Being one of the sectors deemed risky and unattractive by most financial service providers in Tanzania, artisanal and small-scale miners (ASM) have always found themselves on the short end of the stick when it comes to loans and other financial services that other counterparts seem to enjoy, it’s not uncommon for a bank relationship manager to close his diary and tell you upfront that they don’t lend to miners without even listening to the proposal at hand, but such response hasn’t seemed to deter the activities of the miners or the 6 million individuals who are directly involved in ASM activities. so what are some of the ways miners have financed their activities?
Output split financing.
Although not an official term, many small-scale miners commonly use a model that involves the primary mining license (PML) owner, laborers, and sometimes a third-party off-taker. This practice includes a tripartite agreement in which the off-taker provides finance for food and fuel for machinery (typically an air compressor used for blasting). The laborers receive compensation based on the amount of ore produced (a fixed amount per tonnage), and the PML owner/s receive a percentage compensation for the ore produced (such as 30 tons for every 100 tons). There would be a contract between PML owner/s and the off-taker that would be signed/certified by the regional mining officer.
Dealer/Broker pre-financing.
A mineral broker or dealer is a middleman who, by law, can buy minerals directly from small-scale miners, aggregate them, and sell them within the country or export them to other countries (in the case of the dealer). These intermediaries may also make agreements with ASM, providing pre-financing in the form of cash or rented machines, with the understanding that the dealer will have first priority after production. However, this practice is no longer commonly used, especially since the introduction of mineral markets in Tanzania.
Family, friends, and personal savings financing.
A method not favored by most due to the “risky” nature of ASM activities, as the name suggests, a miner usually the PML owner would raise cash through a mixture of personal savings and soft loans from family and friends, these funds would be used to lease machinery (air compressor, excavator, jackhammer, etc) and pay for the laborers. The miner bears all the risks of the project and may stand to lose a lot if the project doesn’t turn a profit.
Although there are a number of other models used, most are a mixture or variations of the 3.
