Tanzania: Hub For Financial Service

Tanzania ranked in top position globally for the best regulatory environment for digital financial services...

Tanzania is fast emerging as the financial hub for East Africa and has been ranked 12th among 21 countries assessed for their efforts to expand and improve access to financial services.

The country is one of the fastest growing countries on the African continent, and is rich in natural resources. At least 30 per cent of the country’s 45 million people live in urban areas, and the country is experiencing an urbanisation rate of six percent per annum.

Mobile money account ownership is almost five times as prevalent as bank account ownership and Tanzania received the second highest score after Kenya in terms of mobile money accounts among women, highlighting the improving gender equity in financial services.

Tanzania has experienced impressive growth rates over the past decade. After rebasing the gross domestic product data in 2020, to factor in expanding industries (e.g. mining and natural gas), the Tanzanian government expects the economy to increase by 10 per cent. This growth is underpinned by: rising investment in the natural gas sector; firm growth in private consumption; and growth in the telecommunications, transport, financial services and manufacturing sectors. The construction sector is also expected to grow as further investment is made in the gas, transport, power and urban property development sectors.

Over 95 million Mobile Money transactions are made each month in Tanzania – more than the number of monthly transactions made in Kenya.

Mobile operators in Tanzania are leading the charge in connecting domestic mobile money ecosystems to international remittances and this was recently evident when Tigo Tanzania announced a partnership with global money transfer App WorldRemit for the Diaspora.

Tigo was the first mobile operator in the world to pay interest on mobile money wallets to customers through its Tigo Wekeza service and Tigo paid out $1.8 million to Tigopesa users.

Vodacom launched a mobile based savings and loans package in Tanzania called m-Pawa with the Commercial Bank of Africa which reached over $3 million in savings recently.

Tanzania received the fourth highest score globally in terms of capacity for mobile-based financial services where the number of Mobile Money agent locations in Tanzania far exceeds the number of “brick and mortar” banks by a ratio of almost 30 to 1.

Alix Murphy, Senior Mobile Analyst at WorldRemit said that Tanzania has made in mobile financial services and financial inclusion. “Today, 80 per cent of our international money transfers to Tanzania go to one of three mobile wallet services, demonstrating the important role Mobile Money plays for Tanzanians living in the diaspora,” she said.

Murphy said that Tanzanians living and working abroad send home approximately $70 million every year, the majority of which is still sent and collected at high-street agents and cash pick-up locations and that as soon as they began offering transfers to mobile money in Tanzania it rapidly overtook all other receive options, including both cash pick-up and bank deposits, as the preferred option for sending money home.

EAST AFRICAN MARKET

East Africa has become a hotbed of innovation in financial services. Kenya is fast catching up with South Africa to become the country with the most comprehensive provision of financial services on the continent. Moreover, the business models of champions such as Equity Bank and M-PESA have been studied worldwide.

The Kenyan financial sector is broad and well developed in sub-Saharan Africa. Kenya’s financial sector is roughly twice as large as Uganda’s and Tanzania’s, but all three have tremendous growth potential when compared to developed-country financial sectors. At last count, Kenya had 43 commercial banks and boasts the best-developed microfinance segment in sub-Saharan Africa region. Roughly three-quarters of the big players in the East African microfinance sector are based out of Kenya. Not to mention that Kenya is also home to Equity Bank, a former building society considered insolvent in 1993 and today considered one of the world’s most admired retail banks.