Less than 40 % of Tanzania’s adult population has a bank account. The Central Bank aims to increase access to integrated financial services to 80 % by 2028.
Financial inclusion is essential for sustainable economic growth
Financial inclusion in Tanzania has significantly improved, but less than 40 % of the adult population holds an account with a financial institution, highlighting the work policymakers still have ahead. To address this, the government, through the Bank of Tanzania (BoT), announced its plan to increase access to integrated financial services to 80 % of the population by 2028.
BoT Deputy Governor, Ms. Sauda Kassim Msemo, recently told the media that access to financial services is vital for sustainable economic growth. « The government continues to create a favorable environment for investment, but we need to enhance financial inclusion, particularly access to banking services », she said.
She emphasized that while financial services reach about 76 % of the country’s population, banking services cover only 22 % of the total population. According to the Central Bank director, as of January this year, only 23.3 % of people aged 15 and older held an account with a financial institution. The highest penetration rate for bank accounts was 46.8 % in 2021.
In a bid to expand financial inclusion and access to banking services, she mentioned that the BoT had relaxed the registration requirements for financial service agents to help improve accessibility.
Mobile financial services boost inclusion
Although the number of banks in Tanzania has grown significantly and the banked population has increased, mobile money services have made the most significant strides in advancing financial inclusion. FinScope Tanzania reports that the number of financially excluded adults dropped to 6.4 million in 2023, thanks to the rise of mobile money services.
« Overall observations indicate that mobile phones are a convenient way to distribute basic banking services quickly and at a relatively low cost », FinScope noted. According to the report, the increase in financial inclusion in Tanzania is primarily due to telecommunications companies and the growing penetration of mobile money transfer services such as M-PESA, Tigo Pesa, Airtel Money, and Z-Pesa.
Despite these advancements, cash remains king in Tanzania. « Significant progress is still needed to encourage Tanzanians to engage in formal transactions and use financial services for development », FinScope noted. The report also highlights a wide gap between « trials » and the « regular » use of digital payment mechanisms for purchasing goods.
As of January 2024, only 23.3 % of the population aged 15 and over held an account with a financial institution, the same rate as the previous year. The report also suggests that while mobile phone ownership is on the rise, younger Tanzanians and women are still lagging in mobile phone ownership.
How to finance a disadvantaged population ?
When it comes to barriers to financial inclusion, it’s important to consider that many people lack collateral simply because they come from poor families, which puts them at a disadvantage.
In its study, FinScope examines how « disadvantaged populations » can also be integrated into the financial system. « Well-functioning financial systems play an essential role by offering savings, credit, payment, and risk management products to people with diverse needs », the report states.
Tanzania has launched its National Financial Inclusion Framework, aimed at expanding access to finance to more than half of the country’s population. The Bank of Tanzania has established a robust system for licensing, regulating, and supervising commercial banks to open up the financial sector.
However, FinScope points out that seasonal or occasional income sources create financial instability for most Tanzanians. There is also a misconception that many people believe they need more money than they do to open a bank account.
