London bond to spur Tanzania SMEs

DAR ES SALAAM: TANZANIAN businesses, particularly Small and Medium-sized Enterprises (SMEs), are expected to gain easier access to long-term financing following the country’s first offshore bond denominated in Tanzanian shillings and listed on the London Stock Exchange.

The 100 million US dollar bond (about 262.5bn/-), issued through the International Finance Corporation (IFC), will channel funds through NMB Bank to businesses, enabling them to expand operations, invest in new equipment, create jobs and grow without the foreign exchange risks associated with borrowing in foreign currencies.

For many business owners, the arrangement means they could access loans in Tanzanian shillings rather than foreign currencies.

A sunflower processor in Dodoma, a furniture manufacturer in Morogoro or a woman running a food-processing enterprise, for example, would be able to borrow in the same currency in which they earn their income, making it easier to plan investments without worrying that exchange rate movements could increase loan repayments.

Economist and investment banker Dr Hildebrand Shayo described the transaction as a significant step in strengthening Tanzania’s financial markets and expanding access to long-term capital for the private sector.

He said one of the biggest advantages of the bond is that businesses borrowing in Tanzanian shillings will be shielded from foreign exchange fluctuations.

“Many Tanzanian businesses earn revenue in shillings but repay loans in foreign currencies. When the shilling weakens, loan repayments become more expensive. Borrowing in local currency allows businesses to invest with greater certainty and reduces the financial burden associated with currency depreciation,” Dr Shayo said.

He said the transaction would diversify Tanzania’s sources of development finance, strengthen the international profile of the Tanzanian shilling and encourage more global investors to consider shilling-denominated investments.

Dr Shayo added that financing channelled through NMB, including support for women-owned businesses, would help firms expand production, invest in technology, create jobs and strengthen supply chains.

Speaking over the weekend during the launch ceremony in London, Minister for Finance Ambassador described the listing as a major milestone for Tanzania’s economy.

He said the bond would attract international investment denominated in Tanzanian shillings while creating new financing opportunities for the private sector and supporting implementation of the country’s Vision 2050 development strategy.

“The initiative will broaden Tanzania’s economic base by making affordable longterm finance more accessible to productive sectors such as agriculture, manufacturing, tourism and other industries,” he said.

ALSO READ: Swiss envoy calls for more capital to bolster SMEs as Tanzania launches the Impact Investment Forum

According to the minister, SMEs, which play a central role in employment and economic activity, are expected to benefit significantly through improved access to capital.

Amb Omar said that, unlike previous international bonds that mainly financed government projects, the proceeds from this bond will be channelled through NMB Bank to the private sector, particularly Micro, Small and Medium-sized Enterprises (MSMEs).

“The proceeds from the bond, which will be managed through NMB Plc, will be used to provide long-term financing to micro, small and medium-sized enterprises.

Notably, 20 per cent of the funds, equivalent to approximately 52.5bn/-, have been earmarked specifically to support women-owned businesses, reflecting the government’s commitment to promoting financial inclusion and women’s economic empowerment,” he said.

The minister added that listing the bond on the London Stock Exchange enhances Tanzania’s international financial profile and strengthens investor confidence, making it easier for international investors to participate in the country’s financial market.

NMB Plc Chief Executive Officer Ruth Zaipuna welcomed the achievement, saying the additional funding would strengthen the bank’s capacity to extend long-term financing to SMEs.

She said greater access to finance would stimulate private sector growth, improve productivity and create employment opportunities across key sectors of the economy.

“This is the second time NMB has successfully accessed funding through the London Stock Exchange. In 2023, the bank raised more than 400bn/- through a social bond and the latest transaction builds on that success by securing more than 262.5bn/- through Tanzania’s first offshore bond denominated in local currency,” she said.

Economist from Marian University and a PhD candidate at the University of Dar es Salaam, Gilbert Mwabeza, also welcomed the initiative, saying improved access to long-term capital would help small businesses expand, encourage investment and increase household incomes.

He said the initiative has the potential to stimulate economic activity across different sectors, provided businesses are able to access financing at affordable lending rates.

However, he cautioned that the programme’s success would ultimately depend on whether the funds reach the enterprises they are intended to support.

“If the financing reaches small businesses that have struggled to obtain long-term credit, the benefits will be reflected in business expansion, increased production, job creation and higher household incomes. That is how the initiative can contribute to the aspirations of Vision 2050,” he said.