DAR ES SALAAM, April 11, 2017–In less than eight years, there has been extraordinary progress in bringing the majority of Tanzanians into the mobile money revolution, mostly by adopting an efficient, low-cost mobile money transfer system. Doing more to support the much larger, formal financial system is now critical for the growth of the country’s business sector and its ability to mobilize savings and gain access to affordable credit, according to a new World Bank Group report, “Money Within Reach: Extending Financial Inclusion in Tanzania.”
“The mobile money revolution has made a tremendous impact on the lives of millions of people who can now send and receive money and thus save at low cost,” says Bella Bird, the World Bank Country Director for Tanzania, Somalia, Burundi, and Malawi. “With more effort, the remaining one-third of Tanzanians could also have access. Access to credit through the formal financial sector, however, remains a critical constraint to the growth of the domestic private sector, and thus a constraint on growth and to poverty reduction.”
Tanzania has 58 banks and a per capita reach of 2.5 bank branches and 6.4 ATMs per 100,000 adults. While most of the population live in rural areas, Bank operations are concentrated in the country’s three largest cities and largely serve better-off city dwellers and formal businesses.
“Financial development can make an important contribution to Tanzania’s development. Supportive government policies and access to affordable credit are necessary to crowding in private investment, especially for the micro, small, and medium size enterprises vital for inclusive growth and poverty reduction,” says William Battaile, the World Bank Lead Economist, who authored the report.
The Tanzania Economic Update (TEU) is issued twice a year by the World Bank, with each edition describing the current state of the economy and providing in-depth coverage of a topic of strategic significance to the country to stimulate policy analysis and debate.
The 9th TEU shows the Tanzanian economy has continued to record relatively strong performance, with low inflation and growth above its regional peers. Real GDP growth for 2016 is estimated near 7%. The short- to medium-term macroeconomic outlook remains stable, though emerging risks need to be carefully managed, including budget implementation and private sector development. To maintain and increase the momentum, Government will need to focus on three key growth enablers: continued macroeconomic stability; the effective implementation of public investments; and supportive policies to promote private sector investment and growth.
Financial Inclusion is an area of significant success, and the mobile money revolution has played a major role in it. From less than 200,000 subscribers in 2008, the total number of registered mobile money user accounts grew rapidly to 53.3 million by the end of February 2016, with 17.6 million active users conducting at least one transaction within a window of 30 days. The World Bank report shows, however, that greater efforts are needed to fully capitalize on these developments to reach the very last customers and expand access to credit to the private sector, enterprises, and entrepreneurs, including more women and young people.