The aim of this paper is to investigate whether local investors are capable of establishing and managing power sector enterprises in Tanzania. The paper then examines the extent to which this capability Could be harnessed to enhance rural electrification especially of the poor. The data used were obtained from interviews of power sector stakeholders. Three major conclusions arise from the findings. First, it seems that substantial local ownership is possible in small power enterprises but is limited in the larger ones. Second, available evidence suggests that the terms and conditions of local financial institutions are major constraining factors on the ability of local investors to mobilise finance locally. Third, it appears that, on the overall, technical, managerial and professional capabilities needed to set up, operate and manage Independent Power Production (IPP) and Independent Power Distribution (IPD) enterprises exist locally.