‘Payment system infrastructure to reduce cash transactions’

TANZANIA: THE International Monetary Fund (IMF) has said payment system infrastructure will help reduce the predominance of cash-based transactions which remains a barrier to financial inclusion in Tanzania.

The IMF latest report said more than 80 per cent of Finscope respondents received their income through cash and made most of their payments in cash.

Among the 55 per cent of respondents who have engaged in a remittance transaction, nearly all – about 90 per cent – made the transfers through mobile money.

However, only 33 per cent of respondents have used mobile money to make a payment or purchase goods.

The uptake of digital airtime purchase has increased to 12 per cent of Finscope respondents (from 3 percent), and rent payments made by phone increased to 5 (from 1 percent).

Tanzania Instant Payment System (TIPS) is intended to reduce cash transactions, by facilitating interoperability between payment infrastructures and lowering the cost of mobile transactions.

The Bank of Tanzania has been orienting financial service providers onto TIPS from January 2022 through July last year.

Various other efforts are underway to overcome barriers to access and are starting to yield results. The rollout of national identity cards and increased mobile phone ownership has helped to lower barriers to access.

The uptake of the National Identification Number (NIN) significantly increased from 10 per cent of Finscope respondents in 2017 to 57 per cent last year.

Also Read: BoT urged to improve interbank cash market functioning

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 ppts, from 63 per cent of respondents in 2017 to 75 per cent last year last year.

However, gender, urban-rural and age gaps in mobile phone ownership were observed s 61 per cent of youths (aged 16 to 24 years), 71 per cent of women, and 69 per cent of respondents in rural areas own a mobile phone, compared with 80 per cent of men, and 85 per cent of respondents in urban areas, and 75 per cent of all Finscope respondents.

The report said further that a secured transactions law is being developed by the authorities to expand the use of formal financial services.

Land is a key form of collateral, but land ownership is particularly limited for women and youth and only 15 per cent of all Finscope respondents reported having documentation of land ownership.

The National Financial Inclusion Framework (NFIF) notes the need to facilitate the development of a secured transactions law and develop a collateral registry for movable assets.

The authorities have commenced work towards a secured transactions Act that allows collateral recovery and broadens the pool of acceptable collateral to movable collateral, to facilitate access to finance in Tanzania.

Related Articles

Back to top button