How are fintech and digital services shaping the financial landscape of Tanzania?
Since its introduction in 2008, mobile money has transformed Tanzania's financial landscape, fueled by supportive regulations and market competition. Despite these strides and innovative fintech solutions, a significant number of Tanzanians still find themselves on the fringes of the financial sector.
Mobile money account ownership in 2014
Mobile money account ownership in 2021
Mobile money account ownership surged from 32% of adults in 2014 to 45% in 2021.
The promise of digital technology in enhancing financial service usage is immense, particularly for women, rural residents, and small to medium enterprise owners.
To truly harness this potential, collaborations between financial institutions, mobile operators, and digital finance providers are crucial. Embracing innovative technologies can lead to affordable, relevant services, boost consumer confidence in digital finance, and even challenge age-old societal norms.
DEMAND FOR FINTECH
DEMAND FOR FINTECH
DEMAND DRIVER...
Perceived Cost
82% of Tanzanians without an account cite lack of funds.
The challenge
Costs are a significant barrier to financial inclusion in Tanzania, especially for low-income individuals. Recent surveys, Findex and FinScope, reveal that 81.67% of Tanzanians without an account cite lack of funds, and 45.56% find services too expensive. Additionally, only 40% of mobile money users believe its cost is reasonable, impacting its adoption, especially in rural areas.
What can be done?
Review of the impact of specific taxes on the affordability of digital financial services and mobile devices.
Promote merchant payments and/or access to affordable point-of-sale devices.
Invest in broadband infrastructure, improve connectivity, and reduce the cost of data.
Increase affordability of digital finance and fintech services.
DEMAND DRIVER...
Perceived Usefulness
While half of the population reported saving any money in 2021, only 19.2% of people saved through a mobile money account.
The challenge
While costs matter, the value and relevance of a financial service often take the lead. Experts note that if a product meets daily needs, users will find ways to afford it. For instance, many Tanzanians use mobile money even without owning a phone, highlighting its essential role. For Financial Service Providers, offering tangible benefits is crucial to attract consumers with limited resources.
What can be done?
Savings products that use traditional savings groups as entry points and that encourage targeted savings for group-specific needs.
Increase use of AI and alternative data sources for credit scoring.
Develop digital credit with repayment plans aligned with business needs and agricultural cycles.
Develop more embedded finance solutions
Incorporate human-centered design in product development from end-to-end.
DEMAND DRIVER...
Perceived Ease of Use
Only 32% of adults in Tanzania reported that they can use a mobile money account without help.
The challenge
Beyond language barriers, the complexity of terms and over-reliance on technical jargon deter potential users. Despite a significant portion of the population owning mobile money accounts, many lack the confidence or skills to use them independently. This digital skills gap, more pronounced among women and those in peri-urban and rural areas, hinders the full potential of DFS in the region.
What can be done?
Eliminate the use of jargon and technical terms and translation of customer interfaces for ease of use.
Deliver financial and digital education through a variety of channels.
Increase attention to customer support, also delivered through digital and non-digital channels.
Revise primary and secondary school curricula to incorporate digital skills.
DEMAND DRIVER...
Perceived Risk and Trust
14% of adults in Tanzania do not have an account with a bank because they do not trust the service.
The challenge
Trust and perceived risk are crucial for digital adoption in Tanzania. While Tanzanians generally trust their financial systems more than their neighbors, the complexity of fintech can be intimidating, especially for those with limited digital literacy. However, many are willing to explore new solutions, possibly due to positive mobile money experiences. Some experts believe this trust may be due to a lack of financial literacy, making users vulnerable in areas like e-commerce. As fintech spans multiple sectors, building trust is essential among consumers, providers, and regulatory stakeholders.
What can be done?
Improve implementation of financial consumer protection regulations, policies, and procedures.
Incorporate consumer protection tips into financial/digital skills-building interventions.
DEMAND DRIVER...
Social Norms
There is a 52% gender gap in the use of mobile internet in Tanzania.
The challenge
Social norms in Tanzania, especially gendered ones, significantly influence engagement with digital financial services (DFS) and fintech. Traditional views limit women's access to education and income, affecting their use of DFS. To address these disparities, it's essential to reshape societal norms, not just improve economic factors. This involves creating gender-focused financial products and understanding the unique challenges different groups of women face.
What can be done?
Promote gender-intentional product design and service delivery.
Public-private partnerships to implement behavioral change interventions.
