LGA EMPOWERMENT FUND HAS CHANCE TO TRANSFORM LIVES

DEVELOPMENT TALK – By Elly Manjale

In Tanzania, Local Government Authorities (LGAs) are mandated to allocate 10% of their own-source revenue as interest-free loans to empower youth, women, and people with disabilities (PWDs). Under this scheme, 4% of the revenue is earmarked for women, 4% for youth, and 2% for PWDs.

The fund functions as a revolving loan scheme aimed at promoting financial inclusion and improving the economic status of its beneficiaries. In the 2025/26 financial year, a total of TZS 123.9 billion will be allocated across all 184 LGAs. For the Arusha Region, the total allocation is TZS 7.14 billion.

Women, youth, and people with disabilities remain some of the most vulnerable and marginalised groups in many African countries. The government’s introduction of this empowerment initiative in 2018, following amendments to the Local Government Finance Act, is commendable. It offers real potential to transform lives.

However, in April 2023, the scheme was temporarily suspended to address serious issues raised in the Controller and Auditor General’s 2021/22 report. These included over TZS 45 billion in unrecovered loans across 155 LGAs, disbursements to non-existent or ineligible groups, and inadequate due diligence in assessing applicants’ repayment ability.

The programme is now set to resume in 2025/26, but for it to succeed, several strategic improvements are necessary.

First, the government must strengthen the institutional capacity of LGAs. This includes training officers in fund management, especially in loan assessment, monitoring, and reporting. Moreover, ICT-based platforms should be introduced to enable real-time tracking of applications, disbursements, repayments, and overall programme performance.

Second, partnerships with the private sector and NGOs—particularly banks and microfinance institutions—should be encouraged. These organisations have proven expertise in managing loans. Encouragingly, in 2025/26, ten selected LGAs will pilot fund disbursement through banks, while the remaining 174 will continue with direct disbursement. By 2026/27, the government expects all LGAs to transition to bank-managed disbursement.

Third, it is essential that these funds reach the most vulnerable, including residents in rural areas, not just urban centres. LGAs should implement awareness and sensitisation campaigns to inform communities about the scheme—many citizens are still unaware of its existence.

Lastly, given the significant disparities in the disbursement capacity of LGAs, the government should create a mechanism to offer additional support to historically and geographically disadvantaged LGAs. This would help level the playing field and ensure equitable access to funding across the country.

The LGA Empowerment Fund, if effectively implemented, could become a powerful engine for grassroots development, economic inclusion, and poverty reduction in Tanzania. Its potential impact deserves collective support and policy attention.


Elly Manjale is an economic, business and management consultant based in Arusha. He writes on economic, business, social and political issues.
📧 Email: emanjale@gmail.com

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