TGT applies
user payment where SMEs receiving support for several services/interventions will be
required to pay 50-75% of the costs (of e.g. training, participation in trade fairs etc).
Benchmarking – SCF vs Tanzania Gatsby Trust
Gatsby Trust
LO
ME
SCF
HI
LO
ME
HI
Facts from interview with Gatsby Trust
May 2007
Target market (narrow-wide)
The target market is wide – and women are considered
important
Range of services (narrow-wide)
The range of services is low
Degree of geographic outreach
(limited – extensive)
Medium to high through various initiatives in outlying areas
Degree of financial support (smallbig)
Gatsby Trust does not offer credit lines or grants
Degree of donor funding (smallbig)
Gatsby Trust UK suppors the Gatsby Trust office running
costs. Projects are financed through fundraising
Conclusions on Tanzania Gatsby Trust:
Strengths:
1) Finance from Gatsby Trust in the UK
2) Strong, dynamic and innovative leadership and management
3) Various micro-finance facilities and linkages
Weakness: Limited internal resources compared to scopes and outreach of projects
84
2.5.3 TechnoServe
TechnoServe is a US based NGO with head office in Washington. Its objective and vision is
to empower the rural poor and entrepreneurs thereby raising income levels. TechnoServe‟s
mission statement is to “create income, employment and opportunity by improving industry
competitiveness for rural poor”.
The strategy to achieve its vision and mission is to use a value-chain approach to add value to
products by simple interventions. Through value chain analysis opportunities are identified
and mechanisms how to create “quick wins” implemented. TechnoServe targets the following
sectors: agriculture (tea, coffee, cashew nuts etc), alternative energy, entrepreneurship
development, tourism, and wood products. The services it offers to SMEs are related to
developing businesses, developing industries and improving the enabling environment. The
support is provided in the areas 1) production (best practice agriculture and registering
producers into groups); 2) processing; and 3) marketing (negotiating price with
customers/importers).
The geographic outreach of TechnoServe in Tanzania is limited to Arusha (head office) where
fifteen people are employed and Dar es Salaam with ten staff members. In addition it operates
in a number of other countries in Africa, Latin America and Eastern Europe.
TechnoServe is financed by various donors e.g. USAid, IFAD, WHO and others depending
on on-going projects.
Some examples of TechnoServe‟s projects in Tanzania are:
 Facilitation of coffee export from KiliCafe to the USA (Starbucks). Thirty containers
are exported every year to the USA and farmers get 20-30% more for their coffee
compared to the coffee auction. Marketing staff at TechnoServe made contact with
potential US buyers of coffee (Starbucks, Peet‟s, Gepa and Unicafe) and negotiated
the prices on behalf of Kilicafe
 Facilitation of value-adding of cashew processing
 Registration of coffee farmers into groups and facilitation of financial linkages.
Today Tanzania has 100 coffee grower groups
Benchmarking – SCF vs TechnoServe
TechnoServe
LO
ME
Target market (narrow-wide)
Range of services (narrow-wide)
Degree of geographic outreach
(limited – extensive)
Degree of financial support (smallbig)
Degree of donor funding (smallbig)
SCF
HI
LO
ME
HI
Facts from interview with TechnoServe
May 2007
TechnoServe target the rural poors in the following sectors:
agriculture, alternative energy, entrepreneurship
development, tourism, and wood products
TechoServe has applied a value chain approach and will add
value to increase prices for rural producers
TechnoServe has a head office in Arusha (15 staff), an office
in Dar es Salaam (10 staff) and two other offices in Tanzania.
TechnoServe only facilitate financial linkages for SMEs.
TechnoServe are continuously financed by various donors
e.g. USAID, IFAD and WHO on project basis
Conclusions on TechnoServe:
Strengths:
1) Strong organisation
2) Value chain analysis approach
3) Direct market contact facilitations
Weakness: No financial credit facilities
85
2.5.4 Centre for Sustainable Development Initiatives (CSDI)
CSDI is an independent private Tanzanian company and the implementing agency for United
States African Development Foundation (USADF). It specialises in providing services
targeting the development of grass root groups. Its vision is to become a centre of excellence
in the area of community development through entrepreneurship and in particular in the
harnessing of trade and investment opportunities to directly create jobs and enhance incomes
for the poor.
CSDI‟s mission statement is to “become an effective catalyst for poverty alleviation and job
creation by developing the possibilities and capacities for individuals, enterprises and
communities to add value to the resources that they have access to and to effectively engage
in mutually beneficial exchange relations with others”.
CSDI‟s target market is small and micro enterprise owners and managers, business
associations, groups and communities. Other target groups include medium and large
enterprises involved in selling or buying goods from small and rural producers, NGOs, and
government departments. In terms of sectors 65% of CSDI‟s projects are within agro-business
the remaining 35% being within textiles and handmade goods (e.g. baskets for Woolworth).
At present (2007) CSDI manages 20 projects subcontracting associates (BDS providers) to
deliver various services such as sector analysis, value chain analysis, business plans, and
training plans. It has three key facilities: 1) Enterprise Expansion Plan (USD 250.000); 2)
Organisation and Administrative Grant (USD 100.000); and 3) Social Enterprise (USD
250.000).
The geographic outreach of CSDI is limited to the office in Dar es Salaam where six staff
members are employed. Furthermore CSDI has one field officer based in Iringa.
CSDI is contracted and financed by one major donor i.e. USADF. In addition associates (BDS
providers) contracted by CSDI pay 20% of the fee back to CSDI which is its only direct
income.
Some examples of CSDI‟s projects are:
 Fresh fruits and vegetables from Arusha: filling the gap in EU (Northern hemisphere
winter)
 Baby corn
 Sugar cane
 Vanilla in Madagascar
 Coffee (Kilicafe)
86
Benchmarking – SCF vs CSDI
CSDI
LO
SCF
ME
HI
LO
ME
HI
Facts from interview with CSDI
May 2007
Target market (narrow-wide)
All individual SMEs and associations can be supported:
agribusiness (65%), textiles, handmade goods, microfinance
Range of services (narrow-wide)
Value chain related services: business plan, financial loans
and support during five year implementation
Degree of geographic outreach
(limited – extensive)
CSDI has office in Dar es Salaam with 6 staff members and
1 field staff member in Iringa
Degree of financial support (smallbig)
Degree of donor funding (smallbig)
CSDI have facilities to pay USD 250,000, USD, 100,000 and
USD 250,000. 1) As flexible no interest loans 2) Grants/gifts
100% for both. CSDI is 100% financed by USADF
Conclusions on CSDI:
Strengths:
1) Strong back up organisation and finance (USADF)
2) Attractive financial support interventions
Weakness: Not sufficient geographic outreach
2.5.5 Tanzania Investment Centre (TIC)
TIC is the primary agency of GoT to coordinate, encourage, promote and facilitate investment
in Tanzania and to advice the government on investment related matters. TIC is the focal
point for investors. It is the first point of call for potential investors and serves as a one stop
facilitative centre for all investors.
TIC‟s vision is to “become a world class investment promotion agency portraying Tanzania
as Africa‟s premier investment destination”. TIC‟s mission statement is to “promote and
facilitate investment for national economic growth by enhancing an environment conducive
for business and entrepreneurship growth.
The strategy to achieve its vision and mission is to offer investment incentives and
guarantees. TIC has a number of functions e.g. assist in establishment of enterprises; secure
investment sites; register technology agreements for all investments over USD 300.000 for
foreign and USD 100.000 for local investments; and provide and disseminate up to date
information on existing investment opportunities, benefits or incentives to investors.
Its target market and priority sectors for investment are: mining manufacturing, petroleum &
gas, tourism, infrastructure development, aviation, agriculture, construction and financial
services.
The geographic outreach of TIC in Tanzania is through TIC zonal offices in the Kilimanjaro,
Mwanza and Mbeya regions. The zonal offices are responsible for assisting investors to
obtain all relevant permits, approvals and licenses that they require in order to set up their
businesses.
TIC is financed by GoT.
87
2.5.6 Board of External Trade (BET)
The BET is establishing global business partnership through organising and managing
international and specialised trade fairs, solo exhibitions, product and market research
development missions, buyer-seller meetings and contact marketing programmes. BET offers
regular trade information dissemination and offers consultancy services to producers,
exporters and importers to enable them to effectively participate in the global market place.
BET has the following objectives:
1) To help industries find markets for their products throughout the world
2) To provide overseas businessmen wishing to trade with Tanzania with the
information they need. The information provided covers Tanzania‟s economy,
business and investment opportunities, in addition to Tanzania‟s import and export
trends
3) To coordinate participation in overseas trade fairs and trade missions as part of export
promotion activities
4) To undertake all aspects of research and development of external trade in close cooperation with other export trade supporting ministries
5) Be a national focal point for external trade, formulates, co-ordinates and conducts
training programme in all areas of international trade in the form of seminars,
workshops, trade missions abroad, holding specialised exhibitions, etc. This covers
export market research, export promotion, product adaptation, methodology,
packaging technology, pricing policies etc.
BET‟s main strength is its specialisation in international trade activities. Its main weakness is
the fact that it only supports SMEs that are ready to export and thus misses out on assisting
many SMEs with good export potential but without the capacity to pursue export markets. It
does not assist SMEs in the process of becoming ready to access foreign markets.
3
SCF STRATEGY
The overall goal and objective of SCF is to increase the sales and export of products of the
members of selected Tanzanian food processing/marketing SMEs.
3.1
Vision
The vision of SCF is that:
“SCF is a role model for interventions to put food products from Tanzanian SME processors
on the world map.”
3.2
Mission
The mission statement of SCF is defined as follows:
“SCF provides Tanzanian food processing/marketing SMEs throughout the value chain with
services that enable them to add value to food commodities and access international food
product markets”.
88
3.3
Definitions
To understand the meaning and implications of SCF‟s vision and mission a few definitions
are offered below:
Role model for interventions: Being a role model for interventions refers to SCF‟s ambition to
develop a way of working with SMEs that will become “best practice” by other SME support
organisations and donor initiatives. SCF will identify and refine a methodology that will result
in visible results and positive impact for its target group. The perception of SCF management
is that SCF is more than a straight forward BDS provider. It is positioned above delivering
single spot interventions and one off services to SMEs but at the same time it is working with
SMEs “on the ground”. SCF will be an engine or catalyst for Tanzanian food
processing/marketing SMEs transforming them from selling often commodity based products
with limited access to local markets to producing value-added products supplied to regional,
national and especially international markets. SCF‟s success rate will be measured on its
ability to support food processing/marketing SMEs to supply bigger quantities of consistently
better quality/value added food products to meet international market requirements.
Food processing: Food processing should be understood in broad terms.
First, food processing includes agricultural products for edible purposes and does not have to
be highly sophisticated food products. Neither does it have to imply food as understood by
Tanzanian traditions i.e. starch meals. To illustrate, an example could be organic herbs and
spices – bundled and packaged - to be supplied directly to domestic and international hotels
and restaurants and upmarket retail stores.
Second, food processing could involve different parties in the total value chain ranging from
groups of out growers or contract farmers to packaging enterprises, processing sites and plants
and marketing groups of food products. Examples of beneficiaries of SCF‟s services and
matching grant scheme could be:
a) An intermediary trading/marketing company buying food produce from a group of
farmers (e.g. contract farmers) with the purpose of segregating it, cleaning it, and
packaging it to the standards of specific customer requirements
b) A packaging company contracting suppliers of various food products in an area to be
packaged for different markets (consumer or industrial segments).
One of the key criteria of eligibility for the matching grant is however that the growth of the
food processing/marketing sales and export will be shared equitable amongst the parties
involved and particularly the food processing SMEs. Hence business plans should be based on
the philosophy and principles of “fair trade”.
Food processing/marketing SMEs: The target group of SCF is food processing/marketing
SMEs. However to make delivery of interventions, services and facilitation effective SCF will
work with clusters of SMEs. These clusters do not have to be formalised at the point in time
of identifying a product category with growth and export potential. However with the view to
manage the disbursement of funds from the matching grant it will be practical to co-operate as
well as coordinate the interventions with one or two appointed representative(s) for the cluster
of SMEs.
Services:
SCF will support food processing/marketing SMEs by means of various interventions e.g.
capacity building required to e.g. increase production volume, improve product quality, and
approaching new markets. The matching grants can fund activities and capacity building (but
not capital investments) for the SMEs that will contribute to the professionalizing of
management (e.g. training in business management, accounting etc.), production (e.g.
application of new or different technology), food processing (e.g. training in handling hygiene
and food safety), products (upgrade of quality and appearance), marketing (packaging and
89
marketing tools), and export sales (negotiations with potential buyers) to access export
markets with value-added products (ref. 3.4 SCF interventions).
Access international food product markets: Food processing/marketing SMEs should position
themselves as suppliers on international markets. A key milestone for SMEs in accessing
international export markets is to become qualified and appointed as supplier to domestic
customers with international standards such as major retail chains (Shoprite etc) or hotels
(Kempinski)
90
3.4
SCF interventions
Food processing/marketing SMEs – examples of SCF input needed in the process of SMEs
becoming suppliers of value added food products to export markets
Need:
Formation of
formal legal
entity
Need:
Internal
capacity
building
Need:
Upgrade
technology
at various
levels
Need:
Upgrade
food safety
etc.
standards
Need:
Upgrade
product
quality
Need:
Upgrade
product
marketing
Need:
Negotiate
with
potential
importers
Input: 4 x
Input: 4 x
Input: 2 x
Input: 2 x
Input: 2 x
Input: 2 x
Input: 5 x
Consultations
with chartered
accountant
4 sessions x
DKK 10.000
= DKK 40.000*
Training in
business mgt:
business plan,
management,
accounting,
marketing
4 sessions
/annum x 3
years x DKK
10.000 =
DKK 120.000*
Face-to-face
with technology
expert* (DKK
60.000), gap
analysis (DKK
50.000),
implementation
(DKK 50.000)
= DKK
160.000**
Face-to-face
with food
product expert*
(DKK 60.000),
gap analysis
(DKK 50.000),
implementation
(DKK 25.000)
= DKK
160.000**
Face-to-face
with industry
expert* (DKK
60.000), gap
analysis (DKK
50.000),
implementation
(DKK 50.000)
= DKK
160.000**
Face-to-face
with export
marketing
expert* (DKK
60.000), gap
analysis (DKK
50.000),
implementation
(DKK 50.000)
= DKK
160.000**
Contact or
negotiation
with importers
and buyers***
Transport,
accommodation,
trade fairs etc.
DKK100.000
Food processing
& marketing
SMEs supplying
only limited
products to local
or regional
market
Food processing &
marketing SMEs
now exporting and
fetching premium
prices on export
markets by
differentiating
from commodity
products in
product category
*local or int.
BDS provider
** average
cost of
intervention
*** SCF
having
identified
professional
sales contact
Average total of needed input for each cluster of food processing/marketing SMEs over five years = DKK 900.000
A matching grant fund of DKK 25 million equals ~25 SME cluster projects over five years
91
3.5
SCF positioning in the SME support market
Based on interviews with five SME support organisations in Tanzania (SIDO, TGT, TechnoServe,
CDSI, and TIC) most SME support initiatives have the following characteristics. They:
•
Target SMEs in many or several sectors
•
Target primarily individual SMEs (with the exception of TechnoServe)
•
Offer support for many different interventions
•
Work with one-off interventions with no or limited tracking of SMEs over time
•
Have limited outreach geographic outreach (with the exception of SIDO with 21 regional
offices)
Given the size of SCF‟s organisation it is important to position SCF amongst other SME support
initiatives and organisations. It will position and differentiate itself in a number of ways:
Differentiation approach:
1) SCF will be specialised in supporting a niche of the SME sector namely the food
processing/marketing SMEs
2) To be delivering its services effectively SCF will be targeting clusters of SMEs and not
individual SMEs or BDS providers
3) SCF will apply a customised process oriented methodology to transform food
processing/marketing SMEs from producing low-key often commodity based products with
limited access to local markets to producing value-added products to regional, national and
especially international markets
4) SCF will work continuously with the same food processing/marketing SMEs hence building a
long term working relationship and partnership
5) SCF will have geographic representation and presence (branch offices) in Tanzania with the
purpose of reaching its target group
3.6
SCF’s mandate and roles
SCF‟s mandate is to work with food processing/marketing SMEs with potential to realise export sales.
Its mandate is to facilitate and support these SMEs in transforming themselves to be capable of
supplying their products to new and bigger markets.
92
SCF roles & mandate
SCF facilitation in transforming SMEs
Food processing/marketing SMEs exporting
and realising premium prices on export
markets by means of value addition i.e.
differentiating from commodity products
Food processing &
marketing SMEs
supplying only
limited products to
local or regional
market
SCF‟s key roles are related to being a long term facilitator for food processing/marketing SMEs. In
working with SMEs it will be important to be dynamic and responsive. SCF should perceive itself as a
catalyst, an innovation enhancer and a “Moverick” – i.e. adapting an attitude of “go get” and “make it
happen”. SCF‟s professional staff members will need to encourage the food processing/marketing
SMEs through the transformation process by means of hand holding, coaching, mentoring, and
enabling. It is vital that the Business Managers should examine and determine where the products will
be marketable before selecting specific clusters of SMEs to work with.
On the demand side SCF‟s mandate and roles entail SCF professional staff possessing the capability,
competence and capacity to support food processing/marketing SMEs by being able to i.e.:




provide the necessary information on demand for the products from domestic and international
markets and customers
provide market assessments and recommendations for the most potential export markets for
specific food product categories
ensure that SMEs meet the relevant standards and requirements of specific export markets
facilitate contacts in export markets (importers, traders, retailers etc.) and assist and participate
when food processing/marketing SMEs or SME representatives approach and negotiate with
potential buyers/importers
On the supply side SCF professional staff must:
 develop a business plan for each cluster of food processing/marketing SMEs estimating the
market potential and the market objective of the SMEs

identify and highlight critical obstacles and shortcomings where intervention and capacity
building are needed
As for SCF‟s own organisation it will gradually become a knowledge centre for food
processing/marketing SMEs by means of:
93
a. gaining, registering and building know-how on market potential and product
requirements for various food sub-sectors
b. gaining, registering and building know-how on various export markets where food
sub-sectors could have competitive advantages
c. gaining, registering and building experiences and lessons learnt on how to move
away from selling commodity products characterised by low and volatile world
market prices (ref. illustration below). This could be done by means of value addition,
innovative product bundling and packaging, marketing activities etc.
SCF
Value adding
SCF ambition:
To support Tanzanian food
processing/mnarketing SMEs
move upwards in the product
quality and price hierarchy
How?:
By applying innovative ideas
through segregation,
processing, packaging and
marketing to differentiate
product from commodity
market products.
Premium
products
Premium
prices
Quality products
Segregation of quality
at producer/processor
Level
High value
Lower volume
Bulk/commodoty products
Low value
High volume
d. gaining, registering and building a network of experts in:
a. technology utilisation that can upgrade either processing methods, product
quality, marketing or market access of product categories
b. safety and related standards for product categories in specific geographic
areas
c. product/export marketing and distribution channels within various food subsectors
SCF must secure this know-how and network by developing a data base of experts
and BDS providers within the above fields.
3.7
SCF’s success rate
The ultimate measure of success is for food processing/marketing SMEs to have grown to earn export
income from selling value-added products and realising premium prices. In the process of achieving
this one way of monitoring SCF‟s work will be assessing to what extent the organisation has been able
to manage and drive the process of transforming the SMEs to become exporters. SCF will engage in
formulating a business plan with each cluster of food processing/marketing SMEs. A baseline status of
the SMEs will be undertaken as well as highlighting the areas of interventions required. From this
ladder of steps/interventions regular reviews and impact assessments will reveal how far the SMEs are
94
from accessing export markets. It will be crucial to formulate realistic targets and time frames for the
process.
Transformation process illustrated as a ladder of continuous interventions.
Finishing
point
Starting
point
Red = SMEs have no or limited capacity and capability of accessing export markets
Yellows = SMEs have developed some capacity and capability
Green = SMEs are exporting
3.8
Resource mobilisation
In Tanzania there are numerous on-going SME support initiatives i.e. organisations and/or
programmes and projects. SCF should make it their business to establish how these can complement
SCF‟s services and interventions. For instance affordable microfinance facilities would benefit SMEs
to raise working and investment capital. Collaborating and coordinating with these partners and
stakeholders will contribution to ensure the maximum impact of SCF‟s strategies.
3.9
Input to Objectives, Targets and Annual Workplan
With the purpose of learning what approaches work most effectively SCF should strive to divide its
project portfolio into different categories e.g.:
1) Pull strategy: SCF identifies buyers and importers for specific products that then will be
sourced from different food processing/marketing SMEs
2) Push strategy: SCF identifies food processing/marketing SMEs with growth potential and
promising products that SCF supports to become capable of exporting
3) SCF facilitates linkage to large enterprises promoting food processing/marketing SMEs as
suppliers or sub-contractors to large enterprises
4) SCF co-operates with TIC to invite foreign investors to engage in the SME food
processing/marketing sector in Tanzania
The above approaches will also minimise the risk of failure and losses of SCF‟s investments.
95
Annex C.9/
Logical Framework for the Enterprise Competitiveness Programme
Enterprise Competitiveness Program
Results
Goal:
Expanded growth &
reduction of income
poverty
Performance Indicators
Impacts:
1.



2.
Employment:
Percent of working age population not currently
employed
Employment in industry % total
% of population with secondary education and
above, not currently employed
GDP growth per annum; by sector
PDO
Outcomes (firms created, growing):
1. Increased
Enterprise Creation &
expanded Growth
1. % increase in foreign direct investment
2. # formal MSMEs enterprises increased
3. Increase in sales and assets, commercial returns,
gross revenues for firms supported under the project
4. Increased exports:
Export Value: % value added for minerals
Non traditional exports % total
5. Higher value retention in Tanzania
6. Increased value of the titled land compared to untitled.
Outputs
Deliverables (Conditions & Capacity):
Create sustainable
conditions & capacity
for enterprise creation
and growth
1.1
1.
Cluster
Competitivenes
s and Business
School Linkage
Program
operational
1.2
1.3
1.4
2.
Tanzania
Business
Development
Scheme (TBDS)
operational
Clusters identified by TPSF, private sector led
strategies developed and implemented and
sustained; initial opportunities in tourism,
construction industry, mining-related industry,
agribusiness in fish, meat, and supplies to local
supermarkets.
TPSF monitors cluster development and manages
public/private sector dialogue with x/y # investor
round-tables at national & sub-national levels.
X/Y # managers completing improved local
Business School Programs using global standard
curriculum and standards.
Improved capacity (see measures) of targeted highgrowth, export ready firms and linkages (see
description) between such firms and smaller
enterprises
2.1 800 SME firms receiving cost-sharing matching
grant (average X$ per applicant) access consulting
and tailored services as needed to modernize
management systems, improve production
techniques, improve marketing skills, and invest in
skills and technology.
2.2 At least 1200 Micro-enterprises access standard
open short training courses provided by local
supported institutions (e.g. book keeping, equipment
assessment, et al).
2.3 Free hand-holding TA support being accessed by
range of X/Y# firms seeking access to TBDS.
3.1
1000 business (X% women owned) plans with high
added value, new market oriented, innovative
ideas, funded ($5,000-$10,000), matched by in-kind
M&E
Assumptions
POPP data
collection,
surveys
MOT surveys.
 Semi-Annual
and EOY
TPSF
Program
Assessment
Report
 Year 2 and
Year 5
external
evaluations.
 Joint
Supervision
Report
 TPSF Semiannual Output
Monitoring
Meetings and
Report.
 TPSF
Quarterly
progress
reviews and
.Meeting
Summaries.
 DP Joint
Supervision
Report.
1.
 Participating SMEs aggregate
individual production
capacities to fill big orders,
link of complementary skills to
increase product variety, and
take collective action to enter
new markets.
 Clusters continue on own:
new or existing apex organ.
 Improved business
environment
 Reduced costs of doing
business.
 Land Reform Policy revised.
 SCF project services provided
to food processors.
2.
 Increased Output growth in
TBDS firms: (generate $15
extra output for every $1
grant, over 5 years).
 Improved legal framework
(improved contract
enforcement)
 Increased access to credit
(MFI and Banks (e.g. CRDB)
extend credit lines to % of
SMEs.
 Improved targeted
infrastructure.
 FCM of the UDSM will provide
entrepreneurship, trade
96
3.2
4.1
4.2
3.
Business
Development
Gateway (BDG)
established &
operational.
4.3
contributions.
X # BDG grant recipients (X% women) working with
mentors from region, working in Y# incubators,
accessing Y# TA interventions.
negotiation and management
development for
professionals.
3.
 BDG recipients start or
upgrade their business.
 Increased SME access to
credit.
 Improved targeted
infrastructure.
 Tax Reforms implemented
(TMP)
 Financial Sector Reforms
implemented (FSP)
5 Pilot phase public technical institutions (NACT
certified) providing paid-for enterprise development
services to X/Y# MSME clients.
X# Phase #2 public technical & vocational
institutions providing demand-based enterprise
development services to X/Y# MSME clients.
X# technical & vocational institutions providing
services with improved infrastructure (equipment,
machinery, tools, and instrumentation).
TPSF providing hand-holding TA, consulting and
training expertise to # participating firms in X, Y Z areas.
TPSF monitoring sub-sector developments with
associations, conducting X/Y# Investor Round-Tables
P/A.
TPSF conducting cluster analysis, providing TA to
participating firm.
TPSF providing TA and consulting support to
Business Schools in entrepreneurship development.
4.
4.
 Science & Technology
Institutions will identify
adaptive and adoptive
technologies for use in
Tanzanian context.
 Recipient institutions will
continue to work with private
sector firms to keep services
relevant.
 Public institutions and private
firms will develop
collaboration such as in-plant
training.
Technical
Innovation
Applied
Research
Scheme (TIAS)
operational
5.
 MSMEs will continue to
support the TPSF with their
membership.
5.
TPSF
established and
operational
Activities
Inputs/Budget
1.1 Identify Cluster
Contractor
1.2 Conduct
competitiveness
diagnostics
1.3 Identify clusters
& create
strategies
1.4 Implement
Cluster
Strategies
1.5 Build TPSF
capacity to use
cluster
approach
1.6 Dialogue with
private sector.
1.7 Analyze
Business
DfID
$15 million
DANIDA $15 million
Dutch
$10 million
World Bank $30 million
Obligations $70+ million
Monthly
Implementation
Monitoring
Meetings and
results
summaries.
97
School needs.
1.8 TPSF/GBSN
Conduct
Curriculum
Development
Workshop
1.9 Identify
Curriculum &
capacity
specialist
Contractor
1.10 GBSN
Introduces
Curriculum in
local institution
1.11 Train local
institution staff
1.12 Conduct
quarterly
workshops with
private sector
on curriculum
effectiveness
1.13 Conduct best
practice
workshops,
disseminate
findings
2.1 Identify TBDS
private
contractor
2.2 Process cost
sharing
matching
grants.
2.3 Monitor grant
process.
2.4 Process training
provider grants.
2.5 Monitor
Program
offerings and
participation.
2.6 Provide handholding support
and TA in
planning.
2.7 Promote
Program
outside Dar with
Chambers, and
others.
2.1 Select BDG
contractor
2.2 Set up Matching
Grant scheme,
process grants
2.3 Promote Grant
scheme
2.4 Identify and
provide mentors
to recipients.
2.5 Monitor firm
progress
3.1 Identify BDG
Contractor
TPSF can develop the capacity
in Cluster Analysis,
Entrepreneurship development,
contractor supervision, early in
the Program to guide the other
Outputs.
98
3.2 Establish BDG
grant Program
3.3 Process Seed
Capital Grants
3.4 Provide mentors
to recipients
4.1 Identify TIAS
contractor
(same as
TBDS)
4.2 Identify, fund 5
pilot institutions
with Preinvestment
feasibility
studies with
75% grant
funding
4.3 Monitor Pilot
results
4.4 Identify, fund
second round
institutions
4.5 Identify, provide
100% grants to
tech/voc
institutions for
long term
upgrades.
5.1 Contract with
TPSF
5.2 TPSF
establishes
finance and
procurement
unit
5.3 TPSF selects
contractors for
TBDS, TIAS,
BDG, Clusters
5.4 Supervise
contractors
5.5
99
Annex C.10
Logical Framework
for
the Financial Sector Deepening Programme
100
GOAL
A deeper financial system providing
greater access to financial services for
more people and businesses
PURPOSE
Improved capacity of Tanzania‟s
financial sector to meet the needs of
MSMEs and poor rural and urban
people and to contribute to economic
growth
Output 1
Improved policy,
institutional, legal and
regulatory framework
and data for delivery of
financial services
Output 2
Increased wholesale
financial service
provision to support retail
financial service
providers
Output 3
Enhanced appropriate
business services for
SACCOs and other MF
providers
Output 4
More and better financial
services available to meet
the needs of urban and
rural enterprises
(MSMEs)
Output 5
More and better financial
services available to meet
the needs of poor urban
and rural households and
individuals
ACTIVITIES
101
Sub-component C.3: Financial Sector Deepening Programme
Narrative Summary
Goal:
A deeper financial system providing
greater access to financial services
for more people and businesses
Objectively Verifiable Indicators (OVIs)
Means of Verification
G.1 Proportion of the adult population that uses
financial services provided by formal financial
service providers.
Baseline, Year 1: 9%; target for Year 5: 18%
G.2 Proportion of the adult population classified as
unserved/excluded. Baseline, Year 1 54%;
target for Year 5: 40%
FinScope Survey (Every two
6
years)
P.1 Credit extended to the private sector as a
percentage of GDP Baseline: 8.9%, target
values by year: 1:9.7 2:10.6% 3:11.4%
4:12.3% 5:13.1%7
P.2 Volume of credit provided by a cross section of
microfinance providers to MSME and poor
people has increased by 300% by end Year 5 8
P.3 Volume of deposits mobilised by a cross
section of MFPs from MSMEs and poor
peoples has increased by 300% by Year 5
Routine BoT data (Quarterly)
Purpose:
Improved capacity of Tanzania’s
financial sector to meet the needs of
MSMEs and poor rural and urban
people and to contribute to economic
growth.
Assumptions
FinScope Survey (Every two
years)
Annual reviews of institutions
supported, Mid-term Review,
End of Project Review
As above
(Purpose to Goal)
Stability in macro-economic,
political and natural
environment
Favourable economic and other
factors support livelihood
improvements from access to
financial services
Government policy remains
supportive of private sector led
financial deepening
Stable wider financial sector
Outputs:
(Output to Purpose)
6
FSDT will of course be monitoring variables such as those for purpose and outputs on a more frequent basis, and these will give advance signals of what the FinScope data
are likely to show.
7
These figures are taken directly from indicators used in the World Bank Private Sector Competitiveness Project (Appraisal Document, 22 November 2005). It has been
suggested that the targets need to be increased to being them in line with Poverty Reduction Budget Support Programmes that envisage a 30% year on year increase in credit
(which, on the assumption of a 7% per annum increase of GDP, would imply baseline and target figures for credit as a percentage of GDP of: 1:9.7%, 2:11.8%, 3:14.3%,
4:17.4%, 5:21.1%. It was agreed that this issue will be further discussed after the workshop.
8
It is proposed that the cross-section of microfinance providers (MFPs) should be BRAC, CRDB, Dunduliza, FERT, and RFSP SACCOs. It was suggested during the
Workshop that NMB might be added to the list, and it was agreed that this should be further discussed. Caution is needed in using self-measurement of outreach by MFPs. It
would therefore be advisable, for this and the next indicator, to check these results against a survey like the CGAP Poverty Assessment Tool and against proxies such as
average loan and deposit size.
102
Narrative Summary
Means of Verification
Assumptions
O1.1 Government of Tanzania financial sector
policies, strategies and activities accord to
appropriate international codes and standards
O1.2 A workable, risk-based regulatory and
supervisory framework for SACCOs is in
place
O1.3 Financial service providers report
improvements to constraints identified in legal
and regulatory framework
O1.4 FinScope, Supply and SME Surveys are
used and cited by financial intermediaries,
policy markers and opinion formers
GoT policy/strategy publications,
GoT 2GFSRP monitoring reports
Wider institutional factors
remain supportive of pro-poor
financial sector deepening
2. Increased wholesale financial
service provision to support retail
financial service providers
O2.1 Volume of non-directed finance from
commercial banks available to MFPs
increased by 300%
Annual PMR, MTR, EPR
3. Enhanced appropriate business
services for SACCOs and other MF
providers
O3.1 MFPs report availability of satisfactory
services for information systems, technology
and human resources development and related
training
O3.2 Review of supported MFPs and sector
indicators indicate enhanced human and
technical institutional capacity
Supply Side Survey, annual
institutional reviews, MTR, EPR
1. Improved policy, institutional, legal
and regulatory framework and data
for delivery of financial services
Objectively Verifiable Indicators (OVIs)
Annual reviews of institutions
supported, Mid-term Review,
End of Project Review
As above
Other donors/ GoT adhere to
best practice and co-ordinate
efforts in developing pro-poor
financial sector
As above
As above
Institutions selected for support
remain focused on achievement
of sustainability
Adequate demand from
financial providers to sustain
market interest of service
providers
Social norms do not prevent
women from demanding
financial services as they are
103
Narrative Summary
Means of Verification
Assumptions
4. More and better financial services
O4.1 Proportion of investment in MSMEs financed
available to meet the needs of urban
through the formal financial sector. Baseline:
and rural enterprises (MSMEs)
2% of formal micro and 5% of formal small.
Target (Year 5): 4% of formal micro and 10%
of formal small
O4.2 At least two significant new products and/or
processes developed, piloted and implemented
to serve MSMEs, of which at least one serves
the agriculture/agro-industrial sector
O4.3 At least 30% of micro entrepreneurs with
investments valued at Tsh 5 million in assisted
MFPs are women
O4.4 At least 5% of micro entrepreneurs with
investments valued at Tsh 5 million in assisted
MFPs are youth (16-25)
World Bank Investment Climate
Survey
extended and deepened
5. More and better financial services
available to meet the needs of poor
urban and rural households and
individuals
Annual PMR, MTR, EPR, FSDT
performance reviews
Activities
Objectively Verifiable Indicators (OVIs)
O5.1 At least four new products developed, piloted
and implemented – including (i) targeting
very poor clients, (ii) women, (iii) remittances
and (iv) housing
O5.2 Fourfold increase in the number of people
accessing financial services from assisted
financial institutions
O5.3 Fourfold increase in the number of women
and youth accessing financial services from
assisted financial institutions
O5.4 Access to finance in low density, high poverty
districts
Annual PMR, MTR, EPR, Supply
Side Surveys, SME Survey
Annual PMR, MTR, EPR, FSDT
performance reviews
As above
As above
As above
FinScope Surveys and REPOA
poverty mapping
Inputs: Projects – (reference to Activity in brackets)
Assumptions
104
Activities
Inputs: Projects – (reference to Activity in brackets)
Assumptions
Activities related to Output 1:
1.1 Identify constraints in policy environment
1.2 Support GoT sector policy formulation and
monitoring
1.3 Provide TA to support improvements in
institutional environment
1.4 Undertake/commission research into critical
issues in Tanzanian context
1.5 Support dissemination of research, best
practice and FSD programme experience
through publications and other channels
Activities related to Output 2:
2.1 Explore and establish innovative financing
and other mechanisms to support SACCOs
and other MF providers
2.2 Support development, testing and roll-out of
innovative financial service products
(especially for the poorest)
MACRO LEVEL
Policy
 Development of rural financial services strategy for BoT/ GoT – including
outline strategy for SACCOs (1.1 + 1.2)
Legal and regulatory
 Review of regulations for mobile phone banking (1.3 + 1.4)
Data
 FinScope Survey (1.4)
 Supply-side survey (1.4)
 SME demand-side survey (1.4)
 FinScope dissemination (1.5)
(Activities to Outputs)
Wider policy considerations/
political interests do not prevent
reforms to identified constraints
Activities relating to Output 3
3.1 Support development of technologies for
deepening financial sector linkages
3.2 Develop providers of services to Banks,
SACCOs and other MF providers,
particularly in MIS and ICT
MESO LEVEL
Supervision
 Training for BoT in implementing MFC regulations (1.3)
Financial sector infrastructure
 Assessment of potential for MFI rating service (2.1 + 3.1)
 Mobile service providers pilots in Tanzania (2.2)
 Umoja – development of common switch (3.1)
Capacity building
 Development of national training standards for SACCOs and SACCO capacity
building (4/5.2)
 TIOB capacity building (3.2)
 Facility to provide MIS support for MFIs (3.2)
Necessary legislation is enacted
Demand for debt from MFPs
Commercial banks have serious
business interest in MF sector
MFIs accessing funds are capable
of sustainable on-lending at the
margin
Fresh ideas/opportunities for debt
finance can be found
MFPs can be found with credible
plans for achieving institutional
sustainability
MFPs are able to attract and
retain staff with relevant skills
and aptitude
105
Activities
Inputs: Projects – (reference to Activity in brackets)
Assumptions
Activities relating to Outputs 4 and 5
4/5.1 Investment in financial institutions with
credible plans for achieving financial
sustainability
4/5.2 Support capacity building for MFIs
4/5.3 Develop providers of services to Banks,
SACCOs and other MF providers,
particularly in MIS and ICT3.

Institutions are willing and
capable of developing and
adopting new products
5.
Management
Capacity building for SME finance trainers (4/ 5.3)
MICRO LEVEL
Microfinance providers – agricultural
 Cash collateral for loan from AGITF to Dunduliza for on-lending to SACCOs
(2.1/5.1)
 Pilot on extending initial AGITF funding into agri-funds (2.1 + 2.2)
 Weather insurance pilot scheme (2.2)
 Warehouse receipts pilots (2.2)
 Support for SACCOs in context of „Fast Track‟ Fertilizer Partnership (3.2)
Microfinance providers – non-agricultural
 Support for restructuring and capacity building for Akiba Commercial Bank
(4/5.2)
 Support for BRAC pilot activities in Tanzania (4/5.1)
 Funding for Access Bank (4/5.1)
 Investment in KFCB (includes capacity building) (4/5.1 + 4/5.2)
 Low-cost housing pilot for WAT (4/5.1)
 Support for FERT network of SACCOs (4/5.3)
 Funding for Dunduliza network (4/5.3)
 Investment in transformation of PRIDE Tanzania into MFC (4/5.2)
 Guarantee for bank loan to SELFINA (4/5.1)
 Regional study of costs & benefits of different models for SACCO networks
(1.4 + 4/5.2)
 Funding for SEDA (4/5.1)
 Community Bank development and possible investment (4/5.2 + 4/5.3)
 Support for TPB (4/5.1 + 2)
SME finance
 Support for SME finance capacity of Eurafrican Bank (4/5.2)
MANAGEMENT:
 Outsourcing management of smaller projects (5)
[Indicators refer to the whole five year period 2006/7 to 2010/11 unless otherwise stated]
106
Objectively verifiable indicators
G – Goal: a deeper financial system providing greater access to financial services for more people and businesses
OVI
Baseline
Target
Weighting
G.1 Proportion of adult population that uses financial services provided by
formal financial service providers
9%
18%
40%
G.2 Proportion of adult population classified as unserved/excluded
54%
40%
60%
P – Purpose: improved capacity of Tanzania’s financial sector to meet the needs of MSMEs and poor rural and urban
people and to contribute to economic growth
OVI
P.1 Credit extended to the private sector as a percentage of GDP9
Baseline
8.9%
Target
13.1%10
Weighting
⅓
P.2 Volume of credit provided by a cross section of MFPs to MSMEs and poor
people – the cross section being BRAC, CRDB, Dunduliza, FERT, [NMB]11
and RFSP SACCOs [PRIDE, FINCA, SEDA]
To be determined
by review of
institutions
Four times the
baseline
⅓
P.3 Volume of deposits mobilized by a cross section of microfinance providers
from MSMEs and poor people – the cross section being CRDB, Dunduliza,
FERT, [NMB]16 and RFSP SACCOs
To be determined
by review of
institutions
Four times the
baseline
⅓
9
Assuming that GDP increases by an average of around 7% a year, the target would represent an increase in the absolute volume of credit of just over 100%, compatible with
the targets for indicators P.2 and P.3
10
See footnote 12 above.
11
See footnote 13 above.
107
O1 – Improved policy, institutional, legal and regulatory framework and data for delivery of financial services
OVI
O1.1 Government of Tanzania financial sector policies, strategies and activities
accord to appropriate international codes and standards
O1.2 A workable, risk-based regulatory and supervisory framework for
SACCOs is in place
O1.3 Financial service providers report improvements to constraints identified
in legal and regulatory framework [Commercial banks, community banks,
PRIDE & other large MFIs and SACCOs - interview]
Note: It is recommended that these indicators are
not quantified, but are assessed on a qualitative
basis through World Bank and IMF reports and
FSAPs etc, through the supply-side survey, and
through media monitoring.
O1.4 FinScope, Supply and SME Surveys are used and cited by financial
intermediaries, policy markers and opinion formers
O2 – Increased wholesale financial service provision to support retail financial service providers
OVI
Baseline
Target
Weighting
O2.1 Volume of non-directed finance from commercial banks available to
MFPs [NMB, CRDB, EXIM, Eurafrican, StanChart, FBME, etc as they
emerge]
To be determined
directly from
banks
Four times the
baseline
100%
108
O3 – Enhanced appropriate business services for SACCOs and other microfinance providers
OVI
Baseline
O3.1 MFPs report availability of satisfactory services for information systems,
technology and human resources development and related training
[To be
determined by
supply-side
survey and other
sources of info]
50%
[To be
determined by
annual
institutional
review]
50%
O3.2 Review of supported MFPs and sector indicators indicate enhanced
human and technical institutional capacity
Target
Weighting
O4 – More and better financial services available to meet the needs of urban and rural enterprises (MSMEs)
OVI
Baseline
Target
O4.1 Proportion of investment in MSMEs financed through the formal
financial sector (as measured by World Bank Investment Climate Survey)
2% formal micro
5% formal small
4% formal micro
10% formal small
30%
O4.2 At least two significant new products and/or processes developed, piloted
and implemented to serve MSMEs, of which at least one serves the
agriculture/agro-industrial sector
Number:
Clients:
Number: 2
Clients: >25k
each
25%
0
0
Weighting
109
O4.3 Proportion of micro entrepreneurs with investments valued at TSh 5
million in assisted MFPs who are women12 [incl Akiba, ABT]
FSDT to report
O4.4 Proportion of micro entrepreneurs with investments valued at TSh 5
million in assisted MFPs who are youth (aged 18-25)
FSDT to report
30%
25%
5%
20%
O5 – More and better financial services available to meet the needs of poor urban and rural households and individuals
OVI
Baseline
O5.1 At least four new products developed, piloted and implemented –
including (i) targeting very poor clients, (ii) women, (iii) remittances and
(iv) housing
Number:
Clients:
O5.2 Number of people accessing financial services from assisted financial
institutions
Target
Number: 4
Clients: >50k
each
20%
[To be
determined by
FSDT]
Four times the
baseline
40%
O5.3 Number of women and youth accessing financial services from assisted
financial institutions
[To be
determined by
FSDT]
Four times the
baseline
30%
O5.4 Access to finance in low density, high poverty regions
[To be based on
FinScope and
REPOA poverty
mapping]
[For discussion]
10%
12
0
0
Weighting
This measurement is based on the indicator used in the IFAD Rural Finance Support Program („Revised Dynamic Logical Framework, June 2006)
110
E – Efficiency indicators: FSDT is run as a cost-effective organization, with overheads less than 15% of commitments and
disbursements
OVI
Baseline
Target
Weighting
E.1 Total projected overheads as a percentage of funds commitment for the
project period
n.a.
< = 15%
50%
E.2 Average annual overhead spend as a percentage of average annual
disbursements 13
n.a.
< = 15%
50%
13
That is, averaged over the five year period – annual progress to be monitored through actual and projected figures.
111
For a full description of ECP and FSDP please refer to Annexes C.11 and C.12 respectively,
presented in two separate volumes
112