26 May 2012

Tanzania: Economic Crisis, a Blessing in Disguise


The economic crisis in Europe is forcing institutions in that continent to review their criteria for providing financial support to developing countries like Tanzania. It can be argued that the economic crisis is a blessing in disguise for developing countries like Tanzania if the crisis helps such countries to become less dependent on foreign aid and more efficient in managing investments.

Indications are that financiers from Europe will increasingly provide less grants and soft loans to Tanzania for development purposes. Less financial handouts will enable Tanzanians to realize local means to convert their wealth in the form of natural resources for development purposes.

The criteria that institutions from Europe will use for providing financial support in the wake of economic crisis will vary from one institution to another. But it can be speculated that obligations, politics, instability, poverty and value of support are the basis on which financial institutions will make decisions as to where and how to provide financial support to developing countries.

Institutions in Europe are obliged to provide financial support to enable European countries to develop. It implies that there will be less financial support for other developing countries like Tanzania.

In addition, institutions in Europe will provide financial aid to enhance democracy where it exists or encourage its practice where dictators are in charge. Stable countries in the sense of peace will receive less financial support from Europe since it is assumed that a peaceful rather than a war torn country is more likely to develop with less financial aid. Tanzania is a peaceful country.

There is less motivation for financial institutions to provide aid to countries like Tanzania which boasts of a wealth of natural resources and relatively high rate of economic growth. Logic would be for financial institutions to provide more technical rather than financial support to Tanzania.

Perhaps more important for developing countries like Tanzania is the fact that financial institutions in Europe emphasize on value of financial support they provide to developing countries.

Previously, many financial institutions were satisfied with results of their investments irrespective of whether the results have changed or improved lives of beneficiaries of the investments. It reminds of the past whereby some social scientists studied behaviour of ethnic groups as specimens rather than collecting information to improve lives of the people they studied.

Financiers use different frameworks to determine effects of their investments on beneficiaries. Frameworks may include assessment of relevance and quality of investment design. Financiers may choose to assess additional aspects of their investments to include efficiency, effectiveness and sustainability.

In particular, investors ask questions to determine whether their investments are relevant to the region or beneficiaries. In addition, investors assess if their investments are able to transform resources and integrate assets to multiply effects of the investments. They check if there is clear commitment on the part of implementers and stakeholders. Investors assess if their financial support is able to change the existing situation from point A to point B say, to reduce poverty.

As regards sustainability, investors assess to determine practical aspects of their investments to be replicated elsewhere.

Perhaps more important, investors ask if their investment will make the environment greener say, with more wild animals. Will the investment enable beneficiaries to earn more income? They may ask further to ascertain the value of their investments.

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