Cashless shift poised to transform economy

DAR ES SALAAM: MANDATORY electronic payments for selected transactions are expected to boost tax revenue, improve transparency and accelerate digital economy, although economists say affordable systems, reliable infrastructure and cybersecurity will determine the reforms’ success.

The Electronic Transactions (Mandatory Electronic Payments for Specified Transactions) Order, 2026 requires businesses and institutions in designated sectors to adopt approved electronic payment systems.

Existing operators have been given a six-month transition period before full compliance becomes mandatory in January next year.

Economist and banker Dr Hilderbrand Shayo said the regulations represent a major step towards formalising the economy by creating digital records for commercial transactions, enabling tax authorities to monitor economic activity more effectively and reduce revenue leakages.

“The policy has the potential to broaden the tax base without increasing tax rates by bringing more businesses into the formal financial system,” Dr Shayo said.

“Digital transaction records will also help many small businesses establish financial histories, making it easier to access bank credit, insurance and other financial services.”

He added that the reforms must be accompanied by affordable transaction costs, stronger digital infrastructure and robust cybersecurity measures to ensure nationwide adoption.

The regulations cover a broad range of sectors, including public transport, shopping malls, supermarkets, hotels, restaurants, educational institutions, fuel stations, tourism, property transactions, motor vehicle sales and agricultural trade.

Once fully implemented, transactions traditionally settled in cash including bus fares, school fees, hotel bills and property payments will be required to use approved electronic payment channels.

The move builds on Tanzania’s rapid expansion of digital payment systems over recent years. Ministry of Transport figures show that 13,843 buses have been connected to the Vehicle Tracking System (VTS), while the Central Electronic Ticketing System (CeTS) has integrated 8,126 buses.

More than 21 million passengers purchased bus tickets electronically between June last year and March this year, reflecting growing public acceptance of digital payment platforms.

The wider economy has witnessed similar growth. According to the Bank of Tanzania’s National Payment Systems Annual Report 2025, the number of merchants accepting digital payments more than doubled to 2.79 million last year from 1.33 million in 2024, underlining the rapid expansion of electronic commerce across the country.

Economist Gilbert Mwabeza of Marian University in Bagamoyo said mandatory electronic payments would strengthen public revenue collection by creating verifiable digital records for transactions, making it easier to monitor business activity and curb tax evasion.

“The system will reduce revenue loss, improve transparency and accountability by creating digital records for every transaction and minimise fraud and tax evasion,” said Mr Mwabeza, who is also pursuing a PhD at the University of Dar es Salaam.

He said wider adoption of digital payments would also reduce dependence on cash, improve public safety by limiting the need to carry large sums of money, promote financial inclusion and support continued growth in ecommerce.

Tanzania Accountants Association President Godvictor Lyimo said the directive would further accelerate the country’s digital transformation while strengthening domestic revenue mobilisation.

According to Mr Lyimo, electronic payments generate verifiable audit trails that improve tax administration and help combat money laundering and other illicit financial activities commonly associated with cash-based transactions.

He said businesses would need to invest in digital payment infrastructure, modernise financial management systems and strengthen internal controls, while banks, mobile money operators and financial technology firms are likely to benefit from growing demand for electronic payment services.

“The transition will encourage greater innovation in digital financial services while improving accountability in both the public and private sectors,” he said.

Business owners who have already adopted electronic payments say the system has improved operational efficiency.

Kelvin Shehoza, owner and founder of Kings Bakery in Ubungo, Dar es Salaam, said cashless payments have reduced financial losses by limiting employees’ access to cash while providing accurate digital records for every sale.

“This is a good system because employees no longer handle cash directly, making theft or overcharging much more difficult, especially when I am away,” he said.

Mr Shehoza said the system has made it easier to monitor daily sales, evaluate business performance and identify discrepancies in real time.

However, he noted that broader adoption remains a challenge because many customers still prefer cash despite the convenience and security of electronic payments.

Legal experts say businesses should use the transition period to prepare for compliance.

FB Attorneys said businesses and institutions already receiving payments covered by the regulations have six months from the commencement of the Order to establish compliant electronic payment systems.

Existing contractual payment arrangements entered into before the regulations came into force will remain valid during the transition period.

The law firm advised businesses to review their payment collection systems and establish approved electronic payment channels well before the compliance deadline.

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However, FB Attorneys noted that the regulations do not clearly specify who should bear electronic transaction charges, raising concerns that consumers could ultimately absorb the additional costs.

The firm also questioned whether the country’s payment infrastructure is sufficiently robust to support nationwide implementation, citing network reliability, cybersecurity risks and digital fraud among the key issues requiring continued attention.

For economists, the success of the reforms will ultimately depend not only on legislation but also on implementation.

Dr Shayo said reducing transaction costs, expanding reliable internet and electricity coverage, strengthening consumer protection and investing in cybersecurity would be essential to building public confidence in electronic payments.

Support for small businesses and nationwide digital financial literacy campaigns would also be critical to ensure that the transition to a cashless economy remains inclusive rather than widening the country’s digital divide.