1. Blended Finance Options for Local Development
30 August 2018

2. Local Development Financing Challenge
Need for infrastructure to accelerate local development
Most acutely felt in urban areas facing in-migration
Thromdes need to generate jobs and economic opportunities
Grant financing from national budget or ODA not enough

3. Example of blended finance
Development Partner
Domestic bank /
Pension fund
Central Government
$10m commercial
loan &
repayment
Concessionary
Loan
Grant
Grant
UNCDF
Local government
$0.2m access
Roads
$0.5m offtake
contract
$0.5m loan &
repayment
Mini hydropower
$100K Project preparation

4. Tanzania Case Study Local Resources. Local Opportunities
Project Developer: Kibaha Town Council Project: Modern Market
Population growth challenges in Kibaha Town - accelerated by the expansion of Dar es Salaam (35 kms away)

5. What do you see changing?
The project was identified due to the fact that:
The KTC has no permanent and modern market;
The current MKT is located on road reserve – can be demolished any time;
It does not fulfill the customers’ needs due to rapid increase of the population and motor vehicle traffic;
Also, the market infrastructure and layout denies KTC substantial amount of revenue that could otherwise be earned from this market.

6. Project in Brief
Project Sub-sector: Public Service Delivery Infrastructure
Project Type & Cost: Modern Market - $10.1M
Domestic Capital: $7.3 million (70%) debt financing by TIB Dev. Bank
Equity Contribution: By Kibaha Council - $2.8 M as land and road network
UNCDF support: Seed capital, technical assistance
Project Company: SPV established
Contribution
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Source
Amount (USD)
Equity
27%
Own source (KTC) and UNCDF (Seed capital)
$2,762,420
Debt (Loan)
73%
TIB Development Bank
$7,303,030
Total
100%
$10,065,450

7. What were the steps?
Financing Process
Selection of Consultants to Develop the Project
MoU with Tanzania Investment Bank
Seek Consent from the Ministry (PMO-RALG) to Borrow
Project Approval By Council
Idea Generation
Technical project development and finance expertise:
preparation of financial model
Enhancement of the business plan.
Establish bankability status
Seed capital
SPV Governance structure of the project
Using its relationship with PMO-RALG to assist in implementation of the transaction.

8. How did contribute to local development?
Revenue boost for Kibaha Town Council
About 835,000 people in Pwani Region and beyond served directly or indirectly by the modern market
Population will trigger demand for goods and services hence emergence of trade and small business enterprises
Job creation for constructors and business owners
Supplementary infrastructure built to support the project (road network, water, electricity etc.)
Increased local economic development
Opportunity for women (farmers) to sell their produce at a modern market & own businesses
Estimated 834,956 people in Pwani Region and beyond will be served by the modern market
Boost revenue for Kibaha Town Council
The targeted population together with daily passengers through Kibaha will trigger demand for goods and services hence emergence of trade and small business enterprises.
Job creation for the people who will construct and those who will subsequently own businesses after completion of the project.
The market will provide space for different operators such as banks, restaurants, retail stores, wholesale and retail traders.

9. Lessons and next steps
Local governments can increase investments in revenue generating infrastructure
Use structured project finance - cash flows from investment to service debts from financial institutions: eg. Car parks
Using future grants, revenues and cash flows to service debt from financial institutions: eg. Markets and warehouses
Use Public Private Partnerships to blend in private equity & debt with assets owned by local government
Incentivize private investments in services – tax incentives, off take contracts and viability gap funding: eg. Waste recycling
DPs are increasingly interested in co-financing debt, and supporting related TA
Loans and guarantees are available as instruments that can leverage ODA and expand the impact

10. Suresh Balakrishnan, Regional Technical Advisor suresh
Suresh Balakrishnan, Regional Technical Advisor