DAR ES SALAAM: Tanzania’s financial inclusion increased last year, but the level of financial exclusion remains high relative to peers, according to the International Monetary Fund (IMF) country report.
The report said the country’s formal financial inclusion climbed up to 76 per cent from 65 per cent in 2017, according to recent survey data from Finscope Tanzania.
The IMF’s country report released in December last year, highlighted the improvement which attributed to the significant increase in mobile money uptake, reaching 72 per cent until last year.
“In contrast, Tanzania’s share of respondents using bank services remained low at 22 per cent until last year, with the increase of 5 per cent since 2017 and mainly driven by banking services that are accessible via mobile phones,” stated the report.
Additionally, the share of ‘excluded’ respondents declined from 28 per cent in 2017 but remained high at 18.7 per cent last year.
While the number of depositors with commercial banks increased significantly in 2022 by 17 per cent, the number of borrowers and loan accounts remains low, in line with Tanzania’s early stage of financial deepening relative to peer countries.
The report also pointed out that although gender and rural-urban gaps in financial inclusion have narrowed, financial exclusion continues to disproportionately affect the young and rural populations.
The share of financially excluded adults in rural areas declined by about 11 percentage points between 2017 and 2023, narrowing the rural-urban gap in financial exclusion by 7 percentage points, from 20.1 to 12.9 percentage points.
However, the report said the work to develop the payment system infrastructure will help reduce the predominance of cash-based transactions, which remains a barrier to financial inclusion.
The report also highlighted numerous initiatives including facilitation of interoperability between payment infrastructures and lowering the cost of mobile transactions by the Tanzania Instant Payment System (TIPS) intended to reduce cash transactions.
Other efforts are underway to overcome barriers to access and are starting to yield results.
Among others, the roll-out of national identity cards and increased mobile phone ownership has helped to lower barriers to access.
The IMF report also noted that the uptake of the National Identification Number (NIN) significantly increased access to financial inclusion.
Overall, more than 80 per cent of respondents hold a form of ID which is required by all formal financial service providers to fulfill know-your-customer requirements.
Mobile phone ownership also increased by 12 percentage points from 63 per cent of respondents in 2017 to 75 per cent last year.