Faida Fund becomes a “game changer” in promoting financial inclusion

17Jan 2023
By Guardian Reporter
The Guardian
Faida Fund becomes a “game changer” in promoting financial inclusion

It was hard for low income earner Tanzanians to invest in financial markets, particularly the government debt instruments or corporate bonds.

These areas require a lot of money at hand, of which are beyond the reach of many low income earning Tanzanians especially youths, women, special groups ad those living in remote areas.

For example, investing in government debt instruments, particularly Treasury bonds, requires an investor to have at least 1mn/-, of which is beyond the reach of many Tanzanians.

This causes most of Tanzanians to fail to exploit these investments opportunities, which are important in building income growth, generated from the yields paid, depending on the maturities periods of the bonds.

Low income earners or people living in remote areas have also missed many investment opportunities in financial markets, mainly capital markets due to logistics barriers such as being far away from banks or brokerage firms where they can buy financial products such as bonds.

Currently, less than one million Tanzanian populations are investing in financial markets, particularly the capital markets, including equities and securities, due to lack of liquidity or lack of awareness on the products available in market.

The government through its economic empowerment policy wants to increase the involvement of many Tanzanians in investments opportunities available, not only in productive sectors of the economy, but also in growing financial markets.

But the recent launched Faida Fund, managed by Watumishi Housing Investment (WHI) has come to remove all barriers, which were limiting low income earning Tanzanians, including women, youths and special groups from investing in capital markets.

Launched on Saturday last week in Dar es Salaam, Faida Fund offers an opportunity for any person to invest with an initial amount of 10,000/-, which is affordable for many, compared to 1mn/- required to invest on one bid of the short, medium or long term government bonds.

The collected money from Faida Fund investors are therefore invested in government debt instruments, particularly Treasury Bonds, linking low income earners to such opportunities, which they never thought of reaching.

This means that 100 low income Tanzanians can now collectively, through Faida Fund, directly invest in government debt instruments and earn profit from yields provided depending on the maturities.

Investing on Faida Fund does not require someone to travel to a broker or bank branch, but it needs someone to click on a mobile phone, both smart phones (App) and non-smart phones (USSD).

By dialing *152*00# anyone can register for Faida Fund and start investing at an initial amount of 10,000/-, to get number of units of which are currently sold at 100.55/ each.

Upon buying the units, the value will be appreciating depending on the profit generated from fixed assets investment by the fund manager.

Dr Fred Msemwa, Chief Executive Officer of WHI, the fund manager of Faida Fund, said this new collective investment scheme does not discriminate any amount of investment the investor has, as it gives an opportunity for any Tanzanian to join.

The fund has so far collected a total of 13.5bn/- from different investors, as at the end of last week, of which 90 percent are retail investors.

As more Tanzanians are continuing to join the fund, it is hoped that by June this year, a total of 20bn/- will be raised of which 60 percent are invested in the primary market of long term government bonds and the remaining will be invested in short term government debt instruments (Treasury bills) and money markets.

Currently, only 800 Tanzanians including minors, students, institutions and retail investors have so far joined the fund.

Minister in the office of the President, Public Services Management and Good Governance Jenister Mhagama though the economic empowerment policy, more emphases are put to ensure women, youths and other special groups are empowered to benefit from economic opportunities.

She has directed District Commissioners, District Executive Directors and District Administrative Secretaries to ensure an increased awareness of the fund to attract more Tanzanians, especially women, youths and special groups which are excluded from financial markets.

“This fund is part of the government intentions to empower Tanzanians economically and it is the implementation of the economic empowerment policy,” she said.

She also called for Faida Fund managers to collaborate with financial institutions to become partners of the fund.

Permanent secretary, ministry of finance and planning Dr Natu Mwamba said the establishment of Faida Fund is part of implementation of five-year development plan which will bring economic benefits to investors.

She said the Faida Fund is also promoting financial inclusion among Tanzanians on areas of investment in capital markets, especially for people who are previously excluded due to the requirements of the existing financial markets products.

“The ministry of finance and planning will collaborate with WHI and other stakeholders to create conducive environment to promote collective investment schemes,” she said during the launch of the fund.

Abdulmajid Nsekela, the chief executive officer of CRDB Bank Group, the custodian bank said the fund is aimed at promoting financial inclusion.

“CRDB Bank has been a champion in coordinating and promoting investments, including in the areas of capital markets,” he said during the fund launch.

Explaining on the benefits of investing in the fund,  Nsekela said it is part of promoting financial inclusion which consider all Tanzanians of all ages and is the cheapest as it requires any person to invest at an initial investment amount of 10,000/-, which is part and parcel of the bank’s policy in improving efficiency.

The Capital Markets and Securities Authority (CMSA) director general Nicodemus Mkama the launch of Faida Fund is part of implementing the five-year development plan which is aimed at building competitive economy.

“We need more products on our capital markets, particularly collective investment schemes to enable people to build liquidity,” he said during the fund’s launch.

Mkama said CMSA approved the fund’s offer document and trust deed on October 15 last year after Faida Fund complied with laws and regulations governing capital markets, particularly having a fund manager and custodian bank.

The CMSA director general believes that Faida Fund is a game changer on financial inclusion because of reduced initial amount of investment required to invest.