In a month of March 2021, I received an invitation to participate in a stakeholder engagement virtual sessions to review and contribute to Tanzania Five Year Development Plan III. Despite short notice and many duties, I decided to attend. Almighty guided me to select the “Blue and Digital Economy” session that included Start-ups, Innovation Enables, Financial sector, Tourism and Natural resources under the discussion.
In this session, I was joined by a friend and colleague Mr. Salum Awadh who specifically chaired the breakout session on financial sector and myself acted as a secretary. Despite of recognition of Islamic finance and Islamic economy in the ruling party (CCM) Election Manifesto for the General Election of year 2020, the proposed five year development plan had ignored completely Islamic finance potential to benefit our country and the people. After a discussion, we recommended to include Islamic finance instruments in diverse areas of financial sector in order to broaden and deepen our financial sector for the benefits of everyone.
Then came 29th June 2021, Tanzania Prime Minister Honorable Kassim Majaliwa launched the Five Year Development Plan (FYDP III) whose theme is “Realizing Competitiveness and Industrialization for Human Development.” I checked with my colleagues at Center for Islamic Finance Compliance and Advice (CIFCA), if anyone had a copy of the final plan. In short time, the plan was in my reach. A question came in my mind, ” will the sleeping giant awake in the global race for Islamic finance? Will Tanzania position itself to fully benefit from Islamic finance value proposition?” As i read the plan, I feel relieved that the plan featured in the need to introduce innovative products such as Islamic financial instruments as highlighted here below:
- Financing implementation of FYDP III.
The financial resource needed for the FYDP III is estimated at TZS 114.8 trillion comprising public and private sources. (This amount is three times the current budget of TZS 36 trillion. Under the current budget that starts today, out of TZS 36 trillion budget, TZS 17 trillion is expected to go towards funding the FYDP III in its first year. Following budgets, it is expected that FYDP will require TZS 18 trillion in 2022/2023, TZS 24 trillion in 2023/2024, TZS 28 trillion in 2024/2025 and TZS 26 trillion in 2025/2026).
Public sector sources of finance that will be used includes Sukuk (Islamic bonds). The plan reads “Non-traditional and innovative financing sources are emerging sources with potential opportunities to complement traditional sources in financing development projects. These sources include municipal bonds, impact investing, Diaspora bond, blue and green bonds, crowd financing, Fund of Funds (FoF) schemes, diverse equity-based instruments, insurance and risk financing and Islamic bond (Sukuk). The introduction of Sukuk bond is at advanced stage.“
- Expansion of Domestic Private Finance.
The plan recognized the need to advance Tanzania financial system by taking several measures such as:
- The Government will look into specific financial market regulations which allow for innovative products to different categories of beneficiaries.
- To diversify insurance products and expand the penetration of the insurance sector, the Government will accelerate the assessment of the Takaful model of insurance regulations. Approval of Takaful regulations is also likely to attract FDI in the country towards offering these services.
- To increase banking services uptake, the Government will assess a model that embraces all forms of banking models that, for instance, accommodating Islamic (interest free) banking products in the banking regulations and be tax-neutrally treated like conventional banking products.
- To increase digital uptake of financial services, the Government will encourage innovative Fintech products; as well as developing digital bank framework and regulation that can attract FDI towards set up of digital bank in the country.
- Promote the penetration of microfinance (including the SACCOS sub-sector) expand products that are inclusive e.g., Islamic products issue.
Whereas Sukuk is at an advanced stage, Takaful regulations are awaiting the Minister of Finance to approve and bring in new investors to the Insurance sector. Tax reforms to achieve neutrality for Islamic financial instruments have been submitted by stakeholders such as Tanzania Bankers Association for considerations.
I appreciate the government and the team that was responsible in collection of stakeholders views for the good work that culminated to this plan. These positive steps relates with what Honorable Minister of Finance statement that “in implementing the Third Five Year National Development Plan the Government will focus on stimulating an inclusive and competitive economy, strengthening industrial production capabilities and service delivery, promoting investment and trade, bringing development to our citizens and building human resource capacity.“
Finally, Her Excellency President Samia Suluhu Hassan delivered hope to Islamic Finance community in her 100 days of office. On this note, we are grateful. Now, through the slogan of the Sixth Phase Government of Kazi Iendelee, each of us has a responsibility to fulfil our responsibilities effectively in order to achieve effective implementation of this Plan.