Digital Finance Plus Readiness in Tanzania: Summary

WORKING DRAFT
Last Modified 7/24/2014 4:21 PM Eastern Standard Time
Printed 6/27/2014 8:10 PM Eastern Standard Time
Digital Finance +
Readiness
Tanzania

LastModified7/24/20144:21PMEasternStandardTimePrinted6/27/20148:10PMEasternStandardTime
1
We assessed the digital finance plus readiness along
6 dimensions
SOURCE: Client Survey (Oct 2011); McKinsey Quarterly Survey (Jul 2011)
Digital finance plus enabling environmentSector-level digital finance plus assessment
4.1 Sector description
4.2 Sector impact on low-
income households
5.1 Financial service needs
along the value chain
5.2 Financial gap analysis
along the value chain
5.3 Barriers to provision of
financial products
4.3 Sector-specific actors
and regulation
6.1 Potential applications
of DF+ to address
barriers
6.2 Viability of observed
and potential
business models
6.3 Scaling and execution
capabilities
4.4 Sector challenges
6
5
4 3
2
1
Readiness
1.1 Technical infra-
structure readiness
1.2 Telecom industry
readiness
1.3 Level of adoption
3.1 Relevant financial and
telco regulation
3.2 Government support
3.3 Use of DF+ by the
government
2.2 Digital finance
readiness
2.3 Level of digital finance
adoption
2.1 Overall financial sector
readiness

2
Sector readiness dimension
Sector-rele-
vant mobile
infrastructure
reach and
adoption
Readiness of
financial and
digital
financial
infrastructure
6
5
4 3
2
1
6
5
4 3
2
1
Role of
government
and
regulation
6
5
4 3
2
1
Severity of
sector
challenges
6
5
4 3
2
1
Financial gap
in sector
6
5
4 3
2
1
DF+ business
models and
scaling
6
5
4 3
2
1
Reach
Reach of mobile
infrastructure
Adoption of mobile
technology
Financial product
offering to sector
Availability of
DF+ solutions
Sector-specific
regulation
Role of
government
Stakeholder
complexity
Non-financial chal-
lenges in sector
Execution and
scalling ability
Depth of financial
gap
Availability of DF+
business models
Sub-dimensions
Applicability of
DF+ solutions
DF+ readiness assessment – DF+ implementation in the
agriculture sector faces varying levels of constraints
▪ 85% of the country are covered by a 2G network, with some
concern around the quality of service in the most rural areas
▪ High penetration, at ~60% of households, with some
concern around ownership of handsets and proficient
usage by poorest farmers
▪ Traditional financial institutions offer limited credit to
farmers without value chain actor guarantees or crop
deposit collateral; MFIs lend at annual rates of up to 100%
▪ Present but not scaled – WRS-based post-harvest credit
provision, input credit in closed-loop ecosystems, and
value chain payment facilitation
▪ No regulatory barriers – regulations on formation of
producer associations and export controls have been
relaxed
▪ Policy priority for the government; but public spending on
the sector is below the target of the 10% of national
budget
▪ Moderate complexity – several actors involved along value
chain, but roles and interaction are relatively well-defined
▪ Severe non-financial challenges related to quality farmer
education, organization, enterprise, and supply/demand
dynamics
▪ The majority of farmers cannot access credit support for
critical steps of input acquisition and post-harvest liquidity
▪ DF+ solutions can play a significant role by facilitating
value chain actors’ market linkages, reducing transaction
costs and financial transparency
▪ Value chain actors collaborate to share risk and create
“closed loop” ecosystems to provide of DF+ enabled
financial products in controlled circumstances
▪ Value chain actors have proven that they can successfully
execute, but solutions still apply to small niche of
“emerging farmers” meetings a set of selective criteria
6.2 AGRICULTURE – VIABILITY OF OBSERVED AND POTENTIAL BUSINESS MODELS
1
Binding constraint Readiness for scaling
2 3 54 Explanation

3
DF+ implementation in the health sector faces varying levels of
constraints
• 85% of the country is covered by 2G networks,
though selected rural areas remain a problem
Sector-rele-
vant mobile
infrastructure
reach and
adoption
Readiness of
financial and
digital
financial
infrastructure
6
5
4 3
2
1
6
5
4 3
2
1
Role of
government
and
regulation
6
5
4 3
2
1
Severity of
sector
challenges
6
5
4 3
2
1
Financial gap
in sector
6
5
4 3
2
1
DF+ business
models and
scaling
6
5
4 3
2
1
• High penetration at ~60% of households, with
some concern over female access to mobile phone
within HH as they seek most child care
• Low level of private lending, savings, or insurance
products for low-income HHs, with low-utilized
government-subsidized insurance as the exception
• Donor organizations adopting technology for
limited pilots, but there is a lack of pilots with
business models or providing financial products
• Free care creates low willingness to pay for
necessary services and low supervision leads to
sub-optimal care practice
• The government has played a neutral role in DF+
implementation; donors are driving development
• Complex stakeholder landscape with a mix of
public, private (incl. faith-based) providers and
active donors
• Severe non-financial challenges related to the
quality of care, availability of medical staff, and
awareness of illnesses among population
• The majority of low-income households do not use
any form of finance products in health; access to
financing for providers is limited
• DF+ solutions can address selected issues within
the health sector though major change will require
comprehensive reform
• Most pilots and solutions are subsidy-based,
though a few potential unexplored business
models exist
• No clear sign of scaling – given large government
role, scaling will require its explicit support
Reach
Reach of mobile
infrastructure
Adoption of mobile
technology
Financial product
offering to sector
Availability of
DF+ solutions
Sector-specific
regulation
Role of
government
Stakeholder
complexity
Non-financial chal-
lenges in sector
Execution and
scalling ability
Depth of financial
gap
Availability of DF+
business models
Sub-dimensions
Applicability of
DF+ solutions
1
2 3 54 Explanation
6.2 HEALTH – VIABILITY OF OBSERVED AND POTENTIAL BUSINESS MODELS

4
▪ 85% of the country is covered by a 2G network, with some concern
about the quality of service in the most rural areas
▪ High penetration, at ~60% of households, with some concern about
the ownership of handsets and proficient usage by poorest
households
▪ Lending to consumers and enterprises by banks and MFIs is minimal.
Robust equity financing for enterprises by VC actors and other
investors
▪ Several innovative energy enterprises are using DF+ to deploy
different financing solutions to consumers
▪ Highly conducive – existing solar enterprises are almost entirely
unregulated given their capacity is less than 100kw capacity
▪ The government is involved through two agencies n/a EWURA
regulates and REA facilitates – both are conducive to off-grid energy
development
▪ Little complexity – primary actors are energy enterprises and
households with demand for electricity access
▪ Moderate – a poor rural infrastructure inhibiting “last mile” reach and
lack of consumer knowledge of off-grid benefits are most notable
▪ Somewhat deep – almost all energy enterprises provide financing
support to consumers, but their own access to working capital is
limiting
▪ Highly applicable – allows enterprises to cut transaction costs,
enhance contract enforcement, and provide additional services
▪ Successful enterprises have identified winning technologies, built low-
cost, effective distribution networks, and established a loyal base of
customers
▪ Currently, SHS reach is 50,000-100,000 households. “True scale” of
1million + will be reached with the introduction of commercial lending,
consumer education and the expansion of distribution networks
DF+ implementation in the energy sector faces varying levels of
constraints
6.2 ENERGY – VIABILITY OF OBSERVED AND POTENTIAL BUSINESS MODELS
Sector-rele-
vant mobile
infrastructure
reach and
adoption
Readiness of
financial and
digital
financial
infrastructure
6
5
4 3
2
1
6
5
4 3
2
1
Role of
government
and
regulation
6
5
4 3
2
1
Severity of
sector
challenges
6
5
4 3
2
1
Financial gap
in sector
6
5
4 3
2
1
DF+ business
models and
scaling
6
5
4 3
2
1
Reach
Reach of mobile
infrastructure
Adoption of mobile
technology
Financial product
offering to sector
Availability of
DF+ solutions
Sector-specific
regulation
Role of
government
Stakeholder
complexity
Non-financial chal-
lenges in sector
Execution and
scalling ability
Depth of financial
gap
Availability of DF+
business models
Sub-dimensions
Applicability of
DF+ solutions
1
2 3 54 Explanation

5
DF+ implementation in the education sector faces varying levels
of constraints
▪ 85% of the country is covered by a 2G network;
selected rural areas remain a problem
▪ High penetration at ~60% of households, with
some concern about female access to mobile
phone within the household
▪ Low level of private lending and savings for
education as BoP consumers are considered
unattractive
▪ The government drives reform in the sector and
is currently not focused on DF+
▪ Regulation neither helps nor hinders growth of
DF+
▪ The government is a major player in the sector
and has not adopted technologies
▪ Government adoption would affect 95% of the
students in public schools
▪ Severe non-financial challenges are related to
absenteeism, quality of instruction, pupil:teacher
ratio
▪ The majority of low-income households do not
use any form of finance products for education
▪ DF+ solutions can play a part in improving
attendance, increasing the ability to pay for school
and access textbooks
▪ While models are impactful, they largely have
unclear business models
▪ Execution and scaling would need to be
undertaken largely by government actors
6.2 EDUCATION – VIABILITY OF OBSERVED AND POTENTIAL BUSINESS MODELS
Sector-rele-
vant mobile
infrastructure
reach and
adoption
Readiness of
financial and
digital
financial
infrastructure
6
5
4 3
2
1
6
5
4 3
2
1
Role of
government
and
regulation
6
5
4 3
2
1
Severity of
sector
challenges
6
5
4 3
2
1
Financial gap
in sector
6
5
4 3
2
1
DF+ business
models and
scaling
6
5
4 3
2
1
Reach
Reach of mobile
infrastructure
Adoption of mobile
technology
Financial product
offering to sector
Availability of
DF+ solutions
Sector-specific
regulation
Role of
government
Stakeholder
complexity
Non-financial chal-
lenges in sector
Execution and
scalling ability
Depth of financial
gap
Availability of DF+
business models
Sub-dimensions
Applicability of
DF+ solutions
1
2 3 54 Explanation

6
water sector faces varying levels of constraints
Sector-rele-
vant mobile
infrastructure
reach and
adoption
Readiness of
financial and
digital
financial
infrastructure
6
5
4 3
2
1
6
5
4 3
2
1
Role of the
government
and
regulation
6
5
4 3
2
1
Severity of the
sector’s
challenges
6
5
4 3
2
1
Financial gap
in the sector
6
5
4 3
2
1
DF+ business
models and
scaling
6
5
4 3
2
1
Reach
Reach of mobile
infrastructure
Adoption of mobile
technology
Financial product
offering to sector
Availability of DF+
solutions
Sector-specific
regulation
Role of the
government
Stakeholder
complexity
Non-financial chal-
lenges in sector
Execution and
scaling ability
Depth of financial
gap
Availability of DF+
business models
Applicability of
DF+ solutions
▪ High penetration at ~60% of households, with some
concern about female access to mobile phone within
the household
▪ Low level of financial sector lending for well
construction or filter purchase
▪ Mobile payments have been adopted by DAWASCO
but other products have yet to be adopted
▪ The government has supported DAWASCO adoption
of mobile billing
▪ Complex decentralized stakeholder landscape as
many different levels of government are involved
▪ Severe non-financial challenges related to
corruption, lack of management capabilities,
countrywide water shortage
▪ Majority of low-income households do not use any
form of finance products in water consumption
▪ DF+ solutions can play a part in lowering the cost of
delivery, increasing efficiency and expanding access to
water
▪ Clear business case for mobile billing and monitoring
though lease-and-own wells, and filter loans require
subsidy
▪ If parts of large donor financing were redirected
toward these impactful solutions, scaling should be
possible
▪ Water is a highly politicized topic and the
government has indicated it might prevent
companies from distributing it to low-income
households if it thinks they are profiting from the poor
6.2 WATER – VIABILITY OF OBSERVED AND POTENTIAL BUSINESS MODELS
Sector readiness dimension Sub-dimensions 1 2 3 54 Explanation

7
Agenda
Overall assessment framework
Sector analysis agriculture
Sector analysis and challenge identification
Assessment of financial service needs and gap analysis
Digital finance plus feasibility assessment
Sector analysis energy
Sector analysis water
Sector analysis health
Sector analysis education
SOURCE: Source
Access to and reach of mobile infrastructure
Adoption and reach of digital finance infrastructure
Role of the government and regulation

8
Sector-rele-
vant mobile
infrastructure
reach and
adoption
Readiness of
financial and
digital
financial
infrastructure
6
5
4 3
2
1
6
5
4 3
2
1
Role of
government
and
regulation
6
5
4 3
2
1
Severity of
sector
challenges
6
5
4 3
2
1
Financial gap
in sector
6
5
4 3
2
1
DF+ business
models and
scaling
6
5
4 3
2
1
Reach
Reach of mobile
infrastructure
Adoption of mobile
technology
Financial product
offering to sector
Availability of
DF+ solutions
Sector-specific
regulation
Role of
government
Stakeholder
complexity
Non-financial chal-
lenges in sector
Execution and
scalling ability
Depth of financial
gap
Availability of DF+
business models
Sub-dimensions
Applicability of
DF+ solutions
agriculture sector faces varying levels of constraints
▪ 85% of the country are covered by a 2G network, with some
concern around the quality of service in the most rural areas
▪ High penetration, at ~60% of households, with some
concern around ownership of handsets and proficient
usage by poorest farmers
▪ Traditional financial institutions offer limited credit to
farmers without value chain actor guarantees or crop
deposit collateral; MFIs lend at annual rates of up to 100%
▪ Present but not scaled – WRS-based post-harvest credit
provision, input credit in closed-loop ecosystems, and
value chain payment facilitation
▪ No regulatory barriers – regulations on formation of
producer associations and export controls have been
relaxed
▪ Policy priority for the government; but public spending on
the sector is below the target of the 10% of national
budget
▪ Moderate complexity – several actors involved along value
chain, but roles and interaction are relatively well-defined
▪ Severe non-financial challenges related to quality farmer
education, organization, enterprise, and supply/demand
dynamics
▪ The majority of farmers cannot access credit support for
critical steps of input acquisition and post-harvest liquidity
▪ DF+ solutions can play a significant role by facilitating
value chain actors’ market linkages, reducing transaction
costs and financial transparency
▪ Value chain actors collaborate to share risk and create
“closed loop” ecosystems to provide of DF+ enabled
financial products in controlled circumstances
▪ Value chain actors have proven that they can successfully
execute, but solutions still apply to small niche of
“emerging farmers” meetings a set of selective criteria
1
2 3 54 Explanation

9
Key takeaways: Agriculture sector Digital Finance Plus solutions
feasibility
AGRICULTURE – DIGITAL FINANCE PLUS SOLUTION FEASIBILITY
6.1 Potential applications of DF+ to address barriers
6.3 Scaling and execution capabilities
6.2 Viability of observed and potential business models
• DF+ can play a positive role in helping to address several of the financing gaps faced by smallholders in
agriculture by facilitating financial linkages between value chain actors, decreasing transaction costs, promoting
transparency in the flow of commodities and financial products, powering the aggregation and analytics of
data (behavioral, agronomic, and market), and enhancing contract enforceability
• Consequently, several value chain actors are partnering to provide innovative applications that enhance farmer
access to financing and increase farmer incomes. The most noteworthy products already in operation and/or
under development for the near term include: i) Warehouse Receipt System based post-harvest credit provision; ii)
input loans through closed-loop agriculture ecosystems; iii) information portals for agronomic, weather, and market
data; iv) e-wallets for input subsidy administration; and v) weather-indexed crop insurance to protect against extreme
weather conditions
• The current landscape of DF+ solutions is mostly driven by value chain actors, including seed and fertilizer
companies (e.g., Monsanto, Yara) and agro-processors (e.g., ETG), with the notable exception of the most
successful agronomic information portal, which is primarily driven by Tigo, a telco company
• Financial institutions lend directly to producers or producer associations in extremely rare cases –
however, banks like NMB and Barclays are extending credit with heavy collateralization/security guarantee through
value chain actors
• Scaling of DF+ solutions is hampered by several non-finance-related challenges, including
– Producer organization and entrepreneurship: many farmers are not encompassed in market-based
associations and lack the business knowledge to self-organize and form enterprising collectives
– Supply/demand market dynamics: the provision of financing is closely linked with robust markets for
particular crops, consequently favoring producers of high-value crops with market for agro-processing and
export (e.g., white maize, sunflower, coffee)

10SOURCE: Organization websites; press search; expert interviews; team analysis
A number of players meet the sector’s financing
needs to a very limited extent
Number/reach of existing initiatives
Minimal Moderate
LimitedN/A
Minimal but efforts underway
1 432 65
Information
Short term
Long term
Product/receive-
ables finance
Credit
Value chain lending
Physical asset
collateralization
Insurance
Credit
guarantees
Savings
Payments
5.2 AGRICULTURE – FINANCIAL GAP ANALYSIS ALONG THE VALUE CHAIN

11
DF+ can help in addressing some of the gaps
in the Agriculture value chain
6.1 AGRICULTURE – POTENTIAL APPLICATIONS OF DF+ TO ADDRESS BARRIERS
Detail
follows
Value chain segment Challenges
Product
evaluation
Finance
as barrier
DF+
potential
No other
barriers
Assessment of applicability of DF+ solution
1.1 Small arable land utilization
1.2 Limited average plot size
2.1 Inadequate fertilizer application
2.2 Weak demand for improved seeds
2.3 Underdeveloped capacity of agro-dealers
2.4 Inefficient government input subsidies
3.1 Farmer information constraints
3.2 Weak extension services
3.3 Low levels of mechanization
3.4 Heavy exposure to weather variability
4.1 Unavailability of storage warehouses
4.2 Post-harvest need for liquidity
4.3 Underdeveloped rural infrastructure
5.1 Low levels of commercialization
5.2 Non-consolidated aggregation/off-take
5.3 Poor access to market information
5.4 Weak market linkages
6.1 Low level of private investment
Land
Input provision
Production
Storage & Distribution
Marketing
Processing
high low

12
Based on the analysis of the current state and barriers to scale,
we suggest 5 DF+ applications for your further consideration
Top challengesDescriptionDF+ product
Unavailability of storage
warehouses
4.1 1. Product financing
2. Storage facilities
3. Qualities and standards
4. Market price information availability
• Inventory-based credit
provision to farmers for
certified commodities held in
storage at warehouses
• Digital Warehouse
Receipt System-
based medium-term
loans
Addressed Agriculture sector
challenge
A
Post-harvest need for
liquidity
4.2
Inadequate fertilizer
application
2.1 1. Product financing
2. Farmer eligibility
3. Value chain actor coordination
4. Side-selling risk
• Post-harvest, off-take-linked
input loan for farmers in
agriculture value chain
ecosystems
• Input credit for small-
holders in closed-
loop ecosystem of
integrated value
chain actors
B
Inadequate usage of
improved seeds
2.2
Inefficient government input
subsidy program
2.4 1. Farmer education
2. Mobile phone penetration
3. Privacy
4. Product financing
• Mobile phone platform for
digital issuance, verification,
and redemption of input
vouchers
• E-wallet for
government input
subsidy
disbursement
C
D Heavy crop losses to
extreme weather
3.4• Insurance product to mitigate
the risk of extreme weather
events with digital purchase,
claims filing, resolution, and
payout
• Weather-indexed
crop insurance
enabled by digital
platform
2. Weather condition and crop yield
correlation modeling
3. Depth of historical weather data
Farmer information
constraints
3.1• Digital portal for collection
and dissemination of
agronomic, weather and
market data, with extension
of financial products based
on detailed consumer profile
• Mobile system for
agriculture informa-
tion dissemination
and collection of
smallholder data
E 1. Primary information access
2. Usability of collected data
3. Marketing
4. Distribution
6.1 AGRICULTURE – POTENTIAL APPLICATIONS OF DF+ TO ADDRESS BARRIERS

13
DF+ solutions have different impact … Key takeaways
Impact
High
Medium
Low
Low Medium High
Feasibility
• Agriculture is a moderately attractive sector for the
adoption of DF+ solution – currently, few players in
Tanzania are operating on a commercially viable
scale, mostly due to the challenges inherent in the
sector, including the high volatility of harvest, the
fragmentation of the producer-base, and the limited
credit knowledge of smallholders
• However, several players are addressing some of
the systemic challenges, by for example, helping
farmers to self-organize into entrepreneurial
associations (RUDI, Faida MaLi) and creating
mobile-based informational portals for farmer
education (TigoKilimo)
• Additionally, value chain and financial actors are
banding together to innovate products like input
financing (e.g., Monsanto, Yara and Barclays) and
WRS-based liquidity (e.g., ETG and NMB)
• Going forward, mobile phones are going to be
critical to decreasing the transaction cost of
providing farmers informational and financial
services, assessing the credit risk of loan product
applicant and helping farmers link to markets
• WRS-based
credit provision
• Input credit in
closed-loop
ecosystem
• Weather-
indexed crop
insurance
• E-wallet for
digitized
government
input subsidy
• Digital
agronomic info
dissemination
and gathering
for future DF+
application
AB
C
D E
Potential DF+ applications in agriculture can be categorized based
on their feasibility and potential impact

14
In the agriculture sector, DF+ solutions have been applied to
enable financing solutions with some successIntervention
Discovery
Piloting
Scale
Application
Expansion &
differentiation
Global scaling
DF+ solution
maturity
• Growth financing/
subsidy
• Growth financing/
subsidy and
innovation
support
• Implementation
support
• Convene
stakeholders to
discuss
expansion
• Financial and
technical advice
during piloting
phase
• Best practice
sharing
• Operating model
development
activities
• DF+ has helped to address a number of the financing gaps faced by smallholders in agriculture, including by facilitating
virtual market linkages, decreasing transaction costs, and increasing the transparency of financial flows
• Value chain actors acting in concert, as well as a few telcos, have been the main drivers of DF+ solutions, with products
like WRS-based credit provision and off-take-linked input loans enabled by closed-loop ecosystems and risk-sharing
• Scaling and full commercial viability require more active financial institution involvement in the space, as well as improved
organization and entrepreneurship of producers, with development of market demand for more crop types
 DF+ business
model in ideation
or early develop-
ment stage
 Individual DF+
business models
are being piloted
in controlled
environments
 DF+ business
models are rolled
out under market
conditions
 Existing DF+
business models
are being
innovated and
differentiated
 Successful DF+
business models
are scaling
nationally
6.3 AGRICULTURE – SCALING AND EXECUTION CAPABILITIES

15
Agenda
Adoption and reach of digital finance infrastructure

16
DF+ implementation in the health sector faces varying levels of
constraints
• 85% of the country is covered by 2G networks,
though selected rural areas remain a problem
Sector-rele-
vant mobile
infrastructure
reach and
adoption
Readiness of
financial and
digital
financial
infrastructure
6
5
4 3
2
1
6
5
4 3
2
1
Role of
government
and
regulation
6
5
4 3
2
1
Severity of
sector
challenges
6
5
4 3
2
1
Financial gap
in sector
6
5
4 3
2
1
DF+ business
models and
scaling
6
5
4 3
2
1
• High penetration at ~60% of households, with
some concern over female access to mobile phone
within HH as they seek most child care
• Low level of private lending, savings, or insurance
products for low-income HHs, with low-utilized
government-subsidized insurance as the exception
• Donor organizations adopting technology for
limited pilots, but there is a lack of pilots with
business models or providing financial products
• Free care creates low willingness to pay for
necessary services and low supervision leads to
sub-optimal care practice
• The government has played a neutral role in DF+
implementation; donors are driving development
• Complex stakeholder landscape with a mix of
public, private (incl. faith-based) providers and
active donors
• Severe non-financial challenges related to the
quality of care, availability of medical staff, and
awareness of illnesses among population
• The majority of low-income households do not use
any form of finance products in health; access to
financing for providers is limited
• DF+ solutions can address selected issues within
the health sector though major change will require
comprehensive reform
• Most pilots and solutions are subsidy-based,
though a few potential unexplored business
models exist
• No clear sign of scaling – given large government
role, scaling will require its explicit support
Reach
Reach of mobile
infrastructure
Adoption of mobile
technology
Financial product
offering to sector
Availability of
DF+ solutions
Sector-specific
regulation
Role of
government
Stakeholder
complexity
Non-financial chal-
lenges in sector
Execution and
scalling ability
Depth of financial
gap
Availability of DF+
business models
Sub-dimensions
Applicability of
DF+ solutions
1
2 3 54 Explanation

17
Key takeaways: Health sector digital finance plus solutions
feasibility
HEALTH – DIGITAL FINANCE PLUS SOLUTION FEASIBILITY
• In Tanzanian health, DF+ is limited to small pilot projects at different stages of the value chain
• These pilots both enhance previously offered payments and financial products through DF+ or offer newly enabled products
• Based on the finance gaps and the ability of DF+ to overcome different barriers, we have identified 6 DF+ products that have the
potential to deliver significant impact e.g.:
– DF+ can enable a more effective system of financial flows through supporting a payment system that incentivizes
community ambassadors to generate demand for health services and a payment system that enables subsidy
transfers to target segments for targeted health interventions
– DF+ can enable an effective new type of payment through a system that ties doctors’ salaries to performance
– DF+ can also aid in the provision of finance products as its use makes existing private insurance and lease-and-own
equipment models more effective while also making a novel maternity savings product possible
• Current DF+ efforts in Tanzania have been implemented only for a limited number of providers but lessons for viability have emerged
• The success of enhancing payments through DF+ (demand generation schemes and subsidy distribution) in various NGO pilots
for single conditions/products suggests a broader applicability to other conditions
• DF+-enabled pay for performance and maternity savings products have shown encouraging results in limited pilots
• The viability of digital private provider insurance and lease-and-own equipment remains to be tested
• Major scaling barriers exist in Tanzania given low system performance, the large role the government plays, patient’s lacking
understanding of financial products (especially insurance), and the lack of management capabilities
• Individual DF+ solutions are unlikely to have a compelling value proposition as a comprehensive reform package is necessary to
address the sector’s core problems
• Scaling of any DF+ solution will require government buy-in given that it directly controls and funds the vast majority of facilities and
medical personnel; limited pilots could be rolled-out in cooperation with the faith-based providers

18
There are low levels of finance provision in
the Tanzanian health sector
Minimal ModerateLimitedN/A
Number/reach of existing financial products
Minimal but efforts underway
Finance for
country's
purchase of Rx
and equipment
Finance for
medical students
Finance for
facilities to hire,
pay, and
incentivize labor
Finance for facility
infrastructure
improvement and
expansion
Finance for
purchasing of
Rx/equipment by
facility
Finance for patients
to pay for desired
health services
Financing for health
education and
demand generation
High
Ability to
access
Build desire
to access
Labor
Provision of care
Infra-
structure
Rx/
equipment
Input production/distribution
Rx and
equipment
Medical training
1 2 3 4
Patient
DirectlendingInsuranceSavings
Payment
Routine
expenses
Catastro-
phic
expenses
Short term
Long term
Specific
type of
expenses
All health
expenses
Donor
financing
Facilities outside referral hospitals
are unable to get credit from
traditional providers
CHF and TIKA cover basic
medical expenses and are
available to all Tanzanians for low
subsidized prices; though overall
insurance covers <15% of
population
Traditional bank
administration
of small
accounts Is
unprofitable
and end
consumer travel
to make small
deposits has
high opportunity
cost
Donor focus on
communicable
diseases – HIV,
etc.
Lump-sum payments required for
treatment as no way exists to enforce
payment post-treatment
Under current model
economics do not
justify banks
determining credit-
worthiness of
patients
CCBRT
transfers funds
to
ambassadors
who provide
information
about maternity
complications
and facilitate
proper care
Flexible payment plans allowed
by teaching facilities
Some NGOs
build and operate
their own care
facilities
CHF does not cover most
secondary or tertiary care while
National Health Insurance Fund is
accepted at most secondary and
tertiary providers
5.2 HEALTH – FINANCIAL GAP ANALYSIS ALONG THE VALUE CHAIN

19
Product
evaluation
Not all identified challenges are caused by a financial barrier or
can be addressed through a DF+ application
6.1 HEALTH – POTENTIAL APPLICATIONS OF DF+ TO ADDRESS BARRIERS
Finance as barrier DF+ potential No other barriers
Medical training
2.1 System has health worker shortage
Rx and equipment
1.1 Temporary and systematic shortfall of drug supplies in
public facilities
Counterfeit drugs enter supply chain1.2
Supply chain deficiencies compromise certain Rx1.3
Labor
2.2 Inconsistent application of best practices across facil-
ities, especially in lower level care settings
Low staff motivation leading to attendance and
retention problems
2.3
Infrastructure
Inability to follow up with patients and tracking them
through a unified system
2.4
2.5 Facilities lack basic access to utilities
2.6 Hospital shortage creates large distances to seek care
Rx and equipment
2.7 Facilities lack ability to acquire and maintain
appropriate equipment
Ability to access
Inability of low-income households to effectively
access health expenditure financing products (savings
and insurance)
3.1
Households are unwilling or unable to pay for im-
portant health services
3.2
3.3 Transport constitutes a significant barrier to care
Desire to access
4.1 Households do not seek treatment in appropriate
health facilities when condition warrants it
InputproductionProvisionofcareDemandforcare
Detail
follows
)(
High Low

20
Top implementation challengesDescriptionDF+ product
Staff are often unmotivated,
leading to low attendance and
retention
2.3 1. Government buy-in
2. Fraud
3. Technical execution
4. Funding
5. Perverse incentives
• Incentive payment to primary
care healthcare worker for each
patient seen paid digitally based
on patient SMS confirmation
• DF+ enabled
performance
payments
2.7 Facilities lack ability to acquire
and maintain appropriate
equipment
1. Receptiveness to rural jobs
2. Absence of parts
3. Government buy-in
4. Technical capabilities
• Medical equipment leased to a
facility that works with a qualified
technician to collect cost-sharing
to pay back machine value
• DF+ enabled
Lease-and-own
PPP equipment
model
4.1 Citizens do not seek treatment
in health facilities when
condition warrants it
1. Ambassador education
2. Provider buy-in
3. Operations
4. Village education
• Incentive payment for
community ambassadors to
identify and refer emergency
cases, combined with payment
to cover transport for patient
• DF+ enabled
demand
generation
Inability of low-income
households to effectively
access health expenditure
financing products (savings
and insurance)
3.1 1. Quality
2. Demand generation
3. Operational implementation
4. Financing
• Time-bound, purpose-tied, DF+-
enabled savings products based
on incremental cash transfers
into dedicated account
• DF+ enabled
Maternity
savings product
Inability of low-income
households to effectively
access health expenditure
financing products (savings
and insurance)
3.1 1. Product understanding
2. Facility quality
3. Financial capabilities
4. Operations
• DF+ enabled insurance that
entitles the beneficiary to a full
suite of primary and maternity
care at a local private health
facility
• DF+ enabled
insurance
administration
3.2 Citizens are unwilling or
unable to pay for important
health services
1. Supply coordination
2. Facility adoption
3. Auditing
4. Adoption
• Subsidy payment to private
providers to enable purchase of
essential health products /
service by low income
households
• DF+ enabled
targeted subsidy
programs
Addressed health sector challenge
A
B
C
D
E
F
Based on our analysis of the current state and barriers to scale,
we suggest 6 DF+ applications for further consideration
6.1 HEALTH – POTENTIAL APPLICATIONS OF DF+ TO ADDRESS BARRIERS

21
DF+ solutions have different impacts … Key takeaways
Impact
High
Medium
Low
Low Medium High
Feasibility
A
B
D
C
F Demand
generation
E Subsidy
delivery
Pay for
performance
Lease-and-own
equipment
Insurance
product admin-
istrative tool
Maternity
savings
product
Requirements for scale
• Government buy-in is necessary given its role as a
funder of the majority of doctors and facilities
• Facility buy-in is necessary given that most mobile
solutions require doctor and administrator data input
• Improved health system quality to increase patient
system use; increased use will improve business model
feasibility and subsidy redemption rates
• Thus a government-led reform effort focused on quality
improvement is necessary to maximize DF+ impact
Steps to facilitate DF+ in health
• Focus initially on engaging the private sector to
implement DF+ solutions with sustainable business
models (lease-and-own equipment, maternity savings,
insurance administrative tool)
• Engage donor organizations to encourage the
implementation of more demand generation and subsidy
delivery efforts
• Encourage collaboration among stakeholders to
implement the solutions that will have the most impact at
scale
Potential DF+ applications in health can be categorized based on
their feasibility and potential impact

22
In the Health sector, DF+ solutions are nascent but growing
Discovery
Piloting
Scale
Application
Expansion and
differentiation
Global scaling
DF+ solution
maturity
• DF+ solutions in
ideation or early
development stage
• Individual DF+
solutions are being
piloted in controll-
ed environments
by selected actors,
especially donors
• Smaller players
have implemented
DF+ into
operations across
conditions
• Some DF+
solutions begin to
be used by large
health system
players (e.g.,
MSD, MOH public
facilities, large
private providers)
• DF+ becomes an
essential
component of the
provision of care
and proposed
health system
reform
• Growth
financing/
subsidy
• Growth
financing/
subsidy and
innovation
support
• Implementation
support
• Convene
stakeholders to
discuss
expansion
• Financial and
technical advice
during piloting
phase
• Best practice
sharing
• Operating model
development
activities
• The health sector lags other sectors in the adoption of mobile payments
• Donor organizations are piloting subsidy-based demand and access generation for a limited set of products
• The use of DF+ is unlikely to be a tipping point in financial product availability to facilities or BoP consumers
• However, unexplored business models do exist for maternity savings, insurance, and lease-and-own equipment
• The scaling of DF+ solutions will depend on government incorporation into comprehensive reform
6.3 HEALTH – SCALING AND EXECUTION CAPABILITIES
Intervention

23
Agenda
Sector analysis – energy
Digital finance plus solution feasibility assessment
Sector analysis – agriculture
Sector analysis – health
Adoption and reach of digital payment infrastructure

24
▪ 85% of the country is covered by a 2G network, with some concern
about the quality of service in the most rural areas
▪ High penetration, at ~60% of households, with some concern about
the ownership of handsets and proficient usage by poorest
households
▪ Lending to consumers and enterprises by banks and MFIs is minimal.
Robust equity financing for enterprises by VC actors and other
investors
▪ Several innovative energy enterprises are using DF+ to deploy
different financing solutions to consumers
▪ Highly conducive – existing solar enterprises are almost entirely
unregulated given their capacity is less than 100kw capacity
▪ The government is involved through two agencies n/a EWURA
regulates and REA facilitates – both are conducive to off-grid energy
development
▪ Little complexity – primary actors are energy enterprises and
households with demand for electricity access
▪ Moderate – a poor rural infrastructure inhibiting “last mile” reach and
lack of consumer knowledge of off-grid benefits are most notable
▪ Somewhat deep – almost all energy enterprises provide financing
support to consumers, but their own access to working capital is
limiting
▪ Highly applicable – allows enterprises to cut transaction costs,
enhance contract enforcement, and provide additional services
▪ Successful enterprises have identified winning technologies, built low-
cost, effective distribution networks, and established a loyal base of
customers
▪ Currently, SHS reach is 50,000-100,000 households. “True scale” of
1million + will be reached with the introduction of commercial lending,
consumer education and the expansion of distribution networks
DF+ implementation in the energy sector faces varying levels of
constraints
Sector-rele-
vant mobile
infrastructure
reach and
adoption
Readiness of
financial and
digital
financial
infrastructure
6
5
4 3
2
1
6
5
4 3
2
1
Role of
government
and
regulation
6
5
4 3
2
1
Severity of
sector
challenges
6
5
4 3
2
1
Financial gap
in sector
6
5
4 3
2
1
DF+ business
models and
scaling
6
5
4 3
2
1
Reach
Reach of mobile
infrastructure
Adoption of mobile
technology
Financial product
offering to sector
Availability of
DF+ solutions
Sector-specific
regulation
Role of
government
Stakeholder
complexity
Non-financial chal-
lenges in sector
Execution and
scalling ability
Depth of financial
gap
Availability of DF+
business models
Sub-dimensions
Applicability of
DF+ solutions
1
2 3 54 Explanation

25
Key takeaways: Energy sector – Digital finance plus solution
feasibility
ENERGY – DIGITAL FINANCE PLUS SOLUTION FEASIBILITY
• The off-grid energy space in Tanzania includes several players (6-8 notables companies, including Mobisol,
Off.Grid :Electric, Devergy and EGG-energy), many of whom have integrated DF+ as an essential enabler of their business
models. The se energy enterprises have modest scale, with each player serving ~1,000 to ~20,000 households today
• For the majority of these players, DF+ facilitates mobile payments (pre-paid, pay-as-you-go, and post-paid schemes for energy
services and/or energy hardware leasing and/or ownership), allows remote regulation (enabling/disabling energy provision
through a control box, providing network maintenance), and enables two-way communication with customers (SMS alerts for
payments, maintenance, consumption modulation).
• Thus, DF+ encourages energy enterprises to offer products and financing by enabling contract enforcement, cutting the
cost of customer service, driving scale, and providing scope for additional services
• The successful solar enterprises have identified winning technologies, built low-cost and effective distribution networks
with “last mile” reach, and deployed capital productively by acquiring creditworthy customers and providing them with financing,
thereby fortifying a loyal and growing customer base, as well as establishing credibility with investors
• With payback periods of up to 2 years by customer, many of the nascent players, mostly having entered the market around
2010, are beginning to turn profits on their first wave of customers
• Given the solar enterprises are proving commercial viability, investors are expressing enthusiasm to fundraising new equity,
with many rounds being oversubscribed; however, securing commercial loans without donor support continues to be a
challenge
• Today, there are estimated to be 50,000-100,000 total off-grid connections in Tanzania. Depending on the business model,
“true scale” (profitable including over-head) for a single energy enterprise can range from 20,000 customers (household solar
systems) to 80,000 connections (solar micro-grids); for nation-wide operations “true scale” number of off-grid customers to be
closer 1 million households
• For the off-grid sector and individual businesses to attain scale, there are a few key areas of focus, including financing
through commercial lending, awareness-creation in rural populaces about the benefits of OG solutions, and the establishment of
wide, efficient, and cost-effective networks for sales and user support

26SOURCE: Organization websites, press search; expert interviews; team analysis
The finance-related needs of the off-grid energy
sector are being met to a limited but improving extent Minimal Moderate
LimitedN/A
Number/reach of existing initiatives
Financial
instrument
Payments
Credit
Grants/
subsidies
Information
Short term
Long-term
Lease
and own
Lease
Loan
servicing
Pay-as-you
go/pre-paid
Equity
Leasing
 Persistent Energy Partners,
SolarCity  SunFunder, Vulcan Capital
 TEDAP (by World Bank,
Rural Energy Agency),
USAID, SIDA
 AECF (by DIFID, IFAD,
BMGF), USAID, SIDA
 TIB and CRDB (with WB
refinancing)
 Bank of Africa, TIB, and
CRDB (with WB
refinancing)
 REA  REA
 Karibu
Solar
 Mobisol,
EGG -
energy
 Off-Grid
Electric
 Devergy
 Karibu
Solar
 Mobisol,
EGG-energy,
OGE
 Devergy
 Devergy Mobisol, Off-Grid Energy
 Mobisol, Devergy
 Persistent Energy Partners
Off-grid
D EA B C
Device-
based
HH-level
system
Com.-
level syst.
i ii iii
 Mobisol,
EGG-energy,
OGE
5.2 ENERGY - FINANCIAL GAP ANALYSIS ALONG THE VALUE CHAIN

27
DF+ can help in addressing some of the gaps
in the off-grid energy value chain
Product
evaluation
Finance
as barrier
DF+
potential
No other
barriers
)(
)(
A2
B1
C1
C2
C3
C4
D1/2
D3
D4
E1
E2
E3
A1 Insufficient business development financing
Insufficient local research and development capacity
Insufficient product financing
Insufficient working capital finance
Insufficient consumer awareness
Insufficient distribution reach
Insufficient consumer risk management experience and tools
Insufficient consumer lending to low-income households
Complex payment administration
Unavailability of liquidity facility
Lack of effective maintenance
Insufficient upgrade financing
Unavailability of protection against theft or destruction of equipment
)(
)(
DF+ solution
Add-on to core
DF+ solution)(
6.1 ENERGY – POTENTIAL APPLICATIONS OF DF+ to ADDRESS BARRIERS
Product
development
Manufacture and
Assembly
Marketing and
Distribution
Usage and
Generation
Maintenance
High Low

28
Top challengesDescriptionDF+ product
Lack of consumer financingD1/2 1. Product financing
2. Customer awareness
3. Distribution reach
4. Maintenance and repairs
• Payment tool that enables
lease-to-own/lease/pay-per-
use financing models for
solar home systems by
facilitating remote access
and incremental payments
• Digital payment-
enabled enterprise
consumer
financing for solar
home system
Addressed energy sector
challenge
A
2. Credit risk assessment
3. Effectiveness of collateral
4. Usability of collected customer data
• Digitally-enabled loan
provided by a traditional
financial institution and sold
through solar enterprise
• Dedicated,
unsecured digital
household loan to
purchase solar
home system
B
2. Smart grid technology
3. Distribution reach
• Remote grid maintenance
and network regulation
platform for micro-grids
driven by SIM-enabled
machine-to-machine
communication
• Digital micro-grid
maintenance and
administration
system
C
Lack of consumer financing 1. Product financing
2. Credit risk assessment
3. Effectiveness of collateral
4. Usability of collected customer data
• Pre-paid solar energy and
appliance leasing service for
households facilitated by
mobile payment platform
• Energy appliance
leasing bundled
with utility service
D
Insufficient consumer risk ma-
nagement experience / tools
C4
Insufficient upgrade
financing
E2
Complex payment
administration
D3
1. Consumer cash flow volatility
2. Government regulation
3. Moral hazard
• Automated overdraft facility
to provide short-term loan
and usage payment relief for
SHS-owning households with
volatile cash flows
• Short-term Solar
Home System
(SHS) enterprise-
administered
overdraft facility
E
Based on our analysis of the current state and barriers to scale,
6.1 ENERGY – POTENTIAL APPLICATIONS OF DF+ to ADDRESS BARRIERS
D1/2
Lack of consumer financingD1/2
Insufficient upgrade
financing
E2
Complex payment
administration
D3
Inability to modulate
consumption on micro-grids
D5
D5 Lack of effective maintenance
Complex payment
administration
D3
D3 Unavailability of liquidity
facility

29
Potential DF+ applications in energy can be categorized based on
their feasibility and potential impact
DF+ solutions have different impacts Key takeaways
Impact
High
Medium
Low
Low Medium High
Feasibility
• The off-grid energy space in Tanzania is beginning to witness
several innovative players
• Companies provide solutions that focus on mobile energy
generators for individual devices, household-based generation
systems for multi-purpose usage as well as mini- and micro-
grid services with solar, biomass, and hydro distributed
generation
• Further opportunities exist in providing services, such as
distribution, salesforce management and maintenance, for the
solar energy enterprises
• Many of the innovations integrate mobile technology and end-
consumer financing as fundamental enablers of their business
models (e.g., Off-Grid Energy, Mobisol)
• Although the innovative players have enjoyed success on
relatively localized levels, scaling to regional and national levels
has been a challenge given limited capital, weak distribution,
and lack of customer awareness
• To spur further innovation and scaling, the focus of enabling
stakeholders should be on providing debt and equity financing
to promising enterprises, creating awareness of off-grid
solutions in rural areas, educating the financial sector, and
providing financing to households
• Digital payment
enabled
consumer
financing for SHS
• Remote micro-
grid admin. and
regulation
• Short-term
overdraft facility
for SHS
customers
• Energy appliance
leasing bundled
with utility service
• Unsecured
digital
consumer bank
loan for SHS
AB
C
D
E

30
In the Energy sector DF+ is enabling the application of successful busi-
ness models; full commercial viability and scaling are challenging
Discovery
Piloting
Scale
Application
Expansion and
differentiation
Global scaling
DF+ business
model maturity
 DF+ business
model in ideation
or early develop-
ment stage
 Individual DF+
business models
are being piloted
in controlled
environments
 DF+ business
models are rolled
out under market
conditions
 Existing DF+
business models
are being
innovated and
differentiated
 Successful DF+
business models
are scaling
nationally
Energy
 Best practice
sharing
 Business plan
development
activities
 Financial and
technical advice
during piloting
phase
 Business and
implementation
support
 Growth financing
and innovation
support
 Growth financing
• Several innovative players have demonstrated successful application of innovative financing and off-grid energy solutions
• Most solutions are solar-based household generation systems or communal mini-grids that power a range of devices
• Mobile-enabled consumer financing options include pay-as-you-go, lease-to-own, and direct lending, among others
• Scaling and full commercial viability of innovative financing-enabled enterprises is challenging given the high risk-bearing
burden by non-financial actors, insufficient reach of distribution networks, and lack of consumer awareness
6.3 ENERGY – SCALING AND EXECUTION CAPABILITIES
Intervention

31
Agenda

32
DF+ implementation in the education sector faces varying levels
of constraints
▪ High penetration at ~60% of households, with
some concern about female access to mobile
phone within the household
▪ Low level of private lending and savings for
education as BoP consumers are considered
unattractive
▪ The government drives reform in the sector and
is currently not focused on DF+
▪ Regulation neither helps nor hinders growth of
DF+
▪ The government is a major player in the sector
and has not adopted technologies
▪ Government adoption would affect 95% of the
students in public schools
▪ Severe non-financial challenges are related to
absenteeism, quality of instruction, pupil:teacher
ratio
▪ The majority of low-income households do not
use any form of finance products for education
▪ DF+ solutions can play a part in improving
attendance, increasing the ability to pay for school
and access textbooks
▪ While models are impactful, they largely have
unclear business models
▪ Execution and scaling would need to be
undertaken largely by government actors
Sector-rele-
vant mobile
infrastructure
reach and
adoption
Readiness of
financial and
digital
financial
infrastructure
6
5
4 3
2
1
6
5
4 3
2
1
Role of
government
and
regulation
6
5
4 3
2
1
Severity of
sector
challenges
6
5
4 3
2
1
Financial gap
in sector
6
5
4 3
2
1
DF+ business
models and
scaling
6
5
4 3
2
1
Reach
Reach of mobile
infrastructure
Adoption of mobile
technology
Financial product
offering to sector
Availability of
DF+ solutions
Sector-specific
regulation
Role of
government
Stakeholder
complexity
Non-financial chal-
lenges in sector
Execution and
scalling ability
Depth of financial
gap
Availability of DF+
business models
Sub-dimensions
Applicability of
DF+ solutions
1
2 3 54 Explanation

33
Key Takeaways
• With the majority of identified products and business models in the pilot phase, their viability is yet to be seen
• However, some of the major challenges to implementation include educating consumers on how the products work and ensuring
that schools, parents, and teachers have the requisite equipment to access the product
• Additionally, several of these products have the potential for fraud; as such, it will be critical to implement appropriate checks and
balances and refine the business models over time
• Major scaling barriers in Tanzania are due to the large role the government has in the education systems and the lack of
understanding of financial products among low-income consumers
• To scale many of these products, entrepreneurs and donors will have to work with the Ministry of Education and Vocational
Training, which is already spread thin with its current responsibilities
• Given the lack of financial products for low-income consumers, a high-touch approach will be required to educate parents and
schools on the products’ usage
• Applications of DF+ to addressing challenges in education are mostly in the discovery and piloting phase in Tanzania
• These pilots are using DF+ to incentivize desired behaviors in teachers and to help parents manage the burden of educational
expenses
• We have identified 5 DF+ products that have the potential to address the major financial and informational gaps in the value chain
– DF+ can enable a pay-for-performance product that ties a portion of the teachers’ salaries to their performance as evidenced
by attendance and student exam results
– A pay-as-you-learn product enables parents to make smaller weekly/monthly payments on school fees using mobile money
– A purpose-tied savings product will provide a forcing mechanism to help parents make longer-term plans for educational
expenses
– Digital text book rental, enabled by 3G, allows students to rent or purchase portions of textbooks and other learning materials
when they need them
– DF+ can facilitate the administration of conditional cash transfers for use on educational expenses
EDUCATION - DIGITAL FINANCE+ SOLUTION FEASIBILITY

34
Potential solutions to finance and information
challenges in the delivery chain
▪ Continued training
for teachers
through interactive
e-learning
modules, daily
teaching tips, and
forums to share
experiences
2.1
▪ Monetary teacher
of the month
awards published
digitally and
shared with entire
community
3.1
▪ SMS-based
communication
system between
teachers and
parents to track
student
attendance and
performance
3.2
▪ Digital claims and
payment system
for per diems
3.4
▪ A pay-for-
performance
digital bonus
scheme based on
test scores and
teacher
attendance
3.1 ▪ Pay-as-you-go
daily/weekly
payments for
school as opposed
to lump-sum fees
paid via mobile
4.1 ▪ Reward students
to do well on
tests – (e.g.,
mobile games, job
opportunity
postings unlocked
by performance
on exams)
5.1
▪ Mobile textbook/
learning material
rental or purchase
4.2
▪ E-learning
modules to lower
number of days
required to be
physically present
4.5
▪ Digital cash
transfer accounts
that can only be
redeemed for
specific services -
e.g., school
feeding program,
transportation –
with text message
code
4.3
Student
Curriculum
development
Teacher training
Learning facility
Labor Infrastructure
Build desire to accessAbility to access
Financial
service
needs
/gaps
Supply Demand
1 2 3 4 5
▪ Purpose-tied
education savings
product
4.1
5.1 EDUCATION – FINANCIAL SERVICE NEEDS

35
DF+ can be used to varying extents to address the challenges
in the education delivery chain (1/2)
Supply
2.2
3.1
3.3
3.5
3.6
3.8
Curriculum development
Teacher training
Labor
Infrastructure
3.7
3.4
2.1
3.2
1.1 Teachers may find hour-by-hour curriculums most helpful but often
are not trained in how to use them
Difficult to provide follow-on instruction for teachers to ensure
continued high-quality instruction
Low morale among public school teachers leading to high levels of
absenteeism
Standardized tests are poorly administered and may not test the
most critical skills
Lack of sufficient head teacher training given financial constraints
Difficult for schools to project enrollment and plan accordingly
A shortage of teacher housing at both the primary and the
secondary levels also contributes to teacher absenteeism and low
morale
Some schools lack the basic infrastructure and resources, such as
chalkboards and lavatories, that help to create a conducive
learning environment
Teacher per diem claims often go unpaid for long periods
Difficult to recruit and retain teachers since teaching is not a well-
respected career choice
Poor communication between parents and teachers on student
performance
6.1 POTENTIAL APPLICATIONS OF DF+ TO ADDRESS BARRIERS
DF+ solution
Add-on to core
DF+ solution)(
High Low
Product
evaluation
Finance
as barrier
DF+
potential
No other
barriers

36
DF+ can be used to varying extents to address the challenges
in the education delivery chain (2/2)
Demand
4.1
4.3
4.4
5.1
5.3
Ability to access
Build desire to access 5.2
4.2
4.5
Lump-sum payments required at the beginning of the term for
private and secondary schools
A lack of an effective delivery mechanism of donor subsidies to
students
Difficult for government and donors to track attendance
Students lack effective motivation and commitment to education
Parents lack insights into their students’ performance making it
difficult to oversee their education
Inadequate employment opportunities for first-time job seekers
Prohibitive text book costs; logistical challenges inherent in
delivering books to remote areas also limits availability
Low-income students face additional hurdles such as distance
traveled to school and lack of food
DF+ solution
Add-on to core
DF+ solution)(
High Low
Product
evaluation
Finance
as barrier
DF+
potential
No other
barriers

37
• A pay-for-
performance
digital bonus
scheme based
on test scores
and teacher
attendance
1. Education
3. Financing
• Salary payments tied to
individual teacher and school-
level performance
• Pay-as-you-go
daily/weekly
payments for
school as
opposed to
lump-sum fees
paid via mobile
1. Education
3. Financing
• Time-bound, purpose-tied, DF+
enabled savings product
• Purpose-tied
education
savings product
1. Logistics
2. Pricing
3. Financing
4. Operations
• Short-term rental of physical or
digital textbooks
• Mobile textbook
/learning
material rental
or purchase
Addressed education sector
challenge
A
B
C
D
• Digital cash
transfer
accounts that
can only be
redeemed for
specific services
E
• Pay-as-you-go school fee
payment plan
• Purpose-tied cash transfer to
parents that can only be used on
certain educational expenses
▪ Public school teachers feel
unappreciated and are often
unmotivated and may miss
classes
3.1
▪ Lump-sum payments required
at the beginning of the term for
4.1
▪ Textbooks are often expensive
and the logistics of getting
books to schools are
complicated
4.2
▪ Donors want to transfer funds
for families to pay expenses
but they lack certainty that the
funds will be used as intended
4.3
▪ Lump-sum payments required
at the beginning of the term for
4.1
1. Infrastructure requirements
3. Desirability
4. Financing
1. Education
2. Provider network
3. Financing

38
DF+ education products can be categorized based
on impact, feasibility, and barriers
Impact
High
Medium
Low
Low Medium High
Feasibility
• Given the large role the government plays in education,
scaling will require collaboration with the Ministry of
Education and Vocational Training
Steps to facilitate DF+ in education
• Initial focus on engaging the private sector to implement
DF+ solutions with sustainable business models
• Engage donors and MFIs to encourage more impactful
solutions
• Pay-for-
performance
digital bonus
scheme
• Pay-as-you-go
payments for
school
• Purpose-tied
education
savings product
• Mobile textbook/
learning
material rental
or purchase
A
B
C
D
• Digital cash
transfer
accounts
E

39
In the education sector, DF+ solutions are limited, typically
donor driven, and in a piloting stageIntervention
Discovery
Piloting
Scale
Application
Expansion and
differentiation
Global scaling
DF+ solution
maturity
ideation or early
development stage
• Individual DF+
solutions are being
ed environments
by selected actors,
especially donors
• Large player(s)
show openness to
DF+ by beginning
to adopt a solution
into their
operations
• Large player(s)
begin adopting a
variety of DF+
solutions and
differentiating
them
• DF+ becomes an
essential
component of the
delivery of
education
• Growth
financing/
subsidy
• Growth
financing/
subsidy and
innovation
support
• Implementation
support
• Convene
stakeholders to
discuss
expansion
• Financial and
technical advice
during piloting
phase
• Best practice
sharing
• Operating model
development
activities
• A large number of potential DF+ applications exist across the education sector, ranging from pay for perfor-
mance, to digitally educational content purchase and delivery, to incentive payments to student and households
• However the applications of DF+ to the Tanzania education sector are limited, potential initiatives are donor-
driven and require substantial subsidies
• The availability of self-sustaining business models remains to be proven
6.3 EDUCATION – SCALING AND EXECUTION CAPABILITIES

40
Agenda

41
water sector faces varying levels of constraints
Sector-rele-
vant mobile
infrastructure
reach and
adoption
Readiness of
financial and
digital
financial
infrastructure
6
5
4 3
2
1
6
5
4 3
2
1
Role of the
government
and
regulation
6
5
4 3
2
1
Severity of the
sector’s
challenges
6
5
4 3
2
1
Financial gap
in the sector
6
5
4 3
2
1
DF+ business
models and
scaling
6
5
4 3
2
1
Reach
Reach of mobile
infrastructure
Adoption of mobile
technology
Financial product
offering to sector
Availability of DF+
solutions
Sector-specific
regulation
Role of the
government
Stakeholder
complexity
Non-financial chal-
lenges in sector
Execution and
scaling ability
Depth of financial
gap
Availability of DF+
business models
Applicability of
DF+ solutions
▪ High penetration at ~60% of households, with some
concern about female access to mobile phone within
the household
▪ Low level of financial sector lending for well
construction or filter purchase
▪ Mobile payments have been adopted by DAWASCO
but other products have yet to be adopted
▪ The government has supported DAWASCO adoption
of mobile billing
▪ Complex decentralized stakeholder landscape as
many different levels of government are involved
▪ Severe non-financial challenges related to
corruption, lack of management capabilities,
countrywide water shortage
▪ Majority of low-income households do not use any
form of finance products in water consumption
▪ DF+ solutions can play a part in lowering the cost of
delivery, increasing efficiency and expanding access to
water
▪ Clear business case for mobile billing and monitoring
though lease-and-own wells, and filter loans require
subsidy
▪ If parts of large donor financing were redirected
toward these impactful solutions, scaling should be
possible
▪ Water is a highly politicized topic and the
government has indicated it might prevent
companies from distributing it to low-income
households if it thinks they are profiting from the poor
Sector readiness dimension Sub-dimensions 1 2 3 54 Explanation

42
There are low amounts of access to finance
across all types of water provision
Minimal ModerateLimitedn/a
Number/reach of existing financial products
Minimal but efforts underway High
Financial
instrument.
Extraction/sourcing Purification Dispensing and storage
Bottom of the pyramid
consumption and billing
Financing available for the
production of improved water
Financing available for water
purification
distribution and storage of water
purchase of water
Pay-as-you-
go
Liquidity
Long term
Savings
Donor
financing
Lease-and-
own
These loans are provided
by certain MFIs
Subsidized model
operated by Grundfos
LIFELINK in Kenya
Lending to connect to the
water grid is more prevalent
in other countries
Payment
Lending
Other financial products No business model for
well implementation
without subsidy
Increased use of mobile
payment usage with
DAWASCO adoption
5.2 WATER – FINANCIAL GAP ANALYSIS ALONG THE VALUE CHAIN

43
Extraction/Sourcing
Dispensing and storage
3.1 Lack of a business model to increase distribution to
rural areas
3.2 Poor management and planning capabilities
Water treatment is sub-optimal2.1Purification
Billing process is inefficient for providers and
consumers
4.1
Lack of financing for community well construction1.3Extraction/sourcing
4.2 Slow and unreliable maintenance process for broken
infrastructure
Private provider water is sold at infrequent times with
varying pricing and quality
4.3
1.4 Rain collection tanks used have sub-optimal health
qualities
High opportunity cost of household travel to obtain
water
1.5
Not all identified challenges are caused by a financial barrier or
can be addressed through a DF+ application
6.1 WATER – POTENTIAL APPLICATIONS OF DF+ TO ADDRESS BARRIERS
Finance
as barrier
DF+
potential
No other
barriers
Onnetworkpipedwater
Communitywells
andpurification
Detail
follows
1.1 Limited availability of a reliable water source,
particularly in specific geographic areas
Competition between sectors for water resources1.2
Product
evalua-
tion
2.3 Consumers that do purchase filters often do not
replace them when necessary
Consumers have low demand and willingness to pay
for filters
2.2
)(
Householdproduced
water
Extraction/sourcing
Purification
High Low

44
1. Obtaining donor financing
2. Technical capability nearby
3. Education on benefits, proper use, and
maintenance
• Consumer pre-pays for desired
amount of water at the local
water pump
• Code input system at the pump
also tracks consumption and
automatically dispatches
maintenance after a period of
prolonged inactivity
• Funded by collected digital
payments
• Lease-to-own
community wells
with pay-as-you-
go consumption
tracking
1. Education on benefits of filters
2. Enforcement of loans
3. Distribution of filters so that they are
available for purchase
• Loan of funds that requires
digital payment proof that the
funds were used for filters with
flexible payment options
• Unsecured loans
for filter
purchase
Addressed water sector challenge
A
B
Lack of financing for
community well construction
1.3
Consumers have low
demand and willingness to
pay for filters
2.2
1. System installation
2. Government enthusiasm for large
player adoption
3. Maintenance of tracking devices
4. Effective system to analyse and act on
data generated
• Mobile device embedded in the
pipe/dispensing unit that tracks
levels of flow
• Reports flows on a daily basis to
key of stakeholders
• Data helps indentify consumption
patterns /maintenance issues
• Water usage
and flow
monitoring
system
D Poor management and
planning capabilities
3.2
1. Technological capabilities
2. Maintenance capabilities
3. Installation costs
• Flexible payment plans so that
consumers can align the billing
schedule with income
• Consumer receives bill on
phone with various payment
options
• Mobile billing for
piped water
C Billing process is
inefficient for providers
and consumers
4.1
6.1 WATER – POTENTIAL APPLICATIONS OF DF+ TO ADDRESS BARRIERS

45
DF+ water products can be categorized based on impact,
feasibility, and barriers
Impact
High
Medium
Low
Low Medium High
Feasibility
• A large donor base is necessary for lease-and-own
community wells
• The implementation of digital unsecured filter loans will
likely need to begin with MFI pilots
• Education for water providers and facilitated
collaboration with technological providers are needed to
encourage them to further adopt mobile billing and water
usage tracking
Steps to facilitate DF+ in water
• Focus initially on engaging the private sector to
implement DF+ solutions with sustainable business
models (mobile billing, water usage tracking)
• Engage donors and MFIs to encourage solutions that will
have a greater impact
▪ Mobile billing for
piped water
C
▪ Water usage and
flow monitoring
system
D
▪ Lease-to-own
community wells
with pay-as-you-
go consumption
tracking
A
▪ Unsecured loans
for filter purchase
B

46
In the water sector, DF+ solutions are beginning to be
applied at scaleIntervention
Discovery
Piloting
Scale
Application
Expansion and
differentiation
Global scaling
DF+ solution
maturity
ideation or early
development stage
• Individual DF+
solutions are being
ed environments
by selected actors
especially donors
• Large player(s)
show openness to
DF+ by beginning
to adopt a solution
into their
operations
• Large player(s)
begin adopting a
variety of DF+
solutions and
differentiating
them
• DF+ becomes an
essential
component of
water provision
and improvement
efforts
• Growth
financing/
subsidy
• Growth
financing/
subsidy and
innovation
support
• Implementation
support
• Convene
stakeholders to
discuss
expansion
• Financial and
technical advice
during piloting
phase
• Best practice
sharing
• Operating model
development
activities
• DAWASCO’s adoption of mobile payments should set a precedent for smaller players
• Other DF+ solutions are still being discovered and have the potential to increase on-grid and donor efficiency and
extend off-grid water access
• Although While mobile billing and monitoring have clear business cases for implementation, lease-and-own wells and
filter loans will require donor subsidy
6.3 SCALING AND EXECUTION CAPABILITIES

47
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www.cgap.org

Digital Finance Plus Readiness in Tanzania: Summary

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