Danish aid making a difference in Tanzania – The Post

Danish aid making a difference in Tanzania

But the future hinges on financial institutions stowing away fears of agriculture investment

70 percent of Tanzanians work in agriculture (photo: PASS)
August 20th, 2019 12:00 pm| by Christian W

Late last year, Denmark threatened to freeze millions of kroner in aid to Tanzania after homophobic rhetoric was voiced by a leading politician in the east-African country.

Now a new report has unveiled that Denmark’s support over the years has made a real impact in Tanzania, particularly in regards to local farmers gaining access to loans and credit – via the private agricultural sector support (PASS).

“PASS is both relevant and additional as a financial instrument within the agriculture sector of Tanzania. It currently serves about 166,000 end-clients (farmers), and hereby an estimated 940,000 household members, mainly by providing a guarantee to their bank,” the report (here in English) documented.

“Since its incorporation, PASS has been and remains both relevant and additional. PASS operations contribute to the goals of the government of Tanzania in economic development as well as those of the government of Denmark.”

READ ALSO: Denmark freezes aid to Tanzania in wake of homophobic rhetoric

Far from ultimate goal
However, the report also found that for PASS to become redundant – which is the ultimate goal of PASS – commercial financial institutions are required to step up and replace it.

Alas, Tanzania’s traditional banks and credit institutions remain conservative when it comes to supporting agriculture, which they associate with unpredictable risks such as disease and drought.

And that’s a problem in Tanzania, where 70 percent of the population are sustained through agriculture, but where the sector only accounts for 30 percent of the country’s GDP. Poor access to loans and credit is one of the biggest hurdles facing a transition of the sector towards more growth and a poverty reduction.

One of the recommendations of the report is for PASS to significantly improve its ability to collect and treat data – a digitalisation of the collection and processing needs to be ushered in.

Since 2000, Denmark has dedicated 326 million kroner in aid to PASS in Tanzania. The current aid phase is scheduled to expire this year and a new phase is being planned from 2020.

The evaluation report (here in English) was compiled by the two Dutch firms Carnegie Consult and Royal Tropical Institute (KIT).