Mobile Phone Boosts Financial Inclusion

The agent banking and mobile phone transaction are picking up while pushing up as demonstrated by increase the volume and value of transactions.

The agency and mobile money have assisted financial sector penetration in the country to overtake its goal of reaching 50 per cent two years ahead of the deadline in 2016.

At the end of last year it posted a 55 per cent. The business, a new phenomenal in the country, defies all odds in the market to contracted 2,013 active agents who are facilitating 881, 327 deposits until the end of this April.

The agents have controlled 503.1bn/- transactions in a way of deposits while withdrawal transactions valued at 75.5bn/-, showing a huge sum was saved in the banks accounts. On other hand, mobile payments have also continued to grow with estimated transactions averaging 116.8bn/- per day.

“This growth points to the potential of leveraging technology based delivery channels in increasing access to financial services with lower transactions cost,” Bank of Tanzania says.

“The sector also continued to be stable and sound as depicted by financial soundness indicators,” BoT says in June Monetary Policy Statement issued recently.

According to the central bank up to the end of the April registered nine banks which are provided agency business—among them CRDB, DCB, Tanzania Postal Bank, Maendeleo Bank and Kenya’s Equity Bank.

Dhow Financials CEO, Prof Mohamed Warsame says going by the current pace of adding some 500 agents a year on CRDB system, shows that the bank is walking toward Equity Bank which has about 60,000 agents in Kenya.

The biggest share of agent banking is controlled by that managed to mobilise 254.4bn/- deposits through it agent banking— FahariHuduma—which was an increase of over 700 per cent in 2014.

The bank’s FahariHuduma agent banking scheme was introduced in 2013 and in the first year managed to mobilise 31.7bn/- deposits. The agent banking though in its nascent stage has managed to recruit 1,067 agents up from 491 in 2013, which was an increase of 117 per cent over a year.

The CDRB, Managing Director, Dr Charles Kimei says that the bank’s agent banking is quite different with as it depends on its own system unlike others.

“Our training budget for agent banking is relative high than our competitors,” Dr Kimei says. Mr Juma Kaundama, a CRDB’s agent, says the business pays well especially when you handle many transactions.

In general “the banking sector remained sound and well capitalised, with adequate liquidity in line with international standard,” BoT says.

The soundness of the banking sector is the results of an enabling regulatory environment and reforms to improve efficiency in financial markets by the BoT have led to the introduction of new financial services and products at low cost.

The low costs financial products assist banks to reach many customers and mobilise more deposits, which are a crucial variable for spurring investments through commercial loaning.

For instance, in 2009 population with access to financial services was merely 27 per cent but jumped to 55 per cent in 2014, two years ahead of the targeted deadline. Under the terms of the Maya [Mexico] Declaration, BoT committed to increase the share of the population with access to financial services from 27 per cent in 2009 to 50 per cent by 2015, now hoping to achieve 75 per cent within the next six years.

The BoT singled out mobile phones as “one of the most critical links for this cusp of phenomenal success” between the unbanked population and financial services. The early challenges were accepting and blending mobile financial infrastructure with main stream banks as a way of growing banking services in a cost effective manner.

Internet banking through mobile phones easy accessibility of the banking services by mobile users propelled the financial inclusion in the country.

A bank customer, Mr Sebastian Kitia, says there is no need to walk all way to the ATM for transaction as the service is also provided at one finger tips via mobile phone services.

“I check my balance, make some withdrawal, transfer funds from my bank account to my M-pesa, life has been made easier, thanks to internet banking,” Mr Kitia says.Prof Warsame says financial inclusion does not translate to have a bank account, rather be a part of the banking system even through mobile phone accounts.

Inclusive finance is a major contributor not only to economic growth and poverty reduction but also for effectiveness of monetary policy transmission and financial sector stability.

Originally published on DailyNews Tanzania