The Bank of Tanzania aims to close a 24 percent financial inclusion gap by leveraging digital innovation, agent banking, and improving financial literacy. Recent advancements in digital services and payment system interoperability have transformed access to finance. However, challenges regarding the utilization of traditional banking services and the need for financial education remain pertinent. The ambition is to reach 85 percent financial inclusion by 2028.
The Bank of Tanzania (BoT) is actively pursuing strategies to close the existing 24 percent financial inclusion gap in the country. During the recent Tanzania Bankers Association Conference on Financial Inclusion, BoT’s Governor, Mr. Emmanuel Tutuba, underscored the remarkable advancements achieved over the years. He indicated that a comprehensive approach is necessary to foster this growth, leveraging digital innovation, alternative banking access, enhanced financial literacy, improved payment interoperability, and regulatory support for innovation.
Digital financial services have transformed the financial landscape in Tanzania, boasting over 40 million registered mobile money accounts. Governor Tutuba acknowledged the significant impact of mobile money, agent banking, and fintech solutions in enhancing access to financial services. However, he cautioned that merely having digital tools is insufficient; they must be integrated with traditional banking services to offer a wider range of financial products and services.
The proliferation of agent banking has significantly mitigated geographical barriers, with over 60,000 outlets facilitating access to financial services in rural areas. According to Mr. Tutuba, “Agent banking brings services closer to people, particularly in remote areas where traditional banks may be few and far between.” While these advancements are commendable, the challenge of financial literacy remains a pressing concern, prompting the launch of national campaigns to educate citizens about formal financial services.
Interoperability in payment systems is another pivotal factor in promoting financial inclusion. The recently launched Tanzania Instant Payments System (TIPS) enables seamless transactions among banks and mobile money operators, thus enhancing convenience and bolstering confidence in formal financial channels. Mr. Tutuba stated, “This system enhances convenience and broadens the adoption of formal financial channels.” This integration is vital in encouraging a shift away from informal financial methods.
To support these initiatives, regulatory measures fostering innovation are crucial. The BoT is committed to creating an environment conducive to the adoption of new digital technologies by financial institutions. Governor Tutuba’s vision aligns with the Digital Economy Strategic Framework, which aims to enhance connectivity throughout the country, ensuring reliable electricity and internet access in nearly all communities by December.
The rate of formal financial service adoption has surged from 65 percent in 2017 to 76 percent in 2023. This growth results from collaborative efforts between policymakers, financial institutions, and technology providers. However, only 22.2 percent of adults utilize traditional banking services, indicating that while mobile money is thriving, traditional banks face underutilization issues. The government aims to achieve an 85 percent financial inclusion rate by 2028, pushing further efforts.
During the conference, TBA chair, Mr. Theobald Sabi, emphasized the importance of ensuring that all citizens benefit from financial inclusion, contributing to national development. He remarked, “This is the third meeting with the primary objective of citizen inclusion in the formal financial sector.” Financial experts concur that digital innovation, alternative banking options, enhanced literacy, and regulatory frameworks are essential to reach these objectives.
Finally, fintech expert Aisha Mkwawa highlighted that digital inclusion extends beyond mere mobile phone access. It requires designing financial products tailored for specific demographics, including women, youth, and smallholder farmers. As Ms. Mkwawa noted, further investment in fintech is critical to reach underserved populations and expand access to formal financial services.
The Bank of Tanzania is committed to bridging the 24 percent financial inclusion gap through a multifaceted approach involving digital innovation, agent banking expansion, enhanced financial literacy, and supportive regulations. Significant strides have been made, yet challenges such as low traditional banking usage and financial literacy persist. It is imperative to sustain collaborative efforts to achieve the national goal of 85 percent financial inclusion by 2028.
Original Source: www.thecitizen.co.tz
