Tanzania water fund explores green bond, seeks Sh50 billion for revolving loans

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

As the primary institution responsible for issuing grants and loans for water-related initiatives, the NWF aims to ensure that all communities have access to sustainable and clean water resources.

Currently, the fund’s main source of financing comes from a Sh50 per litre fuel levy on petrol and diesel, established under the Finance Act No 16 of 2015.

According to the NWF’s Chief Executive Officer, Mr Haji Nandule, this fuel levy generates approximately Sh170 billion annually.

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

This allocation is crucial for financing clean water initiatives and water source conservation efforts, which are vital for improving the health and well-being of rural populations.

In addition to funding rural initiatives, the NWF also provides loans to urban authorities through a revolving fund to enable them to operate commercially, fostering sustainability in urban water supply.

Mr Nandule indicated that the fund has disbursed Sh5.3 billion to several urban authorities over the past six months.

With a current capacity to issue up to Sh15 billion, the NWF has set ambitious goals for the future.

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

To achieve this objective, the NWF is exploring innovative financing avenues, including the issuance of green bonds.

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

The Tanga Uwasa initiated a 10-year water bond, which marked the first green bond for water development projects in Sub-Saharan Africa.

The bond opened for subscription from February 22 to April 4, 2024, with a target of raising Sh53.12 billion to enhance water supply infrastructure and promote environmental conservation in Tanga City.

However, investor interest exceeded expectations, with bids totalling Sh54.72 billion, indicating a robust appetite for green financing solutions.

“The green bond is essential for our initiatives. While the government has made significant investments in water projects, many urban authorities 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, Mr Prosper Buchafwe.

Furthermore, the Board Chairman of the NWF, Mr Abdallah Mkufunzi, outlined that the agency has already launched a resource mobilisation strategy aimed at diversifying funding sources and expanding the loan window.

In addition to green bonds, the NWF is also exploring donor contributions and global climate financing opportunities, thereby broadening its funding base.

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

“We have started reviewing loan terms after initiating lending in the past six months, and we 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 enhancing water development projects across both rural and urban settings.

By leveraging innovative financing options such as green bonds and expanding its funding sources, the NWF aims to address the pressing water needs of communities while fostering sustainable development.

The ongoing efforts to mobilise resources will not only enhance water access but also contribute to the overall economic development of the nation.

As the NWF continues to implement its strategies, it sets a benchmark for other institutions to follow, ensuring that water remains accessible and affordable for all Tanzanians.