Tanzania Water Fund explores green bonds, seeks Sh50 billion for revolving loans

Dar es Salaam. The National Water Fund (NWF) is taking significant steps to explore alternative sources of financing for water supply development projects in both rural and urban areas.

As the primary agency responsible for issuing grants and loans for water-related initiatives, SWF is committed to ensuring all communities have access to sustainable and clean water resources.

Currently, the main source of funding for the fund is the petrol and diesel levy of Sh50 per liter established by the Finance Act No. 16 of 2015.

According to SWF CEO Haji Nandule, this fuel surcharge generates about Sh170 billion annually.

Notably, about 60 percent of these funds are allocated to the Rural Water and Sanitation Agency (Ruvasa), which implements important water projects in rural areas.

This appropriation is critical to funding clean water initiatives and water conservation efforts that are vital to improving the health and well-being of rural populations.

In addition to financing rural initiatives, the SWF also provides loans to city authorities through a revolving fund to enable them to operate on a commercial basis, contributing to the sustainability of urban water supplies.

Mr Nandule pointed out that the fund has paid out Sh5.3 billion to several city authorities in the last six months.

With the capacity to currently issue up to Sh15 billion, the SWF has set ambitious targets for the future.

“Our goal is to create a revolving fund worth Sh50 billion in the next three years,” Mr Nandule said during the October 31, 2024 meeting.

To achieve this goal, the National Welfare Fund is exploring innovative financing opportunities, including the issuance of green bonds.

Green bonds have become a promising source of capital for water supply projects, as evidenced by the recent success of the Tanga Urban Water and Sanitation Authority (Tanga Uwasa).

Tanga Uwasa initiated the issuance of a 10-year water bond, which became the first green bond for water development projects in sub-Saharan Africa.

The bonds are open for subscription from February 22 to April 4, 2024, with the aim of raising Sh53.12 billion to improve water infrastructure and promote environmental conservation in Tanga City.

However, investor interest exceeded expectations, with bids totaling Sh54.72 billion, indicating a strong appetite for green finance solutions.

“Green bonds are essential for our initiatives. Although the government has made significant investments in water projects, many city governments continue to rely heavily on government funding. We need to empower these authorities to become more self-sufficient,” said the Director of Policy and Planning at the Ministry of Water Resources, Mr. Prosper Buchafwe.

In addition, the Chairman of the Board of the National Welfare Fund, Mr. Abdallah Mkufunzi, noted that the agency has already launched a resource mobilization strategy aimed at diversifying funding sources and expanding the lending window.

In addition to green bonds, the SWF is also exploring donor contributions and global climate finance opportunities, thereby expanding its funding base.

To ensure successful repayment of loans issued for water projects, the NWF conducts a thorough assessment of all projects in collaboration with the state-owned TIB Development Bank before disbursing funds.

“We have started reviewing lending terms since we commenced lending in the last six months and are committed to making improvements,” Mr Mkufunzi assured.

In summary, the National Water Fund’s proactive approach to exploring alternative financing mechanisms reflects its commitment to strengthening water development projects in both rural and urban environments.

By leveraging innovative financing options such as green bonds and expanding its funding sources, the SWF aims to meet the critical water needs of communities while promoting sustainable development.

Continued resource mobilization efforts will not only improve access to water but will also contribute to the overall economic development of the country.

By continuing to implement its strategies, the NWF sets a benchmark for other institutions to ensure that water remains affordable and accessible to all Tanzanians.