The European Investment Bank (EIB), the European Union's long-term financing institution, is lending EUR 9 million (approximately 6 800 million Tanzanian shillings (1)) from risk capital resources (2) to financial institutions in Tanzania for on lending to the private sector to finance small and medium-scale investments. At this stage, the financial intermediaries are CRDB, the East African Development Bank (EADB) and Stanbic Bank Tanzania. This is the first global loan (3) scheme available through several financial intermediaries in Tanzania.
The liberalisation reforms undertaken in Tanzania since the early 1990's, which have led to a much improved investment climate, and the ongoing implementation of a large-scale privatisation programme have prompted the Bank to launch this facility. The objective of the scheme is to contribute to the development of the private sector in Tanzania, both export-oriented activities and businesses serving the domestic market. It is also expected to create employment across sectors and boost confidence in the country's economy.
The EIB facility provides long-term funding (6 to 10 years) to part-finance viable private sector projects in major productive sectors of the Tanzanian economy, including industry, agro-industry, horticulture, mining, tourism and related activities. Investments can be new projects, expansion, modernisation, restructuring or diversification of activities. The loans, which should range between EUR 30 000 and EUR 1 million, will be available in TZS or foreign currency, as may be appropriate for the financing needs of a particular project.
Funding applications are to be channelled through the financial intermediaries, which are responsible to select and appraise eligible projects and take the credit risk.
The EIB, established in 1958 by the Treaty of Rome, finances capital investment projects which further the European Union (EU) policy objectives. It also participates in the implementation of the EU's co-operation policy towards third countries that have co-operation or association agreements with the Union. The Fourth Lomé Convention was concluded in 1989 for a duration of 10 years and is accompanied by two Financial Protocols spanning the periods 1991-1995 and 1996-2000. The total financial package available under the second Protocol amounts to EUR 14.6 billion, consisting of EUR 12 billion in grant aid from EU Member States, EUR 1 billion in risk capital ² from the European Development Fund (EDF) and managed by the EIB, and up to EUR 1.6 billion in the form of loans from the EIB's own resources.
(1) On 30 June 1999, 1 Euro = 752 Tanzanian shillings.
(2) The EIB manages under mandate part of the European Development Fund (EDF), constituted by contributions from EU Member States, which it uses primarily for risk capital operations. The Bank's own resources are raised on the international capital markets.
(3) Global loans are basically lines of credit opened to banks and other financial intermediaries operating at national, regional or local level, which pass on the proceeds, in the form of sub-loans, for smaller-scale investment schemes.