With the rapid spread of digital financial services, many in the wider public are now familiar with mobile money and have some idea of what it is. A quick Google News search will tell you that “mobile money” has become essentially a household term. For the most part, however, mainstream press coverage has focused on Kenya as the global hotbed for innovation and leading success story in the space, as demonstrated by the 1.08 million results for a news search of the term “mobile money Kenya.”
However, a growing number of other countries are now catching up with Kenya, featuring their own innovations and paths to success that deserve broader attention. Perhaps foremost among them is Tanzania, which is hot on the heels of its northern neighbor in terms of uptake and use of digital financial services. The total number of mobile money transactions made in Tanzania (95 million per month) now outnumbers that of Kenya and the gap on total value transacted is steadily closing. Yet a similar Google News search kicks back just 185,000 results for “mobile money Tanzania,” It’s time to correct this imbalance. The Tanzanian market features a number of significant differences that makes it an important alternative model for regulators and practitioners to study and worthy of greater attention by the general public.
Infographic: Tanzania's Mobile Money Revolution
Although Kenya and Tanzania are both mobile money success stories, they have followed very different paths to get to this level. A key source of difference can be found in the structure of the telecoms market. Whereas Safaricom sports two thirds of voice users and around 96% of mobile money users in Kenya, the three large Tanzanian MNOs have very even market shares on voice. Vodacom, while the clear leader in Tanzania, has only just over half of mobile money users. While Safaricom’s dominance served Kenyan mobile money customers well in the early days by quickly generating the network effects that help drive the value proposition, after a few years complaints started to crop up and several of its competitors have accused it of anti-competitive behavior by monopolizing agents, rigging pricing and obstructing access to customers as well as of holding sway over the regulators.
The more competitive Tanzanian market seems to have few such controversies but delivers good value for customers and a steady stream of new innovation. For instance, over half of agents in Tanzania work with multiple providers and therefore serve a broad range of customers. The providers even work with aggregators whose very role is to facilitate cash transactions across all of them. This brings greater convenience to customers and makes it easier for them to switch providers if a competitor started offering a better value proposition. The providers don't seem to fear this, however, but rather see it as the spur that drives them to constantly improve their offerings.
It is arguably no coincidence that Tanzania is also the first advanced digital financial services market in the world where providers have voluntarily agreed to interoperate, letting customers with different wallets and on different networks send money to each other. Talks are now under way to do the same for agents and retail merchants. Tanzania also recently became the first country in the world where mobile money providers pay interest on mobile wallets when Tigo Wekeza started passing on the interest earned on the e-money float to its customers, paying out over $10 million in the first two of its quarterly payments; other providers are reportedly following suit. With its CBA-backed M-Pawa savings and credit product, Vodacom Tanzania was the first deployment worldwide to follow on Safaricom’s success with M-Shwari, but in a matter of months Airtel launched its own credit product Timiza. Additionally, Tigo Tanzania won another global first when it launched cross-border remittances to and from Rwanda.
Collectively, these examples are testament to a very dynamic market for digital financial services in Tanzania, with an increasingly interconnected ecosystem of providers competing to offer a range of financial services to a previously almost entirely unbanked population. Though it is early days yet, it is clear that something potentially truly transformative is taking place. So while Kenya is rightly lauded and studied as the global pioneer of mobile money, Tanzania has not only been quietly catching up with its neighbor - with innovation starting to really set the market apart from its peers, Tanzania is blazing its own trail to success.
Great article and some interesting points. This is not the first time that I have brought this up but again have to ask the question as to why the banks are excluded in all your research. One of the most successful global Mobile Banking initiatives is in Tanzania driven by NMB Bank. The achievements of the MNO's in East Africa are to be recognized but so too should the efforts of the banks in their drive to financially empower the nation.
Great post, Peter! The market really does seem dynamic with healthy competition. In addition to the MNOs and other players in the market, the Bank of Tanzania deserves credit for taking a pragmatic approach that has allowed these new business models to develop. Cheers, Adam
These developments are exciting and encouraging so far for Tanzania and clearly MNOs are setting the pace. I wish commercial banks and other players moved with the same speed as MNOs. However, we understand that this may be a timing issue as payments systems develop in the country and around the globe. The next set of priorities is ensuring there is enabling environment that does not adversely impact on this momentum as well as investing in innovations that provide appropriate solutions to various segments of the market (farmers, businesses, health, education, government, etc) driven by appropriate research in identifying use cases. More and efficient distribution systems are extremely important. Equally, there is a need to elevate consumer protection issues going forward. The next big questions are how to ensure these new solutions are designed and used by the low income segments of the population particularly in rural areas. Obviously, we need to invest in assessing whether positive impacts can be recorded. I believe that coordinated effort is necessary.
By Sosthenes Kewe-FSDT
Hi Brian and thanks for the comment, which is indeed one that tends to come up from time to time.
At the general level, I don’t think it’s fair to say that banks are excluded in our research. As you may recall, when CGAP first started exploring this space a few years ago it was in the guise of branchless banking and revolved almost entirely around new business models for banks. We still work very extensively with banks across the globe on a range of issues, including how to move towards omnichannel strategies; how to leverage digital data to improve credit, savings and insurance offerings; how to develop more customer centric approaches in pursuing the BoP; how to structure partnerships with MNOs; how to strengthen customer protection and disclosure; how to develop merchant acquiring in the mobile payments era; etc.
The reason that it can seem as though less is being done on banks the simple truth that in general—with notable exceptions, including NMB—banks have (to our great regret) tended to be considerably less active in this space and as an industry appears less interested than MNOs and other players in pursuing it (for now). Certainly this is true in Africa, though there is somewhat greater bank involvement in other parts of the world—more often than not resulting from regulation. I suspect you would agree that overall, MNOs rather than banks have thus far dominated and driven the mobile financial services space. And as a result, our research and updates on the latest innovation tends to reflect that.
With all of that said, I take to heart your point about banks that are deploying digital financial services too often getting left out of the statistics. The way CGAP defines DFS does include accounts offered by banks as well as MNOs (and indeed by others licensed to issue e-money), as long as they fit basic criteria on being accessible remotely, using digital channels, etc. Part of the problem is that much of the statistics produced by e.g. central banks still reports banking activity separate from mobile money activity and it’s often very difficult for an outsider to disaggregate the banking data into parts that do and don’t qualify as digital. As I hope was clear from the attribution in the infographic, for this piece we drew only on data that were already publicly available (as opposed to new research commissioned by CGAP) and as a result, we had to accept such limitations.
I would however love to work with NMB and others in addressing this shortcoming. If the banks that have relevant offerings are willing to open the books and work with us in producing the required data, we could aim to publish an updated blog post in the near future that even better captures the full extent of the digital financial services revolution in Tanzania. How does that sound?