Tanzania set to benefit from UN loan to boost rural economic activity

The United Nations fund tasked with combating rural poverty has extended a $90 million loan to Tanzania to strengthen access to rural financial services and markets, and promote private sector development in the East African country, the agency announced today.

The loan agreement between the UN International Fund for Agricultural Development (IFAD) and the Tanzanian Government was signed on 25 February in Rome, where the fund is based, by Kanayo F. Nwanze, the IFAD President, and Mustafa Mkulo, the country’s Minister for Finance and Economic Affairs.

The loan, which will finance the Marketing Infrastructure, Value Addition and Rural Finance Support Programme, will be extended to the country on highly concessional terms, IFAD reported.

Agriculture is recognized as a significant catalyst of Tanzania’s economic growth. Its potential is, however, yet to be exploited fully to bring about a significant reduction in rural poverty, according to IFAD.

Smallholder producers have limited access to financial services, markets and opportunities for value addition. To tackle rural finance and marketing constraints, the IFAD-funded projects will scale up some of the successful activities implemented under two pilot programmes – the Agricultural Marketing Systems Development Programme and the Rural Financial Services Programme, completed in 2009 and 2010.

The new programme, co-financed by the African Development Bank (AfDB), the Alliance for a Green Revolution in Africa (AGRA), Tanzania and the beneficiaries, will support the implementation of the agricultural sector development strategy.

The strategy envisages a modernized, commercial, highly productive and profitable agricultural sector by 2025.

The programme is expected to enhance the capacity of participating commercial banks for sustained lending to agriculture, and strengthen rural microfinance institutions with improved governance and management systems.

The marketing groups obtaining higher revenues from improved access to markets and increased synergies in agricultural marketing and rural finance activities will help improve the livelihoods of poor people in rural area.

More than 500,000 vulnerable rural households, including smallholder farmers, livestock keepers, fishers, small-scale rural entrepreneurs, traders and artisans, grass-roots microfinance institutions, processing and marketing groups, poor rural women and rural youth, will benefit directly from the programme.