Arusha. Tanzanian banks are increasingly moving to the centre of blended finance deals across Africa, as development financiers turn to them to unlock lending in sectors considered too risky for private capital.
The shift was highlighted yesterday in Arusha during a panel discussion on ‘Blended Finance and Risk Mitigation for Tanzania’s Investment Pipeline’ at the Tanzania Investment Summit 2026, where financiers stressed that scaling investment will depend on how effectively domestic banks are integrated into financing structures.
Moderated by Convergence Finance Senior Associate for Africa, Basil Kandaya, the session brought together different financial institutions. The discussion centred on how blended finance is moving from theory into practice in order to unlock private capital in markets where risk perception remains high.
IFC Director for Trade and Supply Chain Finance, Nathalie Louat, said blended finance is increasingly being used as a market-building tool rather than just a funding mechanism.
“Blended finance is not just a financial tool. It is an instrument for market creation,” she said.
Ms Louat explained that concessional capital, often deployed through IDA-backed facilities, is used to de-risk early-stage investments and attract commercial lenders.
She said IFC structures aim to mobilise several times the original concessional contribution, with leverage ratios reaching up to six times in some cases.
However, she cautioned that impact, efficiency and transparency remain critical. “If we cannot clearly show development impact and who is benefiting, then concessional finance risks sitting idle instead of being catalytic,” she said.
From Tanzania’s guarantee sector, PASS Trust managing director, Yohane Ibrahim Kaduma, said risk-sharing instruments have been central in pushing banks into sectors they would otherwise avoid.
“We started by carrying the risk ourselves, but we quickly realised that collaboration with banks was the only way to scale,” he said.
Mr Kaduma said guarantee facilities now enable lending to smallholder farmers and agribusinesses who would otherwise be excluded from formal credit. He added that PASS operates across multiple financing levels, from small digital loans of about $100 to larger facilities of up to $20 million.
CRDB Bank Plc, one of Tanzania’s largest lenders, said blended finance has directly changed its risk appetite in agriculture.
CRDB Head of Credit Sanction, Ms Azmina Hemed, said the biggest question for banks remains repayment certainty. “The biggest thing for a bank is simple — how do we get the money back,” she said.
Ms Hemed said concessional finance and guarantees have enabled CRDB to expand lending into agriculture by lowering funding costs and sharing risk with development partners.
In some cases, she said, this has reduced borrowing costs to single-digit interest rates, compared to market levels that can exceed 20 percent. She added that guarantee-backed structures have allowed the bank to scale lending without breaching internal risk limits.
Ms Hemed went on to say collateral requirements and regulatory constraints continue to limit access to finance, particularly for smallholder farmers and informal businesses.
From the development finance side, representatives from PIDG, DEG and DBSA said modern blended finance structures increasingly combine multiple instruments within a single investment pipeline.
PIDG Business Development Manager Doris Muthami said no institution can finance projects alone across their entire lifecycle.
“Flexibility is critical. No single institution can finance the whole lifecycle of a project alone, which is why collaboration is essential,” she said.
DBSA’s Senior Debt and Blended Facilities specialist, Mr Bongo Bacela, said blended finance plays a structural role in correcting market failures that keep private capital away from risky sectors.
“Blended finance plays a key role in correcting market failures by absorbing early-stage risks that discourage private investors,” Mr Bacela said.
He added that this early-risk absorption is what allows commercial financiers to enter markets that would otherwise remain underfunded.
