Tanzania Leads Africa in Financial Inclusion

Tanzania is the first country in Sub-Saharan Africa and ninth globally for demonstrating most conducive environments for financial inclusion, according to the new Global Microscope 2014 by The Economist Intelligence Unit.

The new study released this month shows the country has been outstanding in the region in financial inclusion and the regulatory framework has noted to be the most prudent.

It reveals that in Tanzania the regulatory framework for financial inclusion has become increasingly forward looking and it recognises the Governor of the Bank of Tanzania (BoT), Prof Benno Ndulu as its strong proponent.

According to the study, the country is ahead of others in financial services deepening as a wide range of institutions including banks, non-bank financial institutions (NBFIs), businesses and non-governmental organisations (NGOs) reach out to traditionally underserved populations through non-traditional channels to expand financial offerings.

Rapid growth in the number of Tanzanians with access to financial services and indicators show it will reach 50 per cent target by 2016 as set by the National Financial Inclusion Framework.

The new projections show it was not a mean achievement as a few years ago framework data demonstrated that over 56 per cent of adult Tanzanians (over age 15) did not have access to any financial services.

The 2011 World Bank Global Financial Inclusion (Global Findex) Database showed similar figures for formal-account penetration.

The regulatory framework for financial inclusion in Tanzania has become increasingly forward-looking in the last several years, largely led by the central bank.

The first two credit reference bureaux were established in 2012 and 2013, respectively and the BoT created a national credit-reference databank.

In addition, there are a number of regulations and policies being drafted or updated, including regulations on microfinance, micro-insurance, mobile payments and consumer protection.

Data collection likewise gained priority, with the first FinScope Tanzania survey (a survey of financial access and demand for financial services) occurring in 2006, with followups in 2009 and 2013.

The study notes that the private sector in Tanzania has been strong, as competition in all relevant sectors, microfinance, mobile network operators (MNOs), savings and credit associations (SACCOs) and commercial banks, has been increasing since the country’s economic liberalisation in the 1990s.

There are a large number of microfinance institutions (MFIs) operating in the country, informally co-ordinated under the Tanzania Association of Microfinance Institutions (TAMFI), the study shows further.

In terms of Mobile Network Operators (MNOs), the study says competition in Tanzania with roughly equal presence from four major providers (Vodacom, Airtel, Zantel, Tigo), is superior to Kenya whose market is dominated by Safaricom. The central bank is effectively regulating and staying current with this fast-moving sector, it says.

In Sub-Saharan Africa, Tanzania scored 56 out of 100 points followed by Kenya and Rwanda which scored 55 each. Ghana, Nigeria and Uganda scored 51, 50 and 50 points respectively.

The average score for Sub-Saharan Africa is 44. Sub-Saharan Africa (SSA) ranked second globally, buoyed by government support for financial inclusion and regulatory and supervisory capacity for financial inclusion.

Tanzania and Rwanda have substantially implemented their financial-inclusion strategies, while plans in Kenya, Madagascar, Nigeria and Uganda have been partially implemented. Uganda’s Prosperity for All programme aims to create savings and credit co-operatives in all sub-counties in the country by 2015.

Cameroon was the only country in the region that lacked a strategy, initiatives or specific goals related to financial inclusion.
Regulatory and supervisory capacity for financial inclusion is strong in Kenya, Tanzania, Ghana, Mozambique, Rwanda and Uganda. Kenya’s central bank has a specialised financial-inclusion team.

In Tanzania, the head of the central bank is a strong proponent of financial inclusion and in Rwanda, a push to establish financial institutions throughout the country has stretched supervisory resources thin, although regulators are adding staff at the sub-national level to keep pace.

Originally published on DailyNews Tanzania