Deepening Financial Inclusion in Tanzania: Progress and Potential

The advent of mobile money has revolutionized the financial landscape, particularly in developing economies like Tanzania. Mobile money has emerged as a game-changer, facilitating financial inclusion and economic empowerment, especially for women and traditionally underserved populations.

In thousands of households in rural Tanzania, a woman rises before dawn each day to prepare meals for her loved ones. A subject of constant financial challenges. However, a recent discovery has transformed her life: mobile money. A financial service that enables her to transact, settle bills, borrow and even save, all via her mobile device.

Embracing this technology, she's ventured into a small business, selling local delicacies in the community market. Gone are the days of borrowing from neighbors or fretting over her children's necessities. Mobile money has granted her the autonomy to shape her financial destiny, enhancing the well-being of her entire family.

At Vodacom Tanzania, the availability of tailored lending products like "M-Pawa" and "Mgodi" grants women entrepreneurs and small vendors access to crucial capital for expanding their businesses and meeting daily operational needs. As a result, these financial products contribute to greater financial inclusion by bridging the gender gap and creating economic opportunities for women in the food vending sector. This, in turn, fosters economic growth and strengthens communities by empowering individuals to thrive in their businesses.

Evidently, the growth in account ownership has been largely driven by an increase in mobile money account ownership. In 2021, the share of adults in Tanzania with mobile money accounts was nearly double the share of those with financial institution accounts: 45% vs 23%, respectively. This rapid growth in account ownership stems largely from the adoption of mobile money. Since 2014, the pace of growth in mobile money account ownership has been greater than that of growth in financial institution accounts.

In Tanzania, the mobile money ecosystem has made significant strides in this regard. For M-Pesa, in particular, over 6 trillion shillings processed on merchants by customers annually and over 200,000 active merchants accepting payments via M-Pesa, the platform has become a major player in the financial ecosystem. The platform has also facilitated savings, with over 170 billion shillings in M-Koba and close to 178,000 active groups saving via M-Koba.

The FinScope 2023 survey reveals that mobile money lending is a key driver of financial inclusion in Tanzania. Despite the growing presence of mobile technology and financial service providers, 67% of Tanzanian adults over 16 still borrow from family or friends, primarily due to rising living and healthcare costs. M-Pesa, the largest digital lender in Tanzania, has a monthly lending base of 2.5 million customers and disbursed 1.2 trillion shillings in FY23. The mobile lending platform "Songesha-wakala" serves as a valuable resource for over 45,000 agents, offering loans averaging 300,000 TZS for emergency float and business continuity, addressing short-term cash flow needs and significantly contributing to financial inclusion.

"Songesha-wakala" offers a variety of loan products, encouraging a broader range of entrepreneurs and individuals to access credit tailored to their needs.

M-Pesa's merchant loans provide emergency funds to help merchants manage unforeseen business challenges, such as inventory shortages or unexpected expenses, ensuring smooth operations. These diverse lending options increase financial inclusion by making credit more accessible to a wider audience.

"M-Pawa" and "Mgodi" lending products have significantly impacted consumers, particularly women entrepreneurs in the food vending sector, known as "mama ntilie." With an average loan size of 55,000 TZS, these products address the critical need for working capital. Many "mama ntilie" vendors face daily cash flow challenges and need funds for ingredients, transportation, and other operational expenses.

Mobile lending services offer timely financial support, empowering these entrepreneurs to continue serving their communities and supporting their families. These tailored lending products help small businesses overcome financial hurdles, grow their businesses, and contribute to the local economy.

Overall, the sector growth is remarkable, yet not enough. For M-Pesa, we celebrate this growth, especially when compared to the lending figures from 2018 when M-Pesa disbursed less than 50 billion shillings annually. This surge in mobile money lending demonstrates the increasing acceptance and accessibility of digital financial services, which have proven crucial in expanding financial inclusion in the country. By providing easier access to credit and financial services, mobile money lending is empowering more individuals to participate in the formal economy and improve their overall economic well-being.

The future of mobile money hinges on innovation that addresses everyday cash use cases, accelerating the adoption of digital financial services. By creating solutions that resonate with the daily needs of consumers, the industry can drive a more widespread shift towards digital transactions.

Furthermore, collaboration is key to unlocking the full potential of mobile money. By fostering partnerships within the broader ecosystem of developers, fintechs, banks, and other stakeholders, the industry can leverage diverse expertise and resources to create more robust, inclusive, and innovative financial services. Together, these efforts will pave the way for a more financially inclusive and digitally empowered society.