The imperative of prioritising impact investments in Tanzania

By Jasper Kwayu

In Tanzania’s quest for progress and prosperity, the nation stands at a pivotal juncture. The time has come to seize a powerful tool that can shape the nation’s destiny - Impact Investing.

These transformative investments that prioritise social good can pave the way for sustainable development, reduce dependency on foreign investors, and foster financial returns for the local investor.

Impact investments offer Tanzania a unique pathway to address its most pressing social and environmental challenges. From healthcare and education to renewable energy and agriculture, these investments can drive tangible change, empowering communities and bolstering human development.

As social good is prioritised, Tanzania can uplift its citizens, fostering a more inclusive society that benefits all.

Furthermore, impact investments provide a blueprint for sustainable development amid the global climate crisis.

Investing in projects that prioritise eco-friendly practices can reduce the nation’s carbon footprint, conserving its natural heritage for generations to come.

This approach aligns with global efforts to combat climate change while preserving Tanzania’s natural beauty and resources.

Moreover, prioritising impact investments presents an opportunity for Tanzania to progressively reduce its reliance on foreign investors by embracing local impact-driven ventures, harness its resources, knowledge, and expertise to drive development and empower Tanzanian entrepreneurs to take the reins of their economic destiny.

Financial institutions can further play a vital role by diversifying their portfolios and tapping into a growing market of socially conscious investors.

Specialised products such as green bonds and social venture capitals, can be the bedrock for responsible projects, reduce the need for external financing, and expand the partnerships and customer base for banks and other key institutions.

This will attract new socially responsible clients and stimulate economic growth, aligning Tanzania with the global trend of responsible financing practices.

Africa’s vibrant impact investing ecosystem revolves around Development Finance Institutions, private equity managers, institutional investors, and foundations.

Kenya and Southern Africa have emerged as torchbearers, drawing the lion’s share of impact funds in East Africa and Southern Africa, commanding an impressive 83.8 percent of the region’s assets under management.

The staggering $4.2 trillion global funding gap to achieve the ambitious Sustainable Development Goals urges us to support SMEs in exploring deliberate, innovative, and sustainable avenues.

Africa’s remarkable $1.164 trillion market value in impact investing can serve as a catalyst, providing a promising opportunity for Tanzanian entrepreneurs to attract a significant share of the available global funding and meet the needs of local consumers.

The outlook for impact investing in Africa looks promising as 52 percent of the top 300 Global Impact Investors surveyed by the Global Impact Investing Network plan to commit more resources to Africa by 2025.

This means that African economies, including Tanzania, will have more sustainability-related programmes benefiting businesses and citizens at large.

Partnerships with international impact investors can also serve as beneficial tools for sharing expertise and extending the sustainable value of investment ventures.

Measurement frameworks that assess both financial and social returns on investment can serve as continuous evaluation models to improve accountability and transparency, helping local financial institutions align with global trends in responsible banking practices.

The economic benefits of impact investments extend beyond social good.

By supporting local enterprises, Tanzania can stimulate job creation and economic growth from within, fostering a culture of self-reliance.

Impact-driven ventures can be financially viable and lucrative, providing robust returns and further incentivising future investments in impactful initiatives.

To realise the full potential of impact investments, Tanzania must take decisive steps towards creating an enabling environment.

Policymakers should continue to improve and craft regulations that encourage responsible and impact-driven business practices while providing financial incentives to attract both local and international investors.

Education and awareness are also critical components of this transformation.

Educating investors, entrepreneurs, and the public about the power and benefits of impact investments can foster a culture of social responsibility and conscious decision-making while also establishing platforms and networks that connect investors, enterprises, and impact organisations can facilitate collaboration and knowledge exchange.

Jasper Andrew Kwayu is a business development professional. [email protected]