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Information for banks

The Tanzanian commercial banks play the core role of financing Water Authorities in the context of the IFF Programme. During the inception and piloting phase of the programme the interest of Tanzanian commercial banks to provide loan finance to Water Supply Authorities (WSSAs) for short-term infrastructure financing was confirmed and proven. The commercial banks appreciate the grant share the WSSAs can access after the successful implementation of infrastructure projects in compliance with the project guidelines and water basket requirements. This additional incentive which relaxes the UWSSAs’ liquidity situation at the medium stage of the loan repayment process is considered a risk reduction.

The Figure below presents a schematic overview of the IFF financing framework indicating that that OBA grant can be used to offset the financing costs for the commercial loan.

Nevertheless, the banks base their loan appraisal process clearly on the quality of the project presented, the financial and managerial position of the WSSA and their business history with the WSSA. For this reason, utilities have so far been talking to their “house banks” that host their main collection accounts. However, the IFF Project promotes competition in the commercial banking sector and there are other means of securing revenues for those banks that do not host the utilities’ collection accounts. In such cases ring fencing of revenues from major customers as collateral for the lending institution could be further explored.
Currently, a number of Tanzanian banks are closely monitoring the IFF project development and it is likely that more banks will join once they understand the water sector. This is particularly the case since the water sector is not considered a risky enterprise.
The commercial banks also appreciate the IFF Consultant’s “Quality Stamp” as they do not maintain in-house engineering capacity and feel comfortable relying on international independent Consultant assessments.

Relevant sector specific information
The Tanzanian Government adopted the 2009 Water Supply and Sanitation Act CAP 272 and instituted reforms to form Water Supply and Sanitation Authorities (WSSAs). The Act further provides a clear division of responsibilities between the Ministry of Water, Water Supply and Sanitation Authorities and the Energy and Water Utilities Regulatory Authority (EWURA).
EWURA has the following mandate in the water sector:

  • Regulating 130 WSSAs across the country
  • Regulating networked services related to supply of drinking water and removal of waste water
  • Approval of utility business plans and tariff review
  • Monitoring compliance of WSSAs with approved business plan
  • Evaluation of MDs /Executive officers performance
  • Monitoring water quality

Licensing of WSSAs
A Water Authority established in accordance with the Water Supply and Sanitation Act No. 12 of 2009 shall be in one of the following four categories:
Category AA: Water utilities with water service coverage of more than 85% and coverage of all operation, maintenance costs, depreciation and return on investment

Category A: Water utilities with water service coverage of more than 75% and coverage of all operation, maintenance and depreciation costs.

Category B: Water utilities with water service coverage of more than 65% and coverage all operation and maintenance costs.

Category C: Water utilities with water service coverage of less than 65% and coverage of operation and maintenance costs except part of plant electricity costs as shall be determined in the Memorandum of Understanding.
The Regional WSSAs and National Projects WSSAs classified in the above three categories are listed here under (Status June 2017).

The banks can get more information on the performance of the regional water authorities from the annual EWURA Water utilities Performance Review Report from the EWURA Website