Financial Sector Deepening Trust (FSDT) driving the financial inclusion agenda through digital innovation
Digital financial services have had a remarkable impact on financial inclusion in Tanzania. Since its inception in 2008, mobile money usage has grown to 17m active users, enabling millions of previously unbanked Tanzanians to have convenient, affordable access to payment services.
Tanzania is regarded as one of the first markets in the world to have full interoperability of mobile money services, and is seen as a model competitive market in digital financial services. The Financial Sector Deepening Trust (FSDT) is honoured to have played its part in driving digital financial services forward, facilitating optimal access and usage to improve financial inclusion.
In 2006, the FSDT published FinScope Tanzania, the first survey of the financial behaviour of adults, which showed that over half of the population were without access to financial services and most had never had a bank account.
The reasons given for not having a bank account were cost, lack of understanding of services and long distances to available financial services. In a country with few urban centres and a large rural population, there are significant challenges to providing national networks of financial access points due to large geographical areas, low population density and dispersed communities.
FinScope Tanzania 2006 provided essential market data to key players in mobile telecommunications and digital financial services, and due to the relevance and accuracy of its insights into the scale and nature of demand, enabled the development of market-led innovative new products, services and distribution networks that were convenient and affordable for those who were excluded.
FSDT has built a strong reputation working with regulators and corporate partners to create a positive enabling environment for mobile financial services and agency banking. Its contribution to the development of digital financial services was to pursue an industry-led process with common business standards as well as influencing government policy to develop an enabling regulatory framework. Convinced of the benefits of digital financial services, the Bank of Tanzania adopted a forward-thinking “test and learn” approach and the Tanzania Communications Regulatory Authority (TCRA) enforced new standards for financial transactions made though mobile networks. This collaboration enabled Tanzania to become one of earliest countries to launch mobile money in the world.
By 2014, the market stood at 39 million registered money wallets, 13 million of which were active, spread between the 4 major network providers.
Interoperability remained a considerable challenge for network providers due to the competitive nature of the market. FSDT was successful in acting as a neutral facilitator to reach agreement among the network providers on an interoperability solution. Once the agreement was made, the Bank of Tanzania provided the regulatory framework that ensured that providers offered services in compliance with risk mitigation frameworks that supported both financial stability and inclusion. By December 2014, 3 of the 4 major network providers signed an agreement on operating rules which led to technological development. The fourth came on board in February 2016.
As well as mobile money, the range of new products and services that have entered the market is impressive, from digital credit, digital savings groups and banking services using phones via simbanking. From the inception of digital financial services, as products and services have become established, consumer demand has evolved rapidly. Both industry players and policymakers await FSDT’s FinScope Tanzania 2017, the latest report to be published in September, which will provide an up-to-date, detailed picture of the ongoing impact of digital financial services innovation.
The Financial Sector Deepening Trust (FSDT) is proud to be recognised as one of the key players in the evolution of digital financial services providing essential market data, facilitating new product and service development and driving policy to create an enabling regulatory environment.