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COMBATING POVERTY BY DEVELOPING FINANCIAL SERVICES FOR POOR COMMUNITIES
BUMACO - Equity for Tanzania Fund to Finance the Start-up and Expansion of SMEs: Tanzania
Project Start Date: June 2003
Funding: FDCF £90,500 (51%); BUMACO £85,300 (49%)
What is it?
The Equity for Tanzania Fund provides financing for the start up and expansion of small and medium size businesses in impoverished areas of Tanzania.
Small businesses and entrepreneurs unable to raise financing from existing financial institutions
Poor communities that gain wealth and employment from small businesses benefit from their expansion
The project establishes an investment fund with an initial capital target of £575,000. It provides long term financing to small, domestic businesses for the purchase of equipment in the form of leases valued between £2,000 and £20,000.
Leases are easier to understand than equity and convertible loan finance and the project overcomes the major difficulty in using leases by introducing a flexible repayment schedule.
The project innovates by bringing loan funding to small and medium size businesses in Tanzania. The fund plugs the gap between existing microfinance loans (too little) and conventional lending by mainstream banks (too expensive). Using and adapting the leasing instrument avoids many of the problems normally associated with financing local businesses and it is expected that the Equity for Tanzania Fund will achieve asset growth over time.