Tanzania Mobile money grows:Customers can send and receive money via mobile platforms
Mobile money grows in Tanzania
Mobile money has seen impressive
growth in Tanzania in recent years, emerging as a key facilitator of financial
inclusion, while agency banking is showing promise as a route to new customers
for banks.
The number of Tanzanians with
mobile money accounts rose to 18.08m or 35% of the population by the fourth
quarter of last year, according to the Tanzania Communications Regulatory
Authority, up from 17.4 million in the previous quarter.
The rise in customers follows
several years of rapid growth in transaction volumes. Average monthly
transactions reached TZS4.7trn ($2.1bn) by year-end 2015, according to data
issued by the IMF in June, a 10-fold increase on the TZS452bn ($202.1m) seen in
2011.
The mobile money sector has
benefitted from Tanzania’s rising mobile phone penetration, which grew by four
percentage points to 67% between 2014 and 2016, according to the Tanzania
Communications Regulatory Authority.
This is relatively modest
compared to many other major markets on the continent, particularly in West Africa,
where penetration rates often exceed 100%.
However, with the launch in
October of Tanzania’s fifth mobile operator, Vietnamese-owned Halotel, this is
likely to increase significantly in the coming months.
Mobile footprint
Tanzania’s mobile footprint nonetheless
compares favourably with its banking penetration, which, according to the World
Bank, stands at around one-fifth of the population. Actual bank account usage
may be even lower: a study by New York University (NYU) last year found that
just 2% of the population had an active traditional bank account.
Against this backdrop, mobile
money has helped increase the uptake of financial services in Tanzania.
According to a 2016 IMF report, financial inclusion rose by 42 percentage
points to 58% of the population between 2009 and 2013, a surge that was driven
almost entirely by mobile money.
Indeed, based on data from the
NYU study, 32% of the population uses a mobile money account as their sole
financial service.
According to Dave Aitken, First
National Bank Chief Executive Officer, there is space for both mobile money and
conventional banking services to operate in the Tanzanian market.
“A huge portion of the population
does not make transfers via bank accounts and instead uses mobile money
wallets,” he told OBG. “While these wallets have already aggregated and
re-priced cheap liquidity, they are not an increasing threat to banks. Salaries
deposited to bank accounts provide banks the opportunity to compete to
facilitate payments, while for clients without bank accounts, mobile wallets
provide a viable alternative payment option.
Mobile products
Although mobile products have
evolved beyond simple money transfer and now allow for savings, insurance and
even borrowing, banks are keen to expand their more traditional operations as
well, including the rollout of new brick-and-mortar branches and agency
banking.
The need for this is clear:
Tanzania currently ranks last among East African Community member states in
terms of its branch network, with less than one full branch per 1000 sq km and
just 2.5 branches for every 100 000 adults, as per IMF figures. The country
fares slightly better in terms of ATMs, with 40 554 per 100 000 people, but
still lags behind its neighbours.
Lenders have been expanding their
branch networks, albeit at a modest rate, with 739 branches as of mid-2016, an
increase of 30 on the previous year. The slow pace of expansion is in part a
result of the elevated costs of opening a new branch, particularly given the
high overhead for both staffing and electricity.
As a result, banks have turned to
agency banking to improve their reach, wherein local residents – such as
shopkeepers – are licensed and registered by the Bank of Tanzania, the central
bank, to conduct basic transactions on behalf of different lenders.
Nine banks currently have agency
banking programmes in place, with roughly 4000 agents spread throughout the
country in 2016, a near 100% increase on the 2015 total. The volume of
transactions conducted by agents also increased more than two-fold from the
previous year to TZS1.55trn ($714m) at the end of FY 2015/16.
Abdi Mohamed, managing director
of Barclays Tanzania, told OBG that agency bank accounts were “hugely
scalable”. Tanzania, he said, could follow trends already evident in Kenya,
which currently has more than 40,000 registered agents, who over the course of
2015 handled 80m transactions worth some KSh442.2bn ($4.3bn).
A wider physical banking
footprint has the added benefit of creating direct contact with customers,
helping to promote a broader awareness of financial services.
“The biggest challenge to growth
in the sector is a lack of awareness and financial literacy. There is a lack of
positive information-sharing,” says Mohamed.
Source: Oxford
Business Group
