Banks, Mobile Money Agents Drive Up Financial Inclusion in Tanzania

Commercial banks and mobile money agents are key drivers in expanding and promoting financial services and inclusion, particularly in the rural areas, which are financially underserved.

The increase and improvement of mobile banking services has made commercial banks provide bank accounts, deposit, withdrawal and remittance services, microinsurance and micro-finance facilities to its customers through mobile banking.

Mobile money could become a general platform that transforms entire economies as it is adopted across commerce, health care, agriculture and other sectors. Exclusion from the formal financial system has increasingly been identified as one of the barriers to a world without poverty.

It involves a lack of access to the instruments and means through which the poor could improve their lives. To this end, improving access to financial services by the unbanked populations and small businesses is critical to promote economic growth.

Subsequently, mobile and agency banking industry offers a way to bring the large unbanked population into formal financial sector and facilitate economic activities. Empirical results show that mobile money financial services contribute positively and significantly to financial inclusion after controlling for other factors known to be influencing the financial inclusion.

Among them are the analysis finds that the mobile phone penetration rate, level of education and the level of income influences positively the financial inclusion.

The National Financial Inclusion Framework (2014-16), the level of formal financial access in the rural areas is 8.5 per cent compared to 23 per cent in the urban areas and totally excluded rural population is 60 per cent compared to 45 per cent in urban areas.

Moreover according to the geospatial census of financial access points conducted in 2012 and based on latest population census, only 30 per cent of the Tanzania population live and transact within a 5 km distance of a financial access point.

The financial access points are points where cash in cash out services can be conducted including bank branches, ATMs, microfinance institutions (MFIs), post offices and mobile money agents. However, lack of enough float of mobile money agents has been one of the factors that negatively affected the adoption of mobile banking in the country.

To bridge the gap, the National Microfinance Bank (NMB) has partnered with Tigo Tanzania and Airtel Money to support availability of both cash and e-money (floats) to Tigo pesa agents to smoothly run their business.

The solution will full address Tigo pesa and Airtel Money agent’s liquidity management problems through NMB branches countrywide. The partnership clearly demonstrates the revolutionary role that banks and mobile communications companies can play in improving the living conditions of the communities while at the same time pioneering financial inclusion.

NMB Acting Chief Retail Banking Mr Abdulmajid Nsekela said that the bank’s branch network captures the essence of closeness slogan while believing that the integration will bring mobile agents and their customers closer to services wherever they are.

NMB has always been to create innovative products and services that tackle various financial challenges in the country. It was determined that there is a financial gap in accessing cash from the agents and also converting cash to floats. Banks are introducing M-banking in order to take advantage of high mobile phone penetration around the world and more specifically in Africa.

“NMB and mobile network operations saw this as an opportunity to provide a reliable financial solution that will address agents’ liquidity management issues in relation to physical cash and e-value exchange. This model is much more convenient to both mobile network operations’ agents and wallet customers,” he said.

According to Finscope survey of 2013, financial services had reached to 76 per cent of the population by 2013 from 44 per cent in 2009. Similarly, the Bank of Tanzania (BoT) has set new targets of achieving usage of formal financial services under the National Financial Inclusion Framework (NFIF 2014/17) of having 80 per cent of adult population using a financial access point.

The Monetary Statement of the first half of the 2015/16 fiscal year also shows that BoT is targeting to have at least 70 per cent of the population living within five kilometres of a financial access point by 2017.

Despite the statistics, the number of rural population accessing formal financial services, particularly loans and saving has remained low. Mobile money agents play a vital role in contributing to the country’s economy and therefore as Tanzania’s largest retail bank it is essential to create an environment that works in their favour and helps them to meet the market demand and through that, we are contributing to accelerating financial inclusion in the country.

This innovation is the continuation of long time partnership between NMB, Airtel and Tigo, prior to launch of this service. With the wide network of NMB branches in the country, the bank will ease the process of converting floats into cash and cash into float through an advanced system integration which is capable of identifying the Tigo pesa and Airtel Money agents based on agent’s number. NMB integration is more advanced, easy to use, faster and reliable than any other bank in the country.

NMB will use their banking system which communicates directly to TigoPesa and Airtel Money systems. Under this mode you will not see till numbers stamped at NMB branches but rather the agent is free to transact at any NMB teller counter which is more convenient to customers.

The companies are offering various services to Tigo, Airtel and NMB customers which include but not limited to Tigo and Airtel airtime purchase via NMB mobile and NMB ATMs, Money transfer services from NMB mobile to Tigo Pesa or Airtel Money and Money transfer from TigoPesa or Airtel Money to NMB account.

Due to the high demand of mobile money transfers between networks (interoperability) mobile agents constantly run out of cash putting the business at risk as they fail to meet their customers’ needs. Through NMB, mobile agents need not to fear when run out of cash as they will be able to exchange float against physical cash at any nearby NMB branch in the country.

Globally, obstacles for mobile banking can mean the confronting events or difficulties which hinder the adoption of certain technology or confronting events which are contrary to the adoption of certain technology. It is high time that all stakeholders come together to address the challenging environment in order to reach more financially underserved population particularly in the rural areas.

Originally published on DailyNews Tanzania