MICROCAPITAL STORY: The National Microfinance Bank of Tanzania helps Bail out the Tanzania Electric Supply Company (Tanesco) with a USD 56million Loan

The National Microfinance Bank of Tanzania has joined a syndicate of local banks and pension funds to lend USD 238million to Tanesco, the parastatal electricity company, wholly owned by the Tanzanian government, money which will be used to pay off debts to suppliers and invest in new equipment. The National Microfinance Bank was founded in 1997, and is the third most profitable bank in Tanzania, holding USD 430million in deposits and assets. The loan to Tanesco supports NMB’s business interests, as well as those of its customers, as it organises collection services for the electricity firm via its network. Currently the Tanzanian government owns 51% of the bank, having sold off the remainder of its stake in 2005.The loan syndicate involved in the bail out includes five banks and four pension funds all from Tanzania. According to Mr. Bashir Awale, Managing Director of Stanbic Bank that led the syndicate, the banks will supply two thirds of the funds, with Stanbic Bank giving USD 32million, National Microfinance Bank USD 56million, CRDB Bank USD52 million, with the rest coming from Exim Bank and the Tanzania Investment Bank. The other USD 80million will come from pension funds, the Parastatal Pension Fund (PPF), the National Social Security Fund (NSSF), the Government Employees Provident Fund (GEPF) and the Public Service Pension Fund (PSPF).

Mr Awale said the loan would be repaid by instalments in six years with an 18 month grace period at interest pegged on 182 day treasury bills (TBs) rates.

Tanesco, which was established in 1964, generates and transmits electricity, organising the distribution and sale of electricity to the Tanzanian mainland and bulk power supply to the island of Zanzibar. The majority of its generation comes from hydropower.

The company’s financial decline was blamed on poor management and the high costs of generating power. According to Tanesco, about only 11 percent of the country’s estimated population of 34 million have access to reliable electricity.

Dr. Idris Rashidi, the Managing Director of Tanesco, said the six year credit facility would reinvigorate the firm’s operations and boost existing services. However, he explained that this loan would not replace the USD 1.2 billion needed for a capital investment programme, to which the World Bank, an international quasi-public bank, has already pledged USD 85million.

Amy Rennison, Microcapital writer

Additional Sources:

Tanesco: http://www.tanesco.com/

Daily News Article, ‘Banks bail out Tanesco’, August 31 2007
http://www.dailynews-tsn.com/page.php?id=8395

Daily News Article, ‘Govt rules out more expatriates at Tanesco’, November 11, 2006
http://www.dailynews-tsn.com/page.php?id=4437

ipp media article, ‘Tanesco gets massive cash injection’
http://ippmedia.com/ipp/guardian/2007/08/31/97449.html

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