The inclusive effect of mobile banking in Tanzania

As an early adopter in the mobile banking industry, doubling mobile money transactions between 2013 and 2015, Tanzania has slowly evolved into a competitive market over the last decade. Hosting almost a third of all active mobile money accounts in Eastern Africa, the country facilitates financial inclusion and can be seen as a significant contributor to growth in the region.Nowhere else in the world the mobile phone has meant as much as in Africa. To a certain extent mobile phones can be described as the driving force behind Africa’s renaissance. In less than a decade mobile usage increased from close to zero to a staggering 70 per cent. There are over six hundred million mobile subscribers and more mobile phones in Africa than in the whole of the United States of America (USA).One of the most impressive developments concerning mobile banking in Africa, is noticeable in Tanzania. The former British colony, which obtained independence in 1964, is one of world’s poorest economies in terms of income per capita, but has achieved growth rates of six to seven per cent per year between 2009 and 2016, through its natural resources and tourism.  The national economy highly depends on agriculture, which is accountable for more than one fourth of GDP and employs about 65 per cent of the national work force. With almost half of its territory used by the agricultural sector, Tanzania has the lowest population density in East Africa while having the largest population. Consequently, an estimated 60 per cent of the population lives in rural areas (hard to access) of the country, traditionally falling behind on economic development.

Money can be transferred with all phones that are connected to a network. The use of mobile phones, and the rise of mobile money back in 2008 has proven to be a sustainable manner to counter the traditional divide between poor and rich, as it enables people living in rural areas – and those without bank accounts – to obtain access to banking services in a single stroke. Mobile money has helped increase the availability of financial services in Tanzania, and according the IMF, financial inclusion rose by 42 per cent to a staggering 58 percent of the population between 2009 and 2013. Putting it differently, while only 19 percent of the Tanzanian population has access to a formal financial institution according to the World Bank, this percentage doubles to an estimated 39 percent when mobile money accounts are involved.With four companies – Vodacom, AirTel, Tigo and ZanTel – providing mobile money facilities in Tanzania, the country’s mobile transactions are rapidly increasing to an estimated 50 percent of GDP. The financial inclusion – as a direct result of mobile money – opens the market for a large group of new costumers, which significantly boosts the economy Tanzania. Altogether the increasing involvement of low income classes through mobile money partially contributes to the admirable economic growth of six to seven percent each year.However, it should be taken in consideration that the mobile penetration of Tanzania, and the increasing (financial) inclusion brings along new challenges for the Tanzanian government. Mobile telephony, social media and mobile banking have an inclusive function and provide people with a unique opportunity to feel that they are exerting a certain degree of influence on regional or national matters. In addition, the mobile access reduces the distance between people, both between villages and regions, even between countries. This enables people to organize themselves in large groups, which can exert pressure on the national government. When wealth is not distributed more equitably for instance, it can induce political instability or conflicts in the future, similar to the Arabic spring, as seen in Northern Africa. Mobile inclusion, both financially and socially, therefore brings along responsibilities which should be upheld. Otherwise, the mobile phone can turn into a destabilising factor.

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