Access to and use of digital financial services in Tanzania has increased over the past decade. But despite this progress, women remain under-served by the financial system. This brief analyses data from The World Bank’s Global Findex 2021 and other sources then presents recommendations for increasing financial inclusion in Tanzania.

Overview

This brief — Assessing Progress and Priorities: Tanzania's Financial Inclusion Journey, 2011-2021 — analyses the themes of access, usage and financial health using the latest edition of the World Bank Global Findex Database (2021) alongside other large datasets and publications such as those from the World Bank and the GSMA. We also incorporate UNCDF’s own project-level data and observations. Here are the high-level takeaways:

Access

1. Mobile money is leading the way in facilitating access to finance, although gender gaps persist

2. As compared to financial institution accounts, mobile money provides a pathway to financial inclusion for women in particular

3. Barriers such as affordability, accessibility, lack of documentation and low literacy drive exclusion

Usage

1. While access to mobile money accounts is growing, meaningful usage in terms of digital payments, savings and borrowing lags behind – especially for women

2. The proportion of people making digital payments is growing despite a fragmented merchant payment system yet gender gaps persist

3. Mobile money accounts are popular tools for savings but women are half as likely as men to have saved using this mechanism

4. Adults in Tanzania still prefer to borrow informally

Financial health

1. Access and usage matter but quality and impact of financial inclusion cannot be overlooked

2. The concept of “financial health” offers a broader lens by which to define and measure the impact of financial inclusion efforts on different groups

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Recommendations

1. Put affordability and accessibility front and centre

Affordability remains a key constraint to financial inclusion

• Market-led initiatives should aim to reduce the real costs of financial products and services. For example, tiered account opening fees, subsidies, alternative credit assessments or flexible payment plans for mobile devices and internet services, with an eye toward women and underserved segments.

• Market-led initiatives should aim to reduce the perceived costs of financial products and services by increasing their relevance. For example, user research and customer-centric product design that considers specific needs of specific customer segments. Rather than targeting “women,” design products tailored to female smallholder farmers, MSME-owners (in different sectors), female university students, for example.

• Market-led initiatives should champion gender-intentionality: assess how gender wage gap, social norms, labour participation gaps and ownership of resources gap influence women’s purchase power, choice and control.

• The government should continue to invest in digital infrastructure and connectivity, especially in rural areas, in order to drive down costs of financial services at the last-mile.

Accessibility is fundamental to increasing inclusivity and closing gender gaps

• Lack of proper documentation is still a major constraint to financial inclusion. The public sector should lead initiatives to ensure inclusive access to trusted and verifiable ID systems (i.e., wider access to NIDA). This should be coupled with lighter and tiered KYCs.

• Public-sector led initiatives should continue to improve the enabling environment for digital payments. It is key to encourage uptake and usage, build-out infrastructure to cover rural areas, reduce transactional costs. improve mobile money agent liquidity and reach while ensuring people can efficiently access cash when preferred.

2. Prioritize safety and build consumer trust in the digital financial system

• Public and private sector should lead initiatives to build financial and digital capability and to increase safe and effective usage of financial services while reducing exposure to fraud.

• Regulators play a role in promoting a customer-centric approach to monitoring and supervision, focusing on the impact of financial products, services, policies and regulations on end-users.

• Regulators are responsible for enhancing the implementation of financial consumer protection regulation and for strengthening internal policies and procedures on disclosure, transparency, fair access, privacy and data protection, guarantee schemes and insolvency as well as enforcing re-dress mechanisms.

• Policymakers and regulators should continue to channel resources to fund awareness campaigns on consumer risks, redress mechanisms and basic literacy skills, which can contributes reinforce trust in the system.

• The private sector should ensure good and high-quality customer service, especially directed toward vulnerable groups, while training and supervising mobile money and bank agents on how to take the perspective of the end-user when providing support.

• Development partners, civil society organisations, academia and the private sector should continue to invest in gender segmentation in research and product design, which can help build the business case for serving women and low-income customers.

• The private sector should design products and services that address the needs and aspirations of female and low-income customers (and potential customers) while reducing potential risks. The private sector can leverage research outcomes highlighting the business case for investing in women. Regular monitoring of the uptake and usage of these products and services can improve their impact.

3. Measure what matters

• People’s experiences matter, and gathering insights about users’ perceptions, fears, challenges and perceived risks will lead to more inclusive financial systems. Financial service providers should build on insights from customer-oriented research (with a focus on underserved segments) while strengthening their own analytical capacity and product design. Despite the initial resources required to become more customer-centric, identifying what really matters for end-users will create additional business cases.

• Evidence-based research is essential to better understand the impact of financial inclusion on different population segments, as well as unique challenges and opportunities they face. This requires:

  • Public sector research: Policymakers and regulators should collect and use demand and supply-side data to analyse policy, regulatory and market challenges, understand the impact of current frameworks, address major barriers, develop pertinent solutions and cooperate with the private sector to prevent risks and react to them (e.g., consumer complaints, rising gaps).

  • Private sector research: Financial service providers and mobile network operators should invest in regular, high-quality data collection disaggregated by socio-demographic traits to analyse their clients’ profiles, existing or possible risks, gender gaps as well as financial trends. This requires investments in digitizing data systems, protecting data privacy as well as establishing a good collaboration with regulators in order to support them to make evidence-based decisions and ensure a good flow of information.

• Policymakers and regulators are to adopt a more holistic perspective of financial inclusion, leveraging financial health approaches to achieve better and more sustainable impact on their population. Creating an enabling environment to reinforce choice and control over financial services becomes key, while strengthening measurement indicators. The revision of the Tanzania National Financial Inclusion Framework II (NFIF) could be a powerful opportunity to leverage such holistic approach, by including financial health targets and associated indicators which can support the country in measuring financial inclusion progress, closing gender gaps and increasing financial resilience.

4. Leverage participative policymaking models to drive accountability and inclusivity

• Policymakers should build meaningful partnerships with regulators, the private sector and civil society organisations, especially during the design and implementation phases of policies and regulations.

• Policymakers, regulators and the private sector should include consumer voices in policy design and represent consumers and excluded group's needs in discussions, making sure to hold government and private sector accountable and reduce harmful practices.

• All stakeholders should foster women's economic participation and include women representation at decision-making levels, fostering gender diversity in leadership. 

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This paper was developed by UNCDF's Tanzania Inclusive Digital Economies (T-IDE) project, funded by the European Union under its Digital4Tanzania (D4T) Programme, and the UNCDF Policy Accelerator.

About UNCDF

The United Nations Capital Development Fund (UNCDF) is the U flagship catalytic financing entity for the world's 47 least developed countries (LDCs).

With its capital mandate and instruments, UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, in support of households, localities, and small enterprises that are underserved, where development needs are greatest, and where resources are scarcest.

About the Digital4Tanzania (D4T) Programme

In March 2022, The European Union launched the Digital4Tanzania (D4T) Programme, which aims to contribute to the impact of digital transformation on Tanzania’s inclusive economic growth and citizen wellbeing. With a budget of EUR 35M, its specific objectives include:

• Digital government: improving the digital economy and the use of e-government and e-services.

• Inclusive connectivity: increasing accessible and equitable connectivity services in rural and peri-urban areas, in particular for social services.

• Digital trade support: developing the fintech sector and innovation ecosystems in the country and the region.

The programme will be jointly implemented by The Ministry of Information, Communication and Information Technology (MICIT), EU Member States and the UN Capital Development Fund (UNCDF).

About Tanzania Inclusive Digital Economy (D4T-IDE) Project

With support from the European Union through its Digital4Tanzania (D4T) Action, UNCDF is currently implementing the Tanzania Inclusive Digital Economy (D4T-IDE) project. Launched in September 2022, D4T-IDE is a four-year project that aims to increase access to and usage of digital payments and digital financial services in Tanzania, while enabling the innovation ecosystem to better support entrepreneurs and further drive digital innovation. The project will contribute to the development of a national digital economy strategy, as well as other policies and regulations that enable innovation; support small digital financial service providers' integration to the national payment system (TIPS); and support inclusive innovation to ensure no-one is left behind.

Authors

Caroline Morrow

Sophie Falsini

Report design

Darina Hernikova

Editor

Alexis Ditkowsky