The Millennium Challenge Corporation (MCC) funded a large energy sector project in
Tanzania between 2008 and 2013. The investment was made in part because electrification
was seen as key for economic development and because few households in Tanzania were
connected to the national grid. Only about 18 percent of households in mainland Tanzania
were connected to the grid in 2011–2012, and the rate was under 4 percent in rural areas
(NBS 2014).
Rural electrification in Tanzania has been slow because of the high cost of extending the
national grid throughout the country. Indeed, it may take decades before the grid reaches
the majority of Tanzanians (Ondraczek 2013). Recognizing the importance of electricity
for economic development, the Tanzanian government plans to increase electrification rates
to 50 percent by 2020 and to 75 percent by 2035 (IED 2014).
MCC’s energy sector project was designed to promote economic growth and curb poverty
in Tanzania and was implemented by a Tanzanian government entity called the Millennium
Challenge Account–Tanzania (MCA-T). One component of that project involved building
new lines to the electrical grid. To address the concern that connection fees were a barrier
to connecting to those lines, MCC also funded a second component that offered low-cost
connections to households in a subset of the communities getting new lines.