Annual Progress Report Fiscal Year 2019

Associate Cooperative Agreement No. AID-621-LA-16-00002

ANNUAL PROGRESS REPORT FISCAL YEAR 2019

This annual progress report was made possible through support provided by Feed the Future through the U.S. Agency for International Development. The opinions expressed herein are the sole responsibility of IESC and do not necessarily reflect the views of USAID or the United States Government.

Submitted on 30th October 2019 by: International Executive Service Corps IESC Contact: Andrea Patrick Associate Vice President International Executive Service Corps (IESC) 1900 M Street, NW Suite 500 Washington, DC 20036 Email: [email protected]

iii Program Overview 1 Annual Progress Report 1 Milestones and Analysis of Activities 1 Program Constraints 9 Sustainability 10 Grants 11 Program Outreach and Communications 12 Gender and Youth 12 Environmental Compliance 13 Monitoring, Evaluation, and Learning 17 MEL Team Activities Over the Year 18 Adjustments Based on the Learning Agenda 19 Component 1 19 Component 2 19 Component 3 19 Cross-Cutting Value Chain Opportunities 20

Annex 1 – 4th Quarter Program Financial Report Annex 2 – Zanzibar Engagement Annex 3 – ENGINE Progress Towards Indicators Annex 4 – Justification of MEL Target Deviations Annex 5- 4th Quarter Stakeholder Outreach and Meeting Summary Annex 6 – Success Stories Annex 7 – Volunteer Assignments

ASHTECH African Soil Hives Technology B2B Business to Business BDS Business Development Services BDSP Business Development Service Provider BOAT Bank of Africa Tanzania BOT Bank of Tanzania BRELA Business Registration and Licensing Agency BPRA Business and Property Registration Authority CA Cooperative Agreement CC City Council COP Chief of Party CSO Civil Society Organization D-by-D Decentralization by Devolution D4D Data for Development DBC District Business Council DCA Development Credit Authority DED District Executive Director DQA Data Quality Assessments EABS East Africa Banking School EAC East African Community EMMP Environmental Mitigation and Monitoring Plan ENGINE Enabling Growth through Investment and Enterprise Program FI Financial Institution FY Fiscal Year G & Y Gender and Youth HO Home Office IAA Institutional Architecture Assessment ICMA International City/County Management Association ICT Information and Communications Technologies IESC International Executive Service Corps LGA Local Government Authority LGACI Local Government Authority Competitiveness Index MEDA Mennonite Economic Development Associates MEL Monitoring, Evaluating, and Learning MFI Microfinance Institution MSME Micro, Small and Medium Enterprise NEMC National Environment Management Council NMB National Microfinance Bank OCGS Office of Chief Government Statistician OPIC Overseas Private Investment Corporation PCT Pyrethrum Company of Tanzania iii

PO-RALG President’s Office for Regional Administration and Local Government President’s Office for Regional Administration, Local Government and Special PO-RALGSD Departments PPD Public-Private Dialogue PRIDE Promotion of Rural Initiative and Development Enterprises PROMISE Prosperous Mindset Tanzania Ltd PRPT Policy Reform Priority Setting Tool RBC Regional Business Council RLGSP Regional and Local Government Strengthening Program SACCO Savings and Credit Cooperative Organization SADC Southern African Development Community SAGCOT Southern Agricultural Growth Corridor of Tanzania SCSC Swahili Coast Salt Company SME Small and Medium Enterprise SoW Scope of Work SUGECO Sokoine University Graduate Entrepreneurs Cooperative TA Technical Assistance TCCIA Tanzania Chamber of Commerce, Industry and Agriculture TNBC Tanzania National Business Council TZS Tanzanian Shillings USAID United States Agency for International Development USD United States Dollars WARIDI Water Resources Integration Development Initiative ZALGA Zanzibar Association of Local Government Authorities ZEMA Zanzibar Environmental Management Agency ZNBC Zanzibar National Business Council ZNCCIA Zanzibar National Chamber of Commerce, Industry and Agriculture

PROGRAM OVERVIEW Pursuant to Cooperative Agreement No. AID-621-LA-16-00002, the International Executive Service Corps (IESC) implements the Feed the Future Tanzania Enabling Growth Through Investment and Enterprise Program (ENGINE). The period of performance for the award is September 1, 2016 – August 31, 2020.

IESC is joined by sub-contractors International City/County Management Association (ICMA), Mennonite Economic Development Associates (MEDA) and Diligent Consulting Limited. Under this Agreement, IESC supports United States Agency for International Development’s (USAID) Development Objective 2: Inclusive broad-based economic growth sustained.

ANNUAL PROGRESS REPORT The purpose of this document is to report ENGINE’s progress during the 2019 fiscal year (FY19), including the 4th Quarter (Q4), and provide a quantitative and qualitative analysis of the activities conducted and the successes achieved during the ENGINE’s third year.

DELIVERABLES During FY19, ENGINE submitted, and USAID provided written acceptance, of its 1st, 2nd, and 3rd Quarterly Reports. The Year Four (Y4) Work Plan was submitted to USAID, with approval pending at the end of the reporting period.

MILESTONES AND ANALYSIS OF ACTIVITIES Component 1: Implementing Policies for Growth During FY19, ENGINE supported a total of 32 Public-Private Dialogues (PPD) across all 11 ENGINE Local Government Authorities (LGA). These PPD were conducted during various activities, including Regional Business Councils (RBC) and District Business Councils (DBC). Twelve volunteer expert (VE) and consultant assignments were undertaken to develop the Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA) organization and LGA strengthening that included Institutional Architectural Assessments (IAAs), strategic plan reviews, development of investment promotion strategies, and roadmaps, as well as by-law reviews.

ENGINE supported several policy reform activities during its third year of implementation, including 27 by-laws reviews in eight LGAs, the development of 16 Roadmaps, and formulation of the Policy Reform Priority Setting Tool (PRPT) and Local Government Authority Competitiveness Index (LGACI) online policy reform tools. Not all planned activities for FY19 were completed due to some LGAs’ administrative delays/bureaucratic procedures and occasional setbacks in the timely recruitment of needed VEs and consultants. However, most of these activities are in their final stages (approval stage) and are on track to be completed within the first quarter of the fourth year.

Activity Planned Achieved Support LGA level PPDs & ENGINE supported & facilitated a total of 32 PPDs in FY19. 6 were held follow-up on Action Plans in Morogoro, 6 in Mbeya, 4 in Iringa, & 16 in Zanzibar. ENGINE supported & facilitated 3 RBCs in Mbeya, Iringa, & Morogoro, Support Tanzania National as well as DBCs in Mbeya, Kilosa, & Morogoro. 2 Annual General Business Council (TNBC) & six Meetings were supported in Zanzibar, 1 for Zanzibar Association of LGA-level TNBC Chapters in Local Government Authorities (ZALGA), in which it approved its Tanzania Mainland, & the foundational documents, & 1 for Zanzibar National Chamber of Zanzibar National Business Council (ZNBC) & three Commerce, Industry & Agriculture (ZNCCIA) in which its newly Regional-level ZNBC Chapters developed membership fee structure & clusters were approved. ZNBC in Zanzibar was supported to develop regional & district level chapter PPD guidelines. Support reform of Agricultural Supported & participated in the Annual Agricultural Policy Conference & Business Enabling in Dodoma, where LGA agricultural policy issues were presented & Activity 1.1 Environment Policies, with discussed. Areas of focus included: recommendations on agriculture Predictability, special attention on Women & transformation; effective ways to engage youth in agriculture; and, Coherence and Youth improving access to finance for agribusiness actors, among others. Transparency of The outdated version of PRPT, maintained in an Excel file, was Assist 11 LGAs Develop Policy Policies converted into an easy to use online system for the Iringa Municipal Action Plans Linked to their Impacting the Council (MC). Trainings were held in Morogoro MC LGAs & 5 LGAs for Private Sector Annual Planning & Budgetary Cycle. Zanzibar on this system. Additionally, ENGINE helped to draft the PRPT Increased online system implementation plan. The LGACI online system was developed & tested during the year. The Build the Capacity of LGAs to implementation plan for the tool was also drafted. LGACI core teams of use the LGACI Tool 11 LGAs were trained on the use of LGACI online system. A total of 12 Volunteer Expert assignments were accomplished in FY19. The TA provided include the following: 1 Organizational Development assignment with ZNCCIA; 3 TCCIA membership & marketing strategies Provide Technical Assistance to development was conducted for three Regional Chapters of Mbeya, LGAs & Other Partner Morogoro & Iringa; 1 Mbeya City Council (CC) LGA was supported to Institutions (such as TNBC & develop Revenue Enhancement Plan; 1 ZNBC was supported to develop ZNBC) through Expert Volunteers its PPD guidelines; 6 LGA Investment Promotion strategies were developed for Morogoro, Mbeya, Mufindi, & 3 for Unguja LGAs, Urban MC, West A & West B; and, 3 LGAs were supported to review & align their strategic plans with the current national industrialization strategy. Conduct LGA IAAs in two Activity 1.2 Zanzibar LGAs & Strengthen 2 IAAs were conducted in the Wete & Chake Chake LGAs of Pemba. To Innovative Two LGAs’ Capacity to complement these assessments, 2 action plans were developed with Approaches and Implement, Monitor & Evaluate Mechanisms the support of volunteer experts (VE). their Action Plans Used to Enable Strengthen the Capacity of LGA the departments within the ENGINE supported the 7 LGAs: 1 in Mbeya CC, 1 in Morogoro MC, & 5 Implementation ENGINE ZOI to Undertake Zanzibar, to conduct ward-level consultative meetings in which all of Pro- Policy Analysis, Design, stakeholders involved were trained on the By-law reform processes & Economic Implementation & Advocacy Growth and policy analyses. Supported 27 By-laws reviews for LGAs in Morogoro (2), Guided by Women & Youth Investment Zanzibar (18), Mbeya (4), & Iringa (3). At the time of reporting, these By- Development Frameworks Policies laws are at different stages within the reform structure (3 to 5 Stages). (including USAID GIF) & Targets

Activity Planned Achieved 16 Roadmaps were developed, disseminated, & published publicly at 8 Support LGAs to Increase the LGAs. These roadmaps increase transparency in business licensing Number of Formally Registered procedures & facilitate business operations. Business license data were & Licensed SMEs collected & analysed to assess business formalization trends & introduce improvements to improve business enabling environment. Agricultural & Business Policy This has not been completed as planned. Analysis & Consultation 5 regional & district business councils were strengthened in Morogoro Establish/Strengthen Six (3), Mbeya (1) and, Iringa (1). The TCCIA Morogoro regional chapter Mainland District Business was supported in conducting its annual General Meeting in which their Councils & Three Zanzibar newly developed membership recruitment & retention strategies, Regional Business Councils to Lead Policy Reform which were drafted with the support of ENGINE, were approved. ZNBC was supported to develop RBC/DBC PPD guidelines. Support LGA Policy Units to This has not been completed as planned. Conduct Policy Impact Analysis Build the Capacity of a Research Activity 1.3: Organization/University to Link This is ongoing & a draft scope of work (SOW) developed, which is Effective Policy Local Pro-Growth Economic & currently undergoing internal approval process. It will be completed in Reform Business Investment Policies Frameworks year four (Y4). with LGA “Own-Source” Sustained Revenue Enhanced Capacity of Two Advocacy Groups to Raise This is ongoing, with preliminary steps having been taken to establish a Public Awareness of Pro- grant to implement this activity. It will be completed in Y4. Growth Economic & Local Business Investment Policies This activity is ongoing. A SOW has been completed & ENGINE is Specific Policies Reviewed that collaborating with President’s Office for Regional Administration and Assist the Growth of Women- Local Government (PO-RALG) to engage a consultant & VE to develop & Youth-Owned Small & Medium Enterprise (SMEs) guidelines & establish monitoring mechanisms for Youth, Women & people with disability facilitation loans.

Lessons Learned and Changes to Approach  In order to achieve sustainability, there is a need for mutual agreement with PO-RALG regarding PRPT and LGACI online system ownership, training, hosting and full implementation of the online system in line with their requirements and operational setting. To this end, we are shifting PRPT/LGACI online system hosting from Open University servers (that support e-Government) to a government accredited server in accordance with PO-RALG’s IT division needs.  To ensure President’s Office for Regional Administration, Local Government and Special Departments (PO-RALG-SD) ownership and sustainability of PRPT/LGACI online system in Zanzibar, we recognized the need to streamline the related training and hand over process.  It is wise and strategic to allocate greater validity periods for contracts used for local consultancies due to LGAs administrative delays and slow responses; this practice offers greater flexibility in the procurement process and is now being applied.

 That teaming-up of VEs and local consultants in undertaking policy reforms assignments complements skills and experiences that lead to more effective implementation, as well as helps build local capacity. This practice is now fully applied in all related assignments.

Component 2: Business Development Services In Year Three (Y3), ENGINE provided technical assistance (TA) to 95 business development service providers (BDSPs), meeting approximately 90% of the associated annual target. Component 2 recruited 33 new BDSPs; the total number of BDSPs that have signed collaboration agreements with ENGINE is now 130. Through the TA provided, these BDSPs have introduced new products and attracted new clients, ultimately increasing Business Development Services (BDS) sales as compared to FY18. Coupled with aggressive marketing, this TA led to the value of sales of the assisted BDSPs to exceed the annual target by 50 percent.

Additionally, BDSPs in all four Program locations managed to initiate processes to establish regional BDSPs alliances/networks. The regional BDSP alliance in Mbeya managed to complete the registration process and secured a license from Business Registration and Licensing Agency (BRELA), while in Iringa, Morogoro and Zanzibar the networks managed to draft constitutions and articles of associations to guide their operations. Establishment of the BDSPs regional networks will go a long way to ensure sustainability of the BDS market as it will provide BDSPs with a platform to control the quality of services offered in the market and unified voice to advocate for matters of common interest.

Through the e-Coupon mechanism, 20 BDSPs attracted and engaged more than 760 new Micro, Small and Medium Enterprises (MSMEs) (about 91% above the yearly target) to purchase BDS in FY19. The e- Coupon mechanism was further fine-tuned to exclusively provide support to MSMEs operating in agribusiness and nutrition value chains, thereby ensuring a better alignment with Feed the Future Tanzania’s objectives.

Activity Planned Achieved In Y3, 33 new BDSPs were identified, assessed, developed TA plans, and signed collaboration agreements with ENGINE. TA plans of 40 existing BDSPs were revised and 9 scopes of work were developed for volunteers and consultants to provide TA to BDSPs. 5 VEs and two local consultants were deployed to provide TA to 53 BDSPs. By 2.1 Increase the the end of Y3, 295 BDSPs had cumulatively received TA from the Supply of Provision of Technical Assistance Program. As a result of the TA provided BDSPS reported to have Quality BDS to to at least 40 BDSPs introduced 99 new products in their menu of services and a total of the Market 3,487 new MSMEs purchased services from 62 of the assisted BDSPs during the reporting period. In Y3, the value of sales by the assisted BDSPs increased to 603,051 USD compared to 333,682 USD Y2. By the end of the reporting period, the value of sales by the ENGINE supported BDSPs amounted to 936,733 USD or 69 percent of the life of project (LOP) target.

Activity Planned Achieved 6 BDSPs received matching grants from ENGINE to implement activities that will lead to the expansion of BDS to new markets and Support 12 BDSPs through clients. The grants have enabled 4 BDSPs to develop promotional Matching Grants to develop and marketing materials, whereas 1 BDSP finalized a BDSP market innovative BDS products & delivery mechanism assessment and produced 4 new manuals to provide services to MSMEs. Actual service delivery to the new clients by all 6 BDSPs is anticipated to commence in Q1 of Y4. Mbeya regional BDSP network (with 15 founding members) managed to complete the registration process and acquired its Support minimum of 40 BDSPs to certificate from BRELA. 29 BDSPs from Iringa, Morogoro, and form 4 regional BDSP networks Zanzibar initiated processes to draft their constitutions and Memoranda/Articles of Association to guide operations of their networks/alliances. More than 20 meetings were organized in ENGINE’s 4 locations and a total of 3,233 MSMEs were sensitized about access to BDS and financial services. Through the public awareness and linkage Organize Public Awareness meetings 62 BDSPs reported to have acquired 3,487 new clients Campaigns to sensitize MSMEs on during the reporting period. 3 meetings were organized in Mbeya, BDS & financial services Iringa, and Morogoro to introduce BDSPs to the following Tanzanian government institutions: BRELA, Food and Drugs Authority, LGAs, Tanzania Investment Center, and Bureau of Standards. 762 MSMEs received e-Coupons to purchase BDS at discounted prices. Out of these, 698 e-Coupons were redeemed. Cumulatively, 2.2 Increase Provide Smart Incentives to 200 by the end of the reporting period, 1,252 MSMEs had received e- Demand for MSMEs through the e- Coupon Coupons to purchase BDS at discounted prices. Through this tool, formal BDS system 20 BDSPs managed to attract 762 new clients that purchased BDS worth around 450,000 USD during the reporting period.

Lessons Learned and Changes to Approach  Most small holder farmers involved in agribusiness value chains would improve their operations if they received appropriate BDS; unfortunately, small holder farmers have shown little ability and willingness to pay. ENGINE has responded to this challenge by focusing in selected business clusters along the agricultural value chains by capacitating BDSPs to identify demand and tailor their services to meet the demand of MSME groups as opposed to serving MSMEs individually.  The six BDSPs that received ENGINE grants designed and prepared to produce BDS marketing and promotional materials. According to the grant agreement and marking and branding strategy, the materials required markings to show Program and donor logos. However, experience from the field shows that marketing materials bearing donor and program logos are counterproductive as they give the wrong connotation to MSMES that the services are already funded by donors. ENGINE responded to this challenge by submitting for, and later receiving, a waiver from USAID and permission was granted to exclude the donor and program logos from these materials.  BDS market distortion emanating from free services from other donor-funded and/or government supported programs continued to be a challenge. To counter this issue, ENGINE has made concerted efforts to promote partnering BDSPs to other development partners and LGAs. Increasingly, many Institutional Partners (IPs) are utilizing ENGINE supported BDSPs to serve their MSMEs beneficiaries.

 One of the services frequently requested by MSMEs is support in business formalization and compliance procedures. Unfortunately, the majority of the ENGINE supported BDSPs did not have this expertise. The Program responded to this challenge by deploying a local short-term consultant who compiled a business formalization guide and oriented ENGINE-assisted BDSPs in Mbeya, Iringa, and Morogoro on how to apply the guide and offer business formalization services to MSMEs.

Component 3: Financing for Growth This year, ENGINE expanded its group of partner financial New FI Partner Amana Bank institutions (FI) to include new DCA partner, Amana Bank. With  Awarded subgrant w/value of approval from USAID, Amana has been paired with an approx. 55,300 USD focused on environmental policy expert to design assessment tools consistent women- and youth-owned with DCA guidelines. ENGINE continues to build the capacity of the MSME lending; financial services sector at the systemic level through its work with  Assigned w/Environmental the Tanzania Institute of Bankers (TIOB) both in strategic planning Specialist to develop new and training support. environmental management Program outreach touched over 3,200 MSMEs with messages of policies compliant w/local and BDS, financial services, and awareness of information accessible DCA regulations and through the Bizfundi platform. Development continued on the requirements; and, Bizfundi platform throughout the year: use of the platform  Linked w/clusters of MSMEs in continued to grow with over 3,500 registered users. ENGINE agricultural/nutrition value- continued to support BDSPs in providing credit readiness services chains to support lending. to MSMEs, eventually revealing approximately $244,000 in credit facilitated.

Twelve volunteers and consultants provided TA under ENGINE’s Component 3 during FY19. While external and internal disruptions continued to make effecting policy changes within partner financial institutions difficult, ten significant changes were made. Most of them stemmed from ENGINE’s grant activity with Yetu Microfinance. During Year 3, Yetu scaled up its rural agribusiness lending and issued over $250,000 in microloans to over 800 borrowers. Additionally, this FI partner operationalized two new Islamic finance products for the Zanzibar market with its first clients set for early FY20.

Activity Planned Achieved Management & Issuance of Financial ENGINE’s grant to Yetu Microfinance has been successful in extending financial Institution Grants, services to rural youth in the mainland and developing a new loan product that 3.1 leading to 2,500 loans will soon be used by Muslim farmers and small business owners in Zanzibar. Yetu Technical facilitated from up to 8 issued over 820 loans tied to its grant activity in Y3. Assistance FI grants to At the start of Y3, ENGINE explored the potential for facilitating financing to large Financial landholding pyrethrum farmers. ENGINE collected financial data from farmers, Institutions Develop Value Chain developed financial models, and met with finance institutions. Ultimately, it was Financing Solutions determined that the constraint to accessing financing was farm management. The financing opportunity was eventually tied to a parallel activity promoting the hiring of internationally trained farm managers through Sokoine University Graduate Entrepreneurs Cooperative (SUGECO).

Activity Planned Achieved ENGINE added Amana as a formal financial institution partner in Y3, bringing the total number of partners to 5. 7 international and domestic experts worked with ENGINE partner financial institutions, covering areas such as SME lending, SME risk management, project management, leadership, youth lending, Islamic finance, and customer service. Ongoing TA to partner ENGINE supported TIOB to develop training courses on SME risk management and FIs; including adding financial modeling, bringing the total number of ENGINE-supported courses to 4. one new FI partner & This year, TIOB offered ENGINE-supported courses 5 times. training 125 bank staff In total, 247 bank staff were trained during Y3, either directly through ENGINE experts of indirectly through TIOB. ENGINE further supported TIOB with the development of a new strategic plan designed to improve their value proposition to members and diversify the Institute’s revenue base. As a result of ENGINE support, 10 new or revised policies and practices were reported among partner financial institutions. In Q3, questions about credit readiness were added to the quarterly data collection questionnaire. From there it was revealed that BDSPs reported Credit Readiness facilitating over 500 MSME loans worth a total of approx. 244,000 USD. During Y3 Support, including a ENGINE facilitated linkages between BDSPs and financial institutions, including joint activity with introducing 30 BDSPs to banks, including Amana Bank in Zanzibar and Iringa, and NAFAKA, providing FINCA, VisionFund, and LULU Savings and Credit Cooperative Organization BDSPs with at least 1 (SACCOS) in Mbeya. ENGINE partnered with the NAFAKA program to allow 5 short-term technical ENGINE credit readiness trained BDSPs to provide credit and institutional assistance (STTA) & assessments of 18 NAFAKA-supported producer groups. In addition to being paid negotiating at least 1 by NAFAKA for their work, the BDSPs received on-the-job support from ENGINE VE special referral arrangement, leading Janet Buresh. ENGINE partnered with TIOB to conduct a 3-day agriculture finance to a planned 350 training in Mbeya and Iringa that was open to both bank staff and BDSPs. 33 BDSPs MSMEs receiving loans attended the training. Lastly, ENGINE developed a table of 25 loan products valued at a total of offered by its financial institution partners to BDSPs to help raise their knowledge approx. $1.5 - 2m of available options and connect them to the best funding opportunities. The program was unsuccessful negotiating any special referral arrangements with a financial institution in Year 3. This effort will continue in Y4. Total outreach for the year was 3,233 MSMEs, surpassing the annual target of 2,000. Of these, over 60 percent of these MSMEs are either owned or operated by 3.2 youth and over 40 percent are owned or operated by women. The majority of the Outreach outreach was done through in-person events, which were supplemented with and At least 2,000 MSMEs further social media outreach. Within ENGINE’s zone of influence (ZOI), the Pipeline reached through location with the largest number of MSME reach came from Mbeya, followed by Develop- ENGINE outreach Morogoro. To further improve access to BDSPs, in Y3 ENGINE developed a series ment of paper BDSP directories. The directories list BDSPs in each region, services offered, and contact details and serve as a “paper Bizfundi.” The directories are a valuable resource for in-person outreach and a more appropriate tool for business owners who are less comfortable with technology. More than 12 features and upgrades were added to the platform in Y3, including 3.3 streamlining the login process, adding searches for financial institutions, loan Develop- products, online training courses, a podcast player, an online marketplace, and ment of Development of new regular SMS notifications. 5-remote volunteer experts also contributed user the features design/experience support. In total, over 800 MSME accounts were created during Bizfundi the year, representing a 26 percent increase on the previous year, bringing the Platform total to over 3,500. Feedback collected from BDSPs in Q3 showed that 47 percent of BDSPs surveyed indicated getting new business leads through the platform.

Activity Planned Achieved Work on transitioning the platform to a host organization progressed, albeit at a Transition to local host slower pace than planned, leading to the recruitment of additional temporary support in Q3. The first public announcement of the process to select a host organization is now planned for the first quarter of Y4.

Lessons Learned and Changes to Approach  Institutional will continues to be one of the most critical success factors. This is evident when comparing ENGINE’s engagement with TIOB to some of its financial institution partners. TIOB’s leadership is committed to making changes to improve its responsiveness and the Institute sees ENGINE support as a key resource in attaining that objective. TIOB has consistently been responsive, action-oriented, and willing to commit resources for joint activities. Other partners have been reluctant to commit to implementing changes aimed at improving performance and MSME orientation. One of the ways that we hope to catalyze greater buy-in from partners in Y4 is by making follow-on VE support contingent on implementation of recommendations made by the previous VE. This should also help ensure that VE assignments are impactful.  Aside from Yetu, Component 3 grants struggled. Bank of Africa Tanzania did not pursue their grant opportunity beyond a concept note. Lulu SACCOS voluntarily withdrew from the grant, citing concerns related to Lulu’s capacity and the grant’s timing, terms, and cost-share requirement. Amana Bank’s grant was approved by USAID, but the bank struggled to produce the required revolving loan fund policy to initiate operations before the end of the fiscal year. Closer oversight and guidance from ENGINE will be required to assist the current grantees meet their targets.  While investment opportunities have been identified within ENGINE’s targeted value chains, the extent of follow-up and legwork required of ENGINE staff to bring them to fruition has been substantially greater than expected. ENGINE learned that securing financing required a greater than anticipated allocation of resources. As a result, ENGINE has committed greater human resources to its value chain development activities in Y3 and Y4, supplemented by a value chain consultant.  While the implementation among the BDSPs is not as originally envisioned, the credit readiness support to MSMEs appears to be working. The key learning is that the BDSPs preferred connecting their MSME partners to banks outside of ENGINE’s partner network, so the linkages weren’t being captured through ENGINE’s data collection. The other key insight has been how important incentives from banks are to BDSPs. During Y4, ENGINE will make a concerted effort to broker one or more concessions from banks to BDSPs who refer creditworthy MSMEs for loans.

Cross-Cutting: Value Chain Investment Opportunities During FY19, ENGINE formalized its value chain approach. A reassessment and strategic prioritization of identified opportunities was conducted from March to May. A structured implementation of activities began immediately following the finalization of a work plan in June. Through this process, the previously selected dairy value chain was replaced with salt, given its greater potential for impact and connection to nutrition.

Salt: To date, ENGINE’s support to Swahili Coast Salt Company (SCSC) and its salt farmers has covered strategy, market access, facility design, quality control requirements, US import requirements, solar salt farm engineering and hydrology, access to finance, and BDS needs. ENGINE has encountered delays

8 finding a willing financial partner and in recruiting a solar salt farming expert, but both were secured by the end of Y3. Salt farm assessments and loans for BDS and farm upgrades are planned for next quarter.

Pyrethrum: ENGINE’s work in the pyrethrum value chain has focused on increasing payments to smallholder farmers through improved quality control and increasing the supply of pyrethrum to Pyrethrum Company of Tanzania (PCT) by encouraging more large landholders to devote a portion of their land to pyrethrum cultivation. This activity is being conducted in partnership with SUGECO and promoting the use of SUGECO-trained farm managers. Previous efforts to link pyrethrum growers to financing exposed the lack of farm managers as a barrier to accessing credit from commercial banks. In support of this promotional activity, an ENGINE VE worked with PCT and SUGECO to develop new marketing materials.

Poultry: ENGINE is supporting the establishment of poultry operations in two communities that neighbor tourist sites: Makifu village outside Ruaha National Park and Kilimajuu in Zanzibar. Members of each community committed to attend an upcoming poultry rearing training offered by Silverlands. In Makifu, village-level meetings were held to identify persons interested in poultry raising and form producer groups. Seventy villagers agreed to participate across six sub-villages. In June, the first order of 424 chickens were delivered to Makifu. In September, an ENGINE VE traveled to Makifu and Kilimajuu to develop business models for each location. The first delivery of eggs to clients is expected in December.

PROGRAM CONSTRAINTS Component 1  Frequent changes in LGA leadership slowed the implementation of agreed upon policy reforms, while new LGA staff members had to be oriented on ENGINE’s mission.  ENGINE’s activities are not integrated into LGAs’ Annual Plans and Budget, which makes it difficult to implement program activities, as ENGINE and LGAs are supposed to share implementation costs.  Difficulty in sourcing needed volunteer experts and local consultants to facilitate and execute this year’s planned activities in a timely matter.

Component 2  Linking BDS providers with key government institutions is critical for sustaining the BDS market. In some places, political sensitivities made it difficult to promote BDS through a market mechanism. Some politicians do not want small holder farmers to pay for BDS.  Branding of BDS marketing/promotional materials with ENGINE logos is counterproductive as it creates false connotation to MSMEs that donors have already paid for the services. Promoting ENGINE supported BDSPs to other USAID IPs and other development actors is critical in order to counter the challenge of market distortion emanating from free BDS.  Implementation of activities supported by Matching Grants by the 6 BDSPs has been slowed down by frequent staff turnover. Also, BDSPs have shown inadequate capacity to develop high-quality proposals to receive matching grants.

Component 3

 Continued turbulence in the financial services sector and resulting turnover among senior leadership within partner financial institutions has left partner FIs reluctant to commit to reforms intended to

expand lending to underrepresented segments, like women-owned and youth-owned businesses. The difficulties among financial institution partners also prevented three financial institutions from qualifying for grants from ENGINE.  Local organizations have often proven to be difficult partners. ENGINE’s initial outreach strategy relied on leveraging existing networks to reach a larger number of MSMEs than ENGINE could do directly. However, there has been a general reluctance among local non-government organizations (NGOs) and associations to work with our program without receiving some direct material benefit, such as grant funding. Other ENGINE partners do cooperate but often don’t act with any sense of urgency, causing delays.  Government intervention can pose challenges, such as in price setting of commercial crops and restricting provision of private sector farmer training.  Lack of accurate statistical data, e.g., production quantities and farm gate/market prices, further complicate business planning and financial institution risk assessment.  Environmental factors and changing climate patterns can pose significant production risks—early and heavy rainfall in Pemba has shortened the salt harvesting season for many producers and pyrethrum seedlings are under threat from pests.

SUSTAINABILITY Component 1  The continued use of ENGINE’s LGACI to rank the performance of LGAs in both Tanzania mainland and Zanzibar, based on the level/quality of service delivery in their respective jurisdictions with an objective of promoting competitiveness will enhance the enabling environments and motivate investment. Collaboration with other development partners to roll out PRPT and LGACI online systems in all mainland LGAs and Zanzibar is another strategy to ensure ENGINE’s online system is sustainable and impactful in the long run.  LGAs have started incorporating DBC budget components in LGAs’ annual planning and budgetary processes geared towards building capacity of both public and private sectors in policy reforms through PPDs. This will ensure sustainability of RBCs and DBCs. This approach, coupled with building the capacity of TCCIA and LGAs, has improved the working relations between the public and private sectors and increased private sector participation in policy reform processes.  ENGINE’s support to PO-RALG in undertaking the institutional review for designing the new Decentralization Policy of 2019 and designing the new Regional and Local Government Strengthening Program (RLGSP) provided an opportunity to advise the government on the importance of local business enabling environments, local economic development, and empowerment of LGAs to improve sub-national economies and local revenue generation for better service delivery.  ENGINE’s support in the development of Zanzibar LGAs’ strategic plans and review of LGA by-laws to align with the Decentralization by Devolution (D-by-D) Act will improve service delivery and the overall business enabling environment.  On the Tanzania mainland, ENGINE has supported two studies of the ongoing D-by-D implementation and D-by-D Act. These initiatives will enhance LGAs’ capacity to execute their

responsibilities more efficiently and improve service delivery, which will pave the way for improved local economic development.

Component 2  To ensure sustainability of the BDS market, ENGINE focused on creating business linkages between BDSPs, MSMEs, other USAID IPs, and key government institutions in Year Three. In the mainland regions of Mbeya and Morogoro, ENGINE organized a meeting between BDSPs and key government institutions responsible for business formalization. Through these meetings, BDSPs enhanced their understanding of business formalization procedures and therefore became better equipped to offer business formalization services to MSMEs.  Likewise, ENGINE continued to make concerted efforts to link BDSPs with other USAID IPs and development partners on the ground. Due to these efforts, other programs are increasingly utilizing ENGINE-supported BDSPs to offer services to other MSME beneficiaries.  In Zanzibar, ENGINE initiated discussions with the Business and Property Registration Authority (BPRA) whose aim is to enable BDSPs to offer business formalization services to MSMEs.

Component 3

 ENGINE’s work supporting the TIOB contributes to sustainability in several ways. First, by supporting the development of their strategic plan, TIOB is better able to identify the needs of its members and align its services to meet those needs. Second, by assisting TIOB develop new training courses, ENGINE is helping TIOB create new sources of revenue. These new revenue sources make the Institute less reliant on other sources and provide financial sustainability. A strengthened bank training institute means more bankers in Tanzania are able to receive training; and more bankers receiving training leads to an overall strengthened national banking sector.  The Bizfundi platform has continued to grow and support market linkages among businesses, business advisors, and financial institutions. The platform was designed from the onset to be as automated as possible, so that maintenance costs are minimal. The platform is planned to be transferred to a host organization through a competitive process that is intended to ensure the organization best positioned to keep the platform’s services available, with technical expertise, sufficient resources, and a compelling vision, is awarded the platform.  ENGINE’s training to BDSPs on credit readiness has started showing results. The tools, training, and market linkages facilitated by ENGINE will contribute to MSMEs accessing credit beyond ENGINE’s tenure.

GRANTS

In Y3, ENGINE received USAID approvals to award eight subawards worth a total of 209,137 USD, exclusive of cost share. ENGINE’s grant to Yetu Microfinance has been successful in extending financial services to rural youth and women, and grants to BDSPs on the expansion of BDS to new markets and clients. FINCA, which had been awarded their grant in Y2, failed to undertake planned activities, leading to their grant being terminated at the end of Y3.

Three other grants planned for Year 3 that included UMI SACCOS Limited, Jumuiya ya Changamoto from Zanzibar, and Vision Fund were halted, based on findings from ENGINE’s pre-award assessments.

PROGRAM OUTREACH AND COMMUNICATIONS During its third year of implementation, ENGINE developed and disseminated various promotional materials including flyers on policy reforms, e-coupons, credit readiness, and Bizfundi. Brochures describing BDSPs for all supported regions were also produced. Furthermore, four posters that provide a general overview of ENGINE and the work of ENGINE’s three components were produced. Promotional materials were disseminated to audiences at various outreach events and meetings. ENGINE produced 17 videos showcasing BDSP and MSME work within the project which will be used by BDSPs in their trainings and outreach events. The videos have also been shared through social media platforms. ENGINE continued using its Facebook page for outreach and to create awareness of its activities. Over 30 Facebook posts were shared and viewed by 288 followers in FY19.

GENDER AND YOUTH During Y3, ENGINE’s gender and youth (G&Y) initiatives continued to support both private and public sectors develop/revise their business-enabling policies with better consideration of women and youth issues. Implementation of these policies (i.e. Revenue Enhancement Plan, Investment Promotion Strategies, etc.) have direct benefit to MSMEs (more than 50 percent of micro and small businesses are women- and youth-owned). One Revenue Enhancement Plan suggested the allocation of retail space for street vendors at the airport. As most of them are youth-run, this plan will largely benefit them. Investment Promotion Strategies includes business opportunities and incentives such as land allocation for different types of businesses and infrastructure to support business operations. One of the investment strategies is the development of cold rooms at the Mbeya airport to support horticulture, a business which is largely dominated by women and youth.

In February 2019, the USAID Intra-mission Group focused on promoting gender equality and youth inclusion across the USAID portfolio visited the ENGINE project in Mbeya. During the visit, the team attended the PPD session on regulatory changes regarding the Loan Facilitation Fund for women, youth, and people with disabilities (PWD). They also visited the Zinduka women group, who were able to secure loans after going through credit readiness training provided by an ENGINE BDSP.

During Q2, the G&Y Working Group received training from a G&Y consultant. The objective of the training was to build capacity across the project to integrate gender considerations into its activities and ensure that all staff are cognizant of how gender integration is necessary to achieve project outcomes. The consultant also conducted ENGINE’s gender and youth mid-term review.

ENGINE celebrated International Women’s Day on March 8, 2019 supporting four PPDs in three districts of Zanzibar (West A, West B and Urban) and Iringa MC. In Zanzibar, ENGINE raised awareness for 251 women on how to use the BizFundi digital platform and other social media to publicize and grow their businesses. In Iringa MC, ENGINE facilitated a PPD meeting which aimed to implement policies and guidelines for promoting investment among women and youth entrepreneurs.

To encourage youth to use digital technology in their businesses, ENGINE collaborated with the USAID Advancing Youth Program to facilitate trainings to 58 community mobilizers to teach youth savings groups on how to access Business Development Services through the Bizfundi digital platform. Additionally, ENGINE raised awareness of Bizfundi for the students in a Mzumbe University Entrepreneurship camp event.

ENVIRONMENTAL COMPLIANCE

On May 30, 2019, ENGINE disseminated the Environmental Management (Environmental Impact Assessment and Audit) (Amendment) Regulations, 2018 to ENGINE affiliated BDSP managers in Mbeya during a meeting between BDSPs and key government institutions responsible for business formalization and compliance issues. Twelve BDSP managers attended. This dissemination was conducted to ensure BDSPs are informed of current changes to the host government’s environmental management framework and strengthen BDSPs’ capacity to support their clients.

During the final quarter of the year, ENGINE finalized its search for an environmental specialist to support Amana Bank Limited in developing an environmental management policy. This assignment will better position the bank to comply with environmental requirements under National Environment Management Council (NEMC), Zanzibar Environmental Management Agency (ZEMA), and USAID’s Development Credit Authority (DCA).

COMPONENT 1 Facilitation of Public Private Dialogues (PPD): In Q4, the ENGINE program supported 12 PPDs in the following sessions: one RBC in Iringa, Strategic Plans stakeholders' meetings in Kilosa and Kyela, trainings and baseline data collection in the Kilosa, Mufundi, Kyela, and (two) Pemba LGAs within the LGACI framework, and organizational development for the TCCIA Regional Chapters in Mbeya, Morogoro, and Iringa. ENGINE provided Membership, Marketing and Communications Strategies development in TCCIA chapters, as well as held a Business Round Table PPD meeting during the USAID Mission Director’s visit in Morogoro. Our successes in revamping RBCs/DBCs have attracted the attention of other development partners, such as the Agricultural Markets Development Trust (AMDT), who have shown interest in partnering with ENGINE to support RBCs and DBCs in the Mbeya region.

Policy Reform Tools - PRPT and LGACI: ENGINE undertook LGACI trainings and collected baseline data from LGAs in Kilosa, Kyela, Mufindi, Wete, and Chake-Chake. This exercise helped to inform ENGINE’s indicator 1A (Percent of target LGAs with improved or maintained Local Government Authority Competitiveness Index-LGACI scores). The progress results of these five LGAs in relation to indicator 1A will be measured over the nine-month period between September 2019 through May 2020. The ultimate outcomes will relate to overall improved service delivery to business entities.

Given the technical challenges related to limited server space within the PO-RALG, the E-Government Agency has been chosen by PO-RALG as the ideal hosting agency which exclusively hosts government systems. With ENGINE support, processes are ongoing to secure the hosting space and migrate the online system there. Once online, trainings-of-trainers (TOT) on using the online system will be conducted in all 11 of ENGINE’s supported LGAs. This will be followed by the application of the system by LGAs with continued support from ENGINE. PO-RALG and ENGINE searched for other development partners to assist in rolling out the PRPT/LGACI online system to all 185 LGAs on the Tanzania mainland.

Institutional Strengthening and Capacity Building through Volunteer Experts and Consultants Assignments: A VE supported the development of TCCIA Membership, Communications, and Marketing strategies in the Mbeya, Morogoro, and Iringa regional chapters. Additionally, three local consultants

13 helped build institutional capacities in: the use of the LGACI through trainings at five LGAs; Strategic Planning with LGA staff and their stakeholders in Kilosa and Kyela; and, Investment Promotion planning at six LGAs. A clear observation from these trainings is that there is an apparent need to support LGA investment forums and outreach efforts to ensure the effective implementation of developed Investment Promotion strategies. The objective would be to reach a wider audience and attract both national and international investors.

Roadmaps: A success story on the impact of the Crop Cess Roadmap for Kyela District Council has been prepared and reported. This roadmap has attracted more buyers beyond the Kyela district, including some foreigners. The private-sector’s awareness of the processes required for buying, selling, and exporting crops – especially cereals – has increased. The roadmap has motivated enterprises to do more business with greater ease. There is improved transparency and reduced incidences of corruption. After the publicity of this success story, ENGINE hopes other LGAs will adopt this and other roadmaps that enhance commercial activity and boost economic growth. There is potential for ENGINE to collaborate with other government agencies and border LGAs to develop trade facilitation roadmaps. The aim will be to streamline and facilitate trade across international borders with the East African Community (EAC), Southern African Development Community (SADC) countries, and other neighboring countries.

By-Laws: The ENGINE program has led the review and consultation of 18 by-laws from five LGAs in Zanzibar. The process in the Wete and Chake-Chake LGAs reached the policy review stage. By-law review processes in Mbeya City Council (CC) and Morogoro Municipal Council (MC) slowed during the quarter after getting through the analysis, consultation, and drafting/revision stages. Six policies (two in Morogoro and four in Mbeya) are currently seeking the approval stage. ENGINE has also supported PO- RALG to strengthen the decentralization process to improve local sub-national economies. In earlier program implementation, ENGINE provided technical and financial support to undertake an institutional review, delineating responsibilities for ministries, agencies, regional authorities, and LGAs for an effective decentralization policy. Additionally, the Program teamed up with other partners in sponsoring the drafting of the new Decentralization Policy of 2019. In Q4, ENGINE supported PO-RALG in formulating the next generation of decentralization programs, referred to as the Regional and Local Government Strengthening Program. These efforts will contribute to Local Economic Development (LED) and Empowerment.

Business License Annual Data Collection: For the first time, ENGINE has managed to collect and analyze business license data from all 11 LGAs. LGAs from the Tanzania mainland provided data for FY 2018/19 and Zanzibar LGAs provided data for FY 2016/17 and FY 2018/19. The results from the analysis shows the yearly trends of business formalization and informs indicator 1F: Average percent change from previous year in business licenses issued across all target LGAs.

COMPONENT 2 Recruitment of New Business Development Service Providers (BDSPs): During the fourth quarter of FY19, a total of 12 new BDSPs signed collaboration agreements to partner with the ENGINE Program. Four new BDSPs were recruited in Mbeya, two in Morogoro, and six from Zanzibar. By the end of the reporting period, a total of 130 BDSPs had signed collaboration agreements with ENGINE.

Provision of Technical Assistance (TA) to BDSPs: Three VEs and one local consultant provided TA to 53 BDSPs during the reporting period. Twenty-three BDSPs from Morogoro and Mbeya received TA from a

14 volunteer on the facilitation of market linkages for micro, small, and medium-sized enterprises (MSMEs). Another 50 BDSPs from Zanzibar, Mbeya, Iringa, and Morogoro received TA from two VEs on aspects of strategic planning. A local short-term technical assistance (STTA) assignment led to the compilation of a business formalization guide. The ENGINE team provided orientations to 30 BDSPs in Mbeya, Iringa, and Morogoro on how to apply the guide and offer business formalization services to MSMEs. As a result of the TA provided, eleven BDSPs reported to have introduced 22 new products to their MSMEs clients and attracted a total of 288 new MSMEs to purchase business development services (BDS) during the reporting period.

Facilitating Business Linkages Between BDSPs and MSMEs: The ENGINE Program facilitated ten meetings this quarter to create business linkages between BDSPs and MSMEs. In Mbeya, ENGINE collaborated with the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) center to introduce and link 15 BDSPs with 14 economic growth actors, including four other USAID IPs, SAGCOT partners, and three international development organizations. In Iringa, eight BDSPs were introduced and linked with ten poultry brooders. Four BDSPs in Mbeya were linked with leaders of 35 pyrethrum producer groups in Ileje district. As a result of the linkage meetings, 17 BDSPs reported to have acquired 288 new clients, resulting in an additional 200,338 USD in BDS sales.

Provision of e-Coupon to MSMEs: ENGINE relaunched the e-Coupon mechanism in Q4, enabling MSMEs operating along the agriculture and nutrition value chains to purchase BDS at discounted prices. A total of 35 BDSPs from the four program locations were re-oriented on the operations of the e-Coupon tool. Nine new BDSPs signed agreements to start utilizing them after meeting the required criteria. A total of 218 MSMEs received e-Coupons to purchase BDS from the authorized providers. Out of a total of 274 issued e-Coupons, 218 worth a total of 46,493 USD were redeemed. Cumulatively, 1,257 e-Coupons had been issued to MSMEs; 1,168 e-Coupons were redeemed` by the end of the reporting period. This led to the direct purchase of 98,000 USD worth of BDS by MSMEs.

COMPONENT 3

Expert-Led Technical Assistance: Banking and data analytics VE Tara Heusé Kenyon returned to work with the TIOB. This was Ms. Kenyon’s third volunteer assignment with ENGINE and her second time working with TIOB. Ms. Kenyon delivered a workshop on economic capital and risk management at the Bank of Tanzania (BOT) to five of their staff and 25 bank executives. Ms. Kenyon then traveled to Arusha to participate in the 19th East Africa Banking School (EABS)—a five-day regional training event that included over 100 participants from four countries. Ms. Kenyon was one of 11 featured speakers and led a multi-day masterclass on enterprise risk management.

Corporate Finance Executive Selena Martin spent two weeks working with management from Bank of Africa Tanzania (BOAT) to review end-to-end process flows. The aim of this VE assignment was to reduce BOAT’s attrition rate for small and medium enterprise (SME) customers and increase overall SME lending. Ms. Martin trained 13 BOAT staff and presented its leadership with over 30 customer-centric recommendations, currently under review.

Tanzanian Islamic finance expert Yassir Salim worked with Yetu Microfinance Bank to develop two new Sharia-compliant lending products for the Zanzibar market: Nuru Savings Deposit, and Nuru Murabaha Finance. To accomplish this, Mr. Salim developed new policies and procedures, established a Shariah

Supervisory Committee, and trained Yetu’s staff and the broader community on Islamic financing. Across four sessions, Mr. Salim trained eight Yetu staff, 69 local religious leaders, and 63 small business owners on Islamic finance principles and Yetu’s new products. Yetu officially launched the two new products in September 2019. By the end of his volunteer assignment, Yetu was so pleased with Mr. Salim’s impact that the microfinance institution (MFI) decided to retain him as an advisor. Details can be found in Annex 6.

In addition to Mr. Salim’s work, Yetu conducted leadership training to 20 group leaders from Mlimba, Mofu, Namawala, and Msolwa Ujamaa and engaged in community radio promotion in Ulanga. In Quarter 4, Yetu’s rural agribusiness grant activity led to 304 loans issued worth approximately $95,600.

MSME Outreach and Market Facilitation: From the first through the ninth of August 2019, ENGINE participated in the Nane agricultural fair. ENGINE staff manned tents in Mbeya, Morogoro, and Zanzibar. Over 500 MSMEs were reached during the event, and over 60 percent of MSME participants were women or youth owned. In September, ten BDSPs in Iringa were introduced to representatives from Amana Bank though an activity hosted by USAID’s Advancing Youth Program.

The Bizfundi market linkage and information platform launched a new FI search feature in Q4. Five FIs are featured on the platform thus far, and more will be added in time. Each FI has a profile page and a searchable map of branch locations. A searchable database of 25 loan products was also added. The platform had a total of 4,278 unique visitors during the quarter, which is similar to the previous quarter and 18 percent above the same period a year before. Progress continues for the selection of a host organization to assume control of the Bizfundi platform, with the first public announcement planned before the end of the 2019 calendar year.

CROSSCUTTING ACTIVITIES Value Chain Investment Opportunities

Salt: After more than two months of working to secure financing to salt farmers in Pemba through Amana Bank and with the harvest season fast approaching, ENGINE began seeking alternative financing options. Ultimately, the SCSC found a willing partner in CRDB Bank. CRDB offered competitive terms for borrowers and had traveled to Pemba to start opening accounts with SCSC salt farmers by the end of the quarter. Loans are expected to be disbursed in the next quarter.

ENGINE also facilitated the introduction of SCSC with SUGECO for the purpose of sourcing a solar dryer and an engineering business to build a commercial grade salt grinder for the processing plant.

Pyrethrum: ENGINE has linked SUGECO and the PCT into a joint initiative to conduct fee-based seminars targeted at larger landowners to promote adoption of daisy flowers for pyrethrum processing and the hiring of farm managers who have been specially trained by SUGECO. In support of this initiative, ENGINE fielded a graphic design VE to develop new marketing materials with PCT and SUGECO.

Poultry: ENGINE is supporting the establishment of poultry operations in two communities that neighbor tourist sites: Makifu village outside Ruaha National Park; and, Kilimajuu in Zanzibar. Poultry producers in each location have committed to paying into an upcoming poultry rearing training offered by Silverlands.

Gender and Youth During this reporting period, ENGINE continued to support both public and private sector policy reforms that strengthen women and youth involvement in business and economic activities. ENGINE supported TCCIA regional chapters that help develop youth groups and linked them with LGA community development departments for effective collaboration that will benefit not only women and youth businesses, but communities at large. Out of the 266 MSMEs reached at ENGINE-led outreach events with priority value chains, 136 (51 percent) were women and 89 (33 percent) were youth owned. Furthermore, 1,144 MSMEs that were new to ENGINE purchased BDS from BDSPs during this quarter, out of which 624 (55 percent) were women-owned and 644 (56 percent) were youth-owned.

As mentioned, ENGINE supported YETU Microfinance Bank develop new Islamic products to meet the needs of MSMEs in Zanzibar. Out of 121 participants trained on Islamic finance, 58 were women.

Grants Component 1: Both of the subgrants to LGTI and Office of Chief Government Statistician (OCGS) were closed in the final quarter of FY19.

Component 2: An exception to the Branding and Marketing Requirements for materials designed to promote and market services of ENGINE’s BDSP subgrantees was finalized and received on September 24, 2019. This will allow BDSP subgrantees to start to conduct promotional activities.

Component 3: Amana Bank head office staff responsible for the grant activity were briefed on the subgrant terms and conditions, including their procedures, regulations, tools, and templates. During the quarter ENGINE continued to encourage Amana to produce a revolving loan fund policy as requested by USAID. ENGINE continued to support YETU Microfinance Bank to implement the Women and Youth Enterprises Financing sub-activity. On September 23, 2019, ENGINE terminated the FINCA Microfinance Bank subgrant due to non-performance.

Communications During this reporting period, the communications team updated ENGINE’s promotional materials and developed four new posters to be used in outreach events. ENGINE also continued to use Facebook for outreach purposes and to create awareness of its activities. The communications team also participated in the national agricultural fair (Nane Nane) week’s commemoration in Mbeya, Morogoro, and Zanzibar, and covered a story on the event. The first “Quarterly External Newsletter” for ENGINE was produced and shared with USAID, IPs, and other stakeholders.

Monitoring, Evaluation, and Learning As intervention activities mature in Year 3, the MEL team continued to update and improve systems and data capture tools to better monitor and report on expected impacts – especially at key outcome indicators level. A key focus was on expanding measurement activities for capturing target MSME beneficiaries’ access to finance, investment, sales, and new employment creation. In the final quarter of FY19, the MEL team carried out an eight-day telephone survey of MSMEs engaged with BDSP partners across the four regions of ENGINE’s zone of influence (ZOI). Over 1,270 calls to MSMEs were made by four locally sourced enumerators; 494 survey responses were completed. This effort, combined with MSMEs reached directly via BDSP and ENGINE staff visits, led to the highest number of MSMEs

17 responses received in a reporting quarter to-date. The expanded monitoring and measurement activities this year has been a key contributor to the upturn in results across several key indicators – such as new employment creation – in comparison to previous years of reporting.

MEL TEAM ACTIVITIES OVER THE YEAR

The Monitoring, Evaluation and Learning (MEL) team continued to provide feedback and support to the component teams to prioritize activities that contribute to key custom and standard indicators of interest. Special focus was applied to the collection of data on indicators that have performed significantly below projected levels, or which ENGINE was unable to report to date.

One such example is Custom Indicator 1A “Percent of target LGAs with improved or maintained Local Government Authority Competitiveness (LGACI) Index scores”. In Year 3, ENGINE completed the development of the LGACI as well as conducted multiple trainings on the index to all of the 11 target LGAs in mainland Tanzania and Zanzibar. However, as the indicator measures the year on year improvement in LGACI scores, only the base year scores of these LGAs could be captured in Year 3. As such the MEL team intends to work jointly with Component 1 regional representatives and partner LGAs to undertake a follow-up round of scoring in March and April 2020. From this exercise ENGINE will be able to report on the proportion of LGAs maintaining or improving their LGACI scores in Year 4.

Custom Indicator 3A “Percent of DCA utilization among partner financial institutions” is another indicator which ENGINE was unable to report on in Year 3. The recent partnership created with Amana Bank at the end of Year 3 could potentially be a pathway to reporting on this in Year 4, although no LOP targets for the FI’s utilization of the facility has been set yet.

Periodic external and internally managed data quality assessments (DQAs) also played a role in providing feedback on areas of improvement to MEL systems. Between April and July 2019, an external DQA was conducted by Data for Development (D4D) on Year 2 reporting of 3 standard indicators. These included the now archived policy indicator (EG3.1-12); the access to agricultural financing indicator (EG3.2-27); and, the Youth participants indicator (YOUTH-3). The DQA consisted of an intensive MEL database review in Dar es Salaam with field verification visits to Mbeya and Iringa where interviews were held with public and private sector partners and ENGINE staff and management. In the final debrief session in early August, the DQA team shared the ENGINE preliminary results with senior management. Across the five data quality dimensions, ENGINE had an above average overall score of approximately 94 percent, confirming the validity of the indicator performance results reported to USAID each quarter.

Three internally managed DQA’s were also conducted in Year 3 to review the quality of reporting across the broader 32 standard and custom indicators in the ENGINE portfolio. The value of this exercise was justified during the internal DQA carried out in September on the three FI partners’ reporting in Year 3. Following site visit reviews of each of the FI’s management information systems, as well as in-depth interviews with staff involved in the data compilation process, the ENGINE team identified discrepancies in the unique MSME coding of lending data submitted by one of the FIs in Q2 and Q3. Following the FIs resubmission of data in October, updates to these quarters’ reported values of standard and custom indicators affected (EG3.2-27, GNDR-2, YOUTH-3, P1, 3C and 3D) were made in this report’s MEL Table.

ADJUSTMENTS BASED ON THE LEARNING AGENDA Component 1  To improve assignment execution, volunteer experts are being teamed up with local consultants to facilitate sharing local and international expertise, as well as instilling local capacity building.  To provide a wider base for reporting ENGINE’s indicator 1A through LGTI, the remaining 5 LGAs have been involved in LGACI training and baseline data collection.  To avoid frequent contract extensions/modifications as a result of LGAs’ sporadic programmatic changes, use a wider contract validity period for greater flexibility and implementation effectiveness.  Intervene on priority policy reforms for LGAs which improve the ease of doing business for the public-private sector, which also conforms to ENGINE’s scope of work. This approach will help to speed up assignment implementation and assure its timely completion.  Work with PO-RALG and other donors interested in decentralization and local economies, to disseminate ENGINE’s experience and gain further knowledge on how to improve sub-national business environment, operations of local economies, and generation of own sources of revenue for better public service delivery.

Component 2  During the reporting period, the e-Coupon tool prompted more than 1,000 MSMEs to purchase BDSs on their own for the first time. A significant number of these MSMEs came from sectors not fully aligned with agribusiness or nutrition value chains. However, towards the second half of the reporting period, the e-Coupon arrangement was adjusted to exclusively focus on MSMEs involved in agribusiness and nutrition value chains, therefore ensuring a better alignment with Feed the Future (FTF) objectives.  In order to increase and sustain BDS sales, ENGINE began to target business clusters in selected agribusiness and nutrition value chains as opposed to individual MSMEs, thereby identifying BDS demand and capacitating BDSPs to respond to that demand. By linking BDSPs with specific business clusters, BDSPs are enabled to develop and provide services that are needed by many MSMEs as opposed to serving one MSME. This shift allows BDSPs to earn more revenue and will contribute to the sustainability of the BDS market.

Component 3

 To get a larger and broader population of bank staff participating in ENGINE-supported training, ENGINE will conduct regional training workshops in each of the program’s four locations. Trainings will be open to staff of regional financial institutions and branches. A training needs assessment will be undertaken in the first quarter of Y4.  In an effort to make volunteer TA more impactful, we are planning to make continued volunteer support to FIs dependent on application of recommendations from previous volunteers. This change should further incentivize financial institutions to play a more active role in the development and delivery of expert-led TA and lead to more institutional-level changes taking place during Year 4.

Cross-Cutting Value Chain Opportunities  Poultry: The initial operational structure designed by Makifu for the poultry business failed to generate the forward momentum needed to achieve a functioning business. With counseling from ENGINE, the business minded leaders undertook a restructuring of the leadership team and installed a new team with more focus on creating a functioning business. This also entailed reducing the number of participants from 228 to 70 based on who truly could and would invest in the business.  Pyrethrum: In partnership with PCT, ENGINE designed and implemented BDSP trainings to create services to support the development of producer groups’ operational capacities to ensure increased supply and quality and thus, higher payments to farmers. With the failure of the SAGCOT Catalytic Trust Fund, PCT had endeavored to support the PG trainings, ENGINE pursued a realistic path that would have farmers cover the cost-share of their own trainings. Grouped trainings reduced the cost to each farmer and, in coordination with a small offset from ENGINE’s e-Coupon, the affordability was realistic in its approach. These efforts were unfortunately halted by government officials in Mbeya and Ileje who insisted farmers should not have to pay for their own trainings and that no trainings for farmers could occur without government approval. ENGINE has worked consistently and respectfully for over two months to find solutions which would enable farmers to receive the business-related trainings that will increase their profitability and help them invest in their own businesses.  Salt: ENGINE facilitated the connection of Amana Bank with SCSC to organize loans for up to 200 salt farmers on Pemba. This initiative was driven by two factors: 1) the DCA between USAID and Amana Bank; and 2) Amana Bank’s offering of Islamic financing. Unfortunately, the process faced many delays and the window of time to apply for financing before the start of the salt season in July closed. ENGINE assisted both Amana Bank and SCSC identify and alleviate a number of risk factors that may potentially affect the salt miners. Ultimately, the terms proposed by Amana Bank were not in accordance with the risks identified and the interest rates proposed were considered a non- starter for the farmers. ENGINE promptly moved to identify alternative banks who might wish to work on Pemba with the salt farmers. CRDB was the most interested and aggressive; they attended meetings and gathered information to prepare a realistic term sheet. The offering was 50 percent less than what Amana had proposed. Therefore, the SCSC agreed to work with CRDB and the two institutions are now moving forward with loan agreements and the establishment of 200 new farmer accounts.

In Y4, the MEL team will continue to work closely with component and cross-cutting teams to best document and share ENGINE successes as well as key lessons learned over the four-year project life cycle to internal and external stakeholders and audiences. These should add to USAID as well as the global development industry body of knowledge around implementation and impact of market systems type projects like ENGINE.

ANNEX 6 – SUCCESS STORIES

“It would not have been easy for us to reach where we are now in terms of quality and efficiency of our services without meeting SFEO BDSP. Thanks to SFEO’s support we now have reliable market access for our rice. Additionally, we are well focused in everything we do”, explains Mr. Festo Kulanga, the Chairperson for Tuungane Pawaga Enterprise Limited.

Tuungane Pawaga Enterprise Limited was founded in May 2014 by 30 farmers who organized themselves in a group with an objective of obtaining a joint storage facility for their rice paddies. According to Mr. Festo Kulanga, their group started by constructing a storage facility. Once the construction was completed, the group members mobilized their Tuungane Pawaga Enterprise Ltd members in their store. fellow villagers to store rice in the group’s facility. Their fellow villagers paid for the storage services, opening a stream of revenue for the group. Later, they received a milling machine from the Government of Tanzania and expanded their offerings to clients by providing milling services.

In late 2018, the group began to receive advisory services from an Enabling Growth through Investment and Enterprise (ENGINE) Program-supported business development service provider (BDSPs) called the Southern Zone Farmers Empowerment Organization (SFEO). As a result of the business development services received from SFEO, the group’s business has grown significantly.

In explaining how useful SFEO has been to them, Chairman Festo proclaimed: “Contrary to the past, nowadays our rice is well packaged and labeled with packaging materials designed for us by SFEO. Our packed rice is branded with our logo and includes an expiration date and an accurate weight measurement. This has added value to our product and hence increased sales.

Our current rice market includes a weekly sale of 5000 Kgs to the University of Dodoma’s Cafeteria and several customers in Arusha, Iringa, Mbeya, Dar es Salaam and Zambia. Our monthly profit earned through rice selling is over 20 million TZS. Due to increased market for

our rice, we currently mill up to ten tons of rice per day. This is a great achievement that our company is proud of”, clarified Mr. Festo.

Mr. Festo further explains that SFEO has helped them with the write up of a business plan that they have submitted to the Tanzania Postal Bank for the application of a 200 million TZS loan that will enable them to buy more rice paddies from farmers. This will ensure a constant supply of rice to their customers.

Additionally, SFEO has helped Tuungane Enterprises Limited with proper arrangement of their storage facility which accommodates 1,000 tons of rice daily.

SFEO started working with ENGINE as a Business Development Service Provider in February 2019. Among other support, ENGINE trained this BDSP on Festo Kulanga inspecting the packed rice at their store. skills in market research, agricultural finance and business formalization & compliance.

This success story is made possible by the support of the American people through the United States Agency for International Development (USAID). The contents are the sole responsibility of IESC and do not necessarily reflect the views of USAID and the United States Government.

Annex Six - 2 DEVELOPING SMALL AND MEDIUM SIZED ENTERPRISES THROUGH BUSINESS DEVELOPMENT EDUCATION

Located at the Iringa Municipal Council, Prospective Mindset (PROMISE) Tanzania Company Limited has been building the capacities of MSMEs through business management education since 2005. Despite having a large experience in working with MSMEs, its efficiency and capacity increased after getting into contact with the Enabling Growth through Investment and Enterprise (ENGINE) Program in 2017.

The PROMISE Company Limited’s Training Coordinator, Godfrey Sanga, stated that ENGINE has trained their company’s staff in various business aspects that enhanced their knowledge and efficiency in providing business development services BDSP Godfrey advising his client Salome on to MSMEs. agribusiness.

“Our staff have attended several trainings organized by ENGINE including entrepreneurship skills, digital marketing, business planning, business formalization and compliance, market linkage, record keeping and financial literacy. This has improved our work efficiency in serving MSMEs”, Godfrey adds.

Godfrey further explains that in June 2019, two staff from the PROMISE company Limited attended digital marketing trainings organized by ENGINE. This made them realize the importance of using online services and social media to reach out to their clients.

“Immediately after digital marketing training, we decided to open a WhatsApp group that links our clients so they may share their challenges and experiences in business. Currently we have over 120 MSMEs linked in this group”, stated Godfrey.

Veronica Busagira, a farmer at the Kihwelo irrigation scheme, and Salome Lyela, from Mkoga village, provide their review of the work of the PROMISE and the PROMISE’s WhatsApp group has helped them to learn new ideas on agriculture while networking with their fellow farmers in Iringa.

“I am so grateful to the PROMISE for adding me to their WhatsApp group. Contrary to the past, nowadays when I encounter challenges in my farming activities, I just consult my fellow WhatsApp group members and they advise me accordingly. This is done free of charge contrary to the past when I had to pay for consultation fees to agronomists”, explained Veronica Busagira.

Salome Lyela had a similar experience where she felt that whenever she encountered problems in her vegetable garden, she was able to consult her fellow MSMEs through the PROMISE WhatsApp group.

The company does not only networking services Veronica in front of her farm in Mkoga. through their WhatsApp group, the PROMISE Company Limited has been providing other business development services to MSMEs in Iringa including market linkages from the area, record keeping and development of successful business plans.

Veronica further explained that “In December 2018, when I was closer to harvesting Irish potatoes from my 1.5-acre farm, I consulted Godfrey and he linked me to various buyers in Iringa town. The buyers visited my farm and bought all the potatoes on my farm. I did not have any trouble in selling them. I earned a profit of 2.7 million shillings without struggling in my search for customers. The PROMISE Company also empowered me with skills in bookkeeping. This has helped me to have a clear understanding on expenditures and profit earned through my agricultural business.”

Salome Lyela explains that the PROMISE Company Limited’s support has enhanced her business efficiency and made it profitable.

“When I graduated from Tumaini University in 2016, I decided to start an agribusiness and hired a one-acre farm at Mkoga village in Iringa Municipal where I cultivated maize. Because I lacked enough knowledge in agriculture, this was not successfully done. I invested 460,000 TZS but only earned 200,000 TZS. Thank God I met Godfrey from PROMISE in mid-2018 who taught me agricultural business skills, bookkeeping, and he recently linked me to PROMISE’s

Salome waiting for her green pepper customers.

Annex Six - 4

WhatsApp group where I network with my fellow farmers.

The knowledge I received from PROMISE enabled me to start earning a good profit from my farm. Whatever I cultivate nowadays becomes successful. As an example, I currently harvested 8 sacks of green peppers each week and that gives me a profit of 50,000 TZS. This makes me live a comfortable life”, stated Salome.

ENGINE has been working with the PROMISE Company Limited since 2017.The trainings provided to the Company from ENGINE has resulted in their increased confidence in service provision to MSMEs as well as an increased number of clients accessing their services from 400 in 2017 to over 700 in August 2019.

Annex Six - 5

STRATEGIES FOR SUSTAINABLE REVENUE DEVELOPEMENT

For the past 3 years, our City Council revenue collection had not been performing well. Many of the existing businesses were operating without business licenses and were not paying the required taxes. Thanks to the USAID ENGINE Program for making us realize the gaps that contributed to decrease in revenue collection as well as providing us with the strategies to address the identified gaps, stated Cosmas Kyovecho, the acting economist for the Mbeya City Council.

In April 2019, the Enabling Growth through Investment and Enterprise Program (ENGINE) supported the Mbeya City Council to develop its Mbeya City Economist, Mr. Cosmas Kyovecho. revenue enhancement, monitoring and evaluation plan. The process involved an ENGINE volunteer expert teamed with a Tanzanian consultant who collaborated with the Council’s officials to analyze the gaps hindering revenue collection. At the end of their assignment, the team recommended strategies to enhance revenue collection and mobilization.

The process was participatory and involved key stakeholders including the City Councilors, and representatives from the private-sector, public-sector and small-medium enterprises (SMEs). The revenue plan was approved by the City Council’s management in June 2019.

Mr. Cosmas explained that prior to ENGINE’s support, the Mbeya City Council did not have a revenue enhancement, monitoring, and evaluation plan. Their revenue collection activity plans relied on the Central Government guidelines and orders. In 2018, when the Government of Tanzania removed two main revenue sources from Local Government Authorities (billboard and property taxes), the Mbeya City Council’s revenue decreased from 11 billion TZS in 2017 to 8 billion TZS.

According to the acting City Economist, the revenue enhancement, monitoring, and evaluation plan has enabled the Mbeya City Council to identify additional sources of revenue. These include, but are not limited to, the social economic projects at Mkapa and Azimio primary schools, TPSC’s building rent, crop cess, building permits, land survey fees, fisheries’ fees, and other sources within the City Council. The City Council officials also started working as a team in revenue collection as an immediate strategy to Expert Volunteer, Mr. Michael Malinoff facilitating revenue enhancement, monitoring and evaluation plan overcome the drop in collections, leading to workshop at the Mbeya City Council. an increase in revenue.

Through the application of a revenue enhancement, monitoring, and evaluation plan, we realized that many SMEs in the Mbeya City Council were operating without business licenses and hence our City Executive Director ordered all the supporting staff including messengers and personal secretaries to participate in the identification of unregistered businesses on Saturdays. Through this approach we reached out to a big number of SMEs who decided to acquire their business licenses. As a result, Mbeya City Council’s Revenue increased from 80% in 2018 to 110% in 2019! explained Mr. Cosmas.

Due to the positive results observed by the Mbeya City Council, ten other Local Government Authorities supported by the ENGINE program have requested similar support.

Annex Six - 7 Opening New Markets for Financial Institutional Partners

In Zanzibar, where the population is almost exclusively Muslim, many individuals and businesses are reluctant to take bank loans because the associated interest charges are forbidden by Islamic law, also known as “Sharia” law. The limited number of financial institutions offering Sharia-compliant financial services means that the use of credit to undertake investments in Zanzibar is under- utilized. Prospective borrowers attend an information session in Zanzibar held by Yetu Microfinance Bank to Yetu Microfinance Bank recognized this need introduce their new “Nuru” Sharia-compliant lending and, through a grant with the Feed the Future product. Tanzania Enabling Growth through Investment and Enterprise (ENGINE) program, Yetu set out to develop a new Islamic lending product for the Zanzibar market. Yetu turned to ENGINE for help in finding an Islamic finance expert. ENGINE recruited Mr. Yassir Salim, a Tanzanian Islamic finance expert with extensive formal training and professional experience.

Mr. Salim volunteered with ENGINE and Yetu to bring two new products to the market: the Nuru Savings Deposit; and Nuru Murabaha Finance, which is a form of supplier financing that sells goods to their customers on credit. To accomplish this, Mr. Salim had to develop new policies and procedures, establish a Shariah Supervisory Committee within the bank, and train Yetu’s staff and the broader community on Islamic financing.

Speaking of the training, Mr. Salim noted, I noticed that this knowledge [of Islamic finance] has been eagerly waited for. Participants showed interest in learning how Islamic finance works. The bankers [at Yetu] are now conversant with Islamic finance principles, Islamic leaders are now knowledgeable on how this will be done, and micro, small, and medium size enterprises [MSMEs] have shown much interest in utilizing the new Nuru products.

Across four-separate training sessions, Mr. Salim trained eight bank staff, 69 local religious leaders, and 63 small business owners on principles of Islamic finance principles and Yetu’s new products.

To comply with Islamic religious law, most of our customers needed Islamic banking, said the YETU Microfinance Bank’s Business Development and Project Manager, Mr. Kassim Fadhil.

Mr. Abdi Harith Juma, a Zanzibari farmer is one such example.

I have been longing to get a loan that is interest free; my Islamic religion teaches me this, says Mr. Juma. In early 2020, I will apply for a loan for a water supply system to support my farming activities in Fuoni, where I own a two- Mr. Abdi Harith Juma hopes to take a acre farm. This will include a water tank, water pump, loan from Yetu to improve irrigation on his farm. water pipes, and water tower construction materials. I look forward to increased efficiency and profit earned through my farming activities.

Ms. Mwantumu Omari is another local farmer who attended Mr. Salim’s training and hopes to take a Nuru loan from Yetu. Speaking of her experience, Ms. Omari stated, I am excited to learn that Yetu Microfinance Bank will start lending to us. I am planning to apply for a loan for fencing materials for my 2.5-acre farm in Mohonda village. This will enable demarcation of two portions of my farm: one will be for pawpaw cultivation; and the other one will be for chicken farming.

Members of the local religious community, including Sheikh Thabit Jongo, Head of Research and Community and Religious Interventions in Zanzibar’s Mufti office, were also appreciative of Mr. Salim’s efforts to expose them to the religious underpinnings and implementation of Islamic finance. Sheikh Jongo declared, I am in full support of this good product because the Muslims in Zanzibar will have access to interest free loans. This will make them accomplish their economic goals while observing Islamic Shariah. My office, through the trained Sheikhs, will collaborate with Yetu Microfinance Bank in sensitizing the community members to these products.

With so much appreciation for Mr. Salim’s support, it is not surprising that Yetu decided to retain him as an advisor after his volunteer assignment through ENGINE concluded. Mr. Salim will be one of three members of the newly formed Shariah Supervisory Committee. Ms. Mwantumu Omari attended the training by Mr. Salum. She plans to take a loan from Yetu to improve her farm.

Annex Six - IX

Thanks to ENGINE’s support with capacity building in starting Islamic financing products, we look forward to increased number of customers accessing our microfinance services, stated Yetu Business Development and Project Manager, Kassim Fadhil.

Annex Six - X