What Sh26 billion initiative means for MSMEs ecosystem

Dar es Salaam. The Swiss Embassy in Tanzania has launched a Sh26.4 billion fund as part of its Innovation for Social Change project to support the growth of impact-driven micro, small and medium-sized enterprises (MSMEs) in Tanzania over the course of the next five years.

Entitled Daraja Impact Fund, the initiative, launched in the city on Wednesday, will be implemented and managed by Small Enterprise Assistance Funds (SEAF), an international investment management group for capital and business assistance to MSMEs.

SEAF will implement the project in partnership with the Alpha Mundi Foundation (AMF), an organization committed to strengthening the commercial viability of MSMEs in Africa and Latin America.

The Swiss Embassy’s financial support for the development of MSMEs in Tanzania adds to efforts by other organisations, including financial institutions, which have also come up with ways to unveil the potential of the MSMEs sector.

CRDB Bank recently took a significant step in supporting the government’s efforts to promote economic inclusion when it signed an agreement with the IT Commission (ICTC) and the National Science and Technology Commission (COSTECH) through its ‘IMBEJU’ programme.

The programme was focused on empowering women and youth economically by providing them with capital and support to develop their businesses.

The Daraja Impact Fund, on its part, comes to support Tanzanian entrepreneurs to gain access to essential skills and investment funding, bolstering their business performance and generating positive impacts within their communities.

“This Fund will prioritise support for businesses led by women and youth entrepreneurs, as well as enterprises with significant female representation as employees, customers, or suppliers,” said Mr Didier Chassot, the Swiss ambassador to Tanzania.

He said during the launching ceremony that the project will support initiatives and actors such as the Tanzania Startup Association in order to enhance a conducive environment and ecosystem in which thriving MSMEs continue to improve the living standards of Tanzanians.

By covering the initial setup costs, such as technical assistance, the Swiss support will reduce the investor’s initial transactional costs, which in turn will help attract more private investments into those enterprises.

“The private sector best plays its key role when promoting the scaling of socially impactful enterprises,” Mr Chassot stated. “The catalytic Daraja Impact Fund will ensure that a solid pipeline of social enterprises receives technical assistance and the financing needed in order to scale their business model...”

He noted that, building on Switzerland’s role as a pioneer of impact-linked financing, his government will apply its expertise and support in leveraging private investments coming to Tanzania, targeting social enterprises, and assisting them to scale.

According to SEAF’s Director of International Programmes, Mr Peter Righi, the Fund presented a timely opportunity for Tanzanian entrepreneurs to attain business success while making a positive impact in their community.

“Incorporating impact into post-investment technical assistance support holds significant potential to enhance financial performance and foster growth,’’ he said.

For her part, the executive director of AMF, Ladé Araba, noted; “We are thrilled to manage the investment vehicle for the Daraja Impact Fund to support SMEs that show high potential for generating positive impact for women and youth, while delivering strong business performance.”

Mr Laurent Moronge, owner of Elimu Supplies Enterprises Limited, said that having an initiative that supports their growth would play a role in ensuring they reach their potential.

“The biggest thing we have been missing is capital and the market at a time when the regulatory environment has not been good. But given the emergence of institutions to support us, it is a very good motivation for investors,” he said.

Despite their great economic contribution, MSMEs continue to face many challenges. Some of the impediments include inadequate access to capital and markets and regulatory constraints.