Green finance could unlock Dira 2050’s economic potential

DAR ES SALAAM: AS Tanzania charts its path towards Vision 2050, green finance is emerging as a potentially important source of capital for turning the country’s development ambitions into sustainable economic growth. Vision 2050 seeks to build a prosperous, industrialised, inclusive and climate-resilient Tanzania.

Achieving these ambitions will require substantial investment in renewable energy, climate-smart agriculture, sustainable transport, green infrastructure, water management, waste recycling and environmental conservation. Public resources alone are unlikely to meet the scale of financing required.

Green finance therefore offers an opportunity to mobilise private and international capital while ensuring that economic expansion does not undermine environmental sustainability.

Green finance refers to investments directed towards projects that deliver environmental and climate benefits alongside economic returns.

It includes green bonds, climate funds, sustainability-linked loans, carbon markets, green insurance and blended finance.

For Tanzania, the potential is considerable The country has abundant sunshine suitable for solar energy, significant wind resources, hydropower potential and extensive forests that can support carbon sequestration.

Its large agricultural sector also offers opportunities for climate-smart production and sustainable land management.

Investment in these areas could deliver benefits beyond reducing greenhouse gas emissions.

Renewable energy can expand electricity access, climate-smart agriculture can improve productivity and food security, while sustainable infrastructure can create jobs and strengthen economic resilience.

Agriculture deserves particular attention because of its importance to the economy and its vulnerability to climate change.

Green financing can support irrigation infrastructure, renewablepowered irrigation, precision agriculture, improved seeds, agroforestry, sustainable land management and weather-indexed agricultural insurance.

Such investment could help farmers manage climate-related risks while raising productivity and incomes.

The same principle applies to Tanzania’s rapidly expanding urban centres. Cities will require increasing investment in sustainable public transport, energy-efficient buildings, waste recycling, clean water systems and climate-resilient drainage.

Green financing can help mobilise domestic and international investors to fund projects that may otherwise struggle to secure conventional financing.

However, significant barriers remain Awareness of green finance is still limited among some financial institutions, businesses and local authorities. Green financial products remain relatively few, while many potential projects lack the preparation needed to attract investment.

A promising environmental project may fail to secure financing if it lacks a viable business model, credible financial projections or measurable environmental outcomes. Small and medium enterprises face an additional challenge.

Although they represent a major part of the economy, many struggle to access affordable financing because of limited collateral, high borrowing costs and inadequate capacity to prepare investment-ready projects.

Policy coordination is another critical issue Green finance requires collaboration among government ministries, regulators, commercial banks, development partners, pension funds, insurers, investors and project developers.

A clear national green-finance framework could provide greater certainty for investors while ensuring that financial flows are aligned with Tanzania’s development and climate priorities.

Financial institutions also have an important role to play. Banks can expand green lending products targeting renewable energy, sustainable agriculture, waste management, clean manufacturing and energy efficiency.

Pension funds and insurance companies, meanwhile, can provide long-term capital for commercially viable green infrastructure.

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Development finance institutions can help reduce investment risks through guarantees, concessional financing and blended finance structures, particularly for projects that generate significant public benefits but may initially offer modest financial returns.

Positive developments are already emerging Financial institutions are increasingly considering environmental, social and governance principles in investment and lending decisions.

Development partners continue to support renewable energy and climate-adaptation projects, while discussions around carbon markets, green bonds and sustainable investment standards are gaining momentum across Africa.

Tanzania can draw lessons from these developments while designing instruments suited to its own economic conditions. The immediate priority should be to strengthen the regulatory environment for green investment.

Clear definitions of what qualifies as a green investment, credible sustainability standards and transparent reporting requirements would help prevent greenwashing while giving investors greater confidence.

The country also needs stronger project-development capacity. Government agencies, businesses and local authorities must be able to identify, design and package commercially viable green projects.

Without a sufficient pipeline of bankable projects, available capital will not necessarily translate into investment.

Financial literacy is equally important. Businesses and citizens need to understand that green finance is not simply about environmental protection.

It can provide access to new markets, reduce operating costs, improve resilience and create opportunities in emerging industries.

Green finance should therefore be treated as an economic development strategy rather than a narrow environmental agenda.

For Tanzania, it can support innovation, create jobs, attract foreign investment, strengthen energy security, improve agricultural productivity and reduce exposure to climate-related economic losses.