Press Releases 2010
USAID and PRIDE Tanzania Partner on Historic Microfinance Bond
November 16, 2010
Trading has begun on the Dar es Salaam Stock Exchange for the first ever microfinance bond in Sub-Saharan Africa. The Tsh 15,300,000,000 ($10 Million) bond issue has been guaranteed by the United States Agency for International Development (USAID) in Tanzania to support lending through Tanzania’s Promotion of Rural Initiatives and Development Enterprises Limited (PRIDE), extending credit to poor but economically active Tanzanians owning and running businesses since 1994.
The five-year bond, paying an interest rate of 11.75% per annum, will allow PRIDE Tanzania to expand their successful microfinance program and reach more than 10,000 rural businesses and farmers by raising longer term local currency and diversifying sources of funding, This historic bond issue opens a new chapter in the growth and development of Tanzania’s capital markets and has already generated interest by other lenders in raising capital through bond markets.
The bond issue was well received by investors including banks, fund managers, insurance companies and individuals resulting in 22% over-subscription. The successful issuance of the PRIDE Bond resulted from public-private-alliances in which USAID and PRIDE are partnering with Standard Charted Bank Tanzania Limited (Lead Arranger), Vertex International Securities Limited (Sponsoring Stockbroker and Placing Agent), CRB Africa Legal (Legal Counsel), PricewaterhouseCoopers (Reporting Accountants) and EXIM Bank Tanzania Limited (Fiscal Agent and Registrar).
USAID’s guarantee of the PRIDE Bond is part of a larger investment by the American people, $52 million in assistance over the past 18 months, to help Tanzania mitigate the impacts of the global financial crisis. This “Financial Crisis Initiative (FCI)” includes a partnership with the World Food Program providing nutritious school meals to 500,000 Tanzanian children each day. FCI also supports “food for work” and “cash for work” employing members of hard-hit communities to build the infrastructure that underlies broad based rural prosperity such as feeder roads, irrigation canals and tourism infrastructure. In the horticulture, FCI supports businesses and communities to access credit and remain competitive despite global economic challenges. USAID is also working through FCI to address critical policy barriers to accelerated agricultural growth such as partnering with the Bank of Tanzania to create a legal framework allowing movable assets, such as livestock, to be used as collateral for accessing loans.