Digital loans have experienced significant growth in Tanzania, driven by mobile technology, increased phone ownership, and partnerships between banks, microfinance institutions, and mobile network operators (MNOs).

Key Statistics

1. Total Number of Digital Loan Accounts:
   • The number of digital loan accounts in Tanzania skyrocketed by 198% from 32.09 million in 2022 to 95.89 million in 2023.
   • This dramatic increase highlights a growing trend of digital borrowing, especially among low-income and rural populations who find traditional banking inaccessible.
2. Amount of Digital Credit Issued:
   • The total amount of digital credit issued in Tanzania surged from TZS 26.79 billion in 2022 to TZS 126.03 billion in 2023, marking a 370% increase.
   • This indicates that while the number of loans has grown significantly, the total value of loans issued has also risen, suggesting an increasing demand for larger loans.
3. Demographic Trends:
   • Men represent 66.5% of all digital loan borrowers, while women account for 33.5%. However, the number of women accessing digital loans is steadily increasing, indicating greater financial empowerment among women.
   • Youth and young adults (primarily those aged 18–35) make up a large proportion of digital loan borrowers, as they are more likely to use mobile phones and digital financial services.
4. Active Mobile Money Accounts:
   • The increase in mobile money accounts (from 38.34 million in 2022 to 51.72 million in 2023) has contributed to the growth of digital loan services, as digital loan products are typically linked to mobile wallets.
   • The growth in mobile money accounts and the availability of National Identification Numbers (NINs) have made it easier for more people to access mobile financial services.

Key Drivers of Growth

1. Technology and Mobile Penetration:
   • The expansion of 3G and 4G network coverage and the increased availability of smartphones have made digital loans more accessible to Tanzanians, particularly in rural areas.
   • The ease of instant loans via mobile platforms has allowed users to access credit without needing a bank account or physical collateral.
2. Partnerships between Banks and MNOs:
   • Many financial institutions have partnered with mobile network operators (MNOs) to offer digital loans. These partnerships leverage MNOs' extensive mobile money networks, enabling quicker disbursement and repayment of loans.
   • Artificial Intelligence (AI) is used to assess the creditworthiness of borrowers, allowing for faster loan approval processes based on transaction history and mobile phone usage.
3. Government Support:
   • Regulatory changes by the Bank of Tanzania (BoT) and other financial authorities have helped create a favorable environment for digital lending, supporting the development of mobile loan platforms and enhancing financial inclusion.

Impact of Digital Loans

1. Financial Inclusion:
   • Digital loans have significantly improved financial inclusion by providing access to credit for underserved populations, particularly in rural areas where traditional banks have limited reach.
   • The increased access to instant loans has enabled individuals to meet urgent financial needs, such as healthcare, education, or emergency expenses.
2. Economic Growth:
   • By giving small businesses and individuals access to capital, digital loans contribute to economic activity, especially for MSMEs and entrepreneurs who may otherwise struggle to access credit from traditional financial institutions.

Challenges and Opportunities

1. Challenges:
   • Despite their growth, digital loans often carry high-interest rates, which can burden borrowers, especially those in low-income segments.
   • There is also concern over the sustainability of digital lending models, as some borrowers may struggle to repay loans on time, leading to over-indebtedness.
2. Opportunities:
   • The growth of digital credit presents opportunities for further product innovation in micro-lending, especially targeting women and youth.
   • There is potential for regulatory improvements to balance the rapid growth of digital lending with consumer protection to ensure long-term stability and sustainability.

Conclusion

The surge in digital loans in Tanzania, with a 198% increase in loan accounts and a 370% rise in the value of loans, demonstrates the country's rapid adoption of mobile financial services. While digital loans have opened up new opportunities for financial inclusion, they also present challenges related to affordability and long-term sustainability. Continued innovation, coupled with regulatory oversight, will be key to maximizing the benefits of digital lending in Tanzania's evolving financial landscape.

In 2023, access to finance for MSMEs in Tanzania saw significant growth, with the number of MSME loan accounts rising by 21.9% to 176,213 and total loan values increasing by 16.2% to TZS 3,612.72 billion. This surge was driven by government-backed programs like the SME Credit Guarantee Scheme and local government loans, which collectively supported over 23,000 MSMEs, with TZS 43.94 billion disbursed. Despite these advances, challenges such as limited collateral and high borrowing costs continue to hinder some MSMEs from fully accessing financial services.

MSMEs Access to Finance in Tanzania (2023)

Micro, Small, and Medium Enterprises (MSMEs) in Tanzania have seen significant advancements in accessing finance, supported by tailored financial products, government initiatives, and public-private collaborations:

Key Statistics

1. Bank Loans to MSMEs:
   • The number of loan accounts held by MSMEs in the banking sector increased to 176,213 in 2023 from 144,522 in 2022, a growth of 21.9%.
   • The total value of these loans rose by 16.2%, from TZS 3,109.20 billion in 2022 to TZS 3,612.72 billion in 2023.
   • MSME loans accounted for 12% of the total loan portfolio in the banking sector.
2. Microfinance Loans:
   • Tier II microfinance service providers granted loans to 4.14 million MSMEs in 2023, compared to 5 million in 2022, showing a slight decline in the number of accounts.
   • However, the value of loans granted by these providers increased significantly by 39.15%, reaching TZS 749.99 billion in 2023.
3. Local Government Loans:
   • Local Government Authorities (LGAs) disbursed loans amounting to TZS 24.02 billion to 16,724 women and TZS 19.92 billion to 10,032 youth in 2023.
   • In Zanzibar, the Zanzibar Economic Empowerment Authority (ZEEA) provided loans to 16,432 beneficiaries in 2023, up from 3,980 in 2022, with the value increasing to TZS 16.83 billion.

Government Programs Supporting MSMEs

1. Small and Medium Enterprises Credit Guarantee Scheme (SME-CGS):
   • Administered by the Bank of Tanzania, this scheme facilitated loans for viable MSME projects lacking sufficient collateral.
2. NEEC and SIDO Programs:
   • Under the National Economic Empowerment Council (NEEC), loans to MSMEs increased from TZS 713.79 billion in 2022 to TZS 743.66 billion in 2023, benefiting 6.1 million MSMEs.
   • The Small Industries Development Organization (SIDO) issued TZS 17.76 billion in loans to MSMEs in 2023.
3. Zanzibar MSMEs Development Program:
   • A total of TZS 2.10 billion was disbursed to 18 MSME projects in Zanzibar in 2023.

Impact of Access to Finance

1. Economic Growth:
   • Enhanced access to credit enabled MSMEs to expand operations, contributing to job creation and economic development.
2. Formalization and Inclusivity:
   • Increased financial literacy and business formalization programs allowed more MSMEs, especially women-led and youth-led businesses, to participate in formal financial systems.
3. Support for Targeted Groups:
   • Government initiatives prioritized financing for underserved groups, including women and youth, fostering inclusivity in economic opportunities.

Challenges and Opportunities

• Challenges: Limited collateral, high lending costs, and urban-rural disparities remain obstacles.
• Opportunities: Expanding digital credit solutions and government-guaranteed schemes can further enhance MSMEs' financial access.

MSMEs Access to Finance in Tanzania (2023)

The data on MSMEs access to finance in Tanzania in 2023 highlights significant progress and emerging opportunities, as well as some challenges:

1. Growing Access to Finance for MSMEs

• Increase in Loan Accounts: The 21.9% growth in the number of MSME loan accounts (from 144,522 in 2022 to 176,213 in 2023) and the 16.2% rise in loan values reflect a positive trend in MSMEs' access to formal financial services. This suggests that more MSMEs are tapping into formal financing channels, indicating a growing confidence in the financial system.
• Rising Loan Values: The increase of TZS 503.52 billion in loan value for MSMEs (from TZS 3,109.20 billion in 2022 to TZS 3,612.72 billion in 2023) points to greater access to larger sums of credit, which can help fuel business growth, expansion, and innovation.

2. Strong Support from Government and Financial Institutions

• Government Schemes: The continuation and expansion of government programs like the SME-CGS, which allows MSMEs to access loans with lower collateral requirements, play a critical role in boosting financial access. Similarly, local government programs supporting women, youth, and MSMEs have helped create a more inclusive financial ecosystem.
• Local Government Loans: Disbursements from Local Government Authorities (LGAs), totaling TZS 43.94 billion to over 23,000 MSME owners (across women and youth), show targeted efforts to empower underserved groups. This indicates focused governmental efforts to integrate vulnerable populations into the formal financial system.

3. Increased Focus on Financial Inclusion

• The 39.15% increase in loan value from Tier II microfinance institutions (from TZS 539.84 billion in 2022 to TZS 749.99 billion in 2023) signifies that microfinance remains an essential pillar for MSMEs, particularly for smaller or informal businesses that face more significant barriers in accessing bank loans.
• Zanzibar MSME Development: The TZS 2.10 billion allocated to 18 MSME projects in Zanzibar highlights the government's regional and local focus on inclusivity, ensuring that MSMEs across the country benefit from financial access, not just in larger urban areas.

4. Continued Challenges

• Collateral and High Costs: Despite the increases in access to credit, many MSMEs, particularly in rural areas, still face difficulties accessing loans due to lack of collateral and the high cost of credit. This limits the growth potential of some businesses, especially smaller and informal ones.
• Disparities Between Sectors: There remains a gap between larger and smaller MSMEs in accessing finance, with smaller businesses still relying heavily on microfinance institutions or government-backed loans, rather than banks.

5. Significant Economic and Social Impact

• Economic Growth and Job Creation: Increased access to finance enables MSMEs to expand operations, improve productivity, and generate employment. This supports Tanzania’s economic growth and job creation in the informal and formal sectors.
• Focus on Women and Youth: Government-targeted schemes are fostering economic empowerment for women and youth, key drivers of sustainable development, by enabling these groups to establish and scale businesses, contributing to social inclusion and gender equality.

Conclusion

The progress in MSMEs' access to finance in Tanzania in 2023 tells a story of positive growth, government commitment, and increased financial inclusion. While challenges like collateral requirements and high loan costs persist, the growing access to financial products, combined with targeted initiatives for women, youth, and smallholder farmers, highlights Tanzania’s path toward fostering a more inclusive and vibrant economy. The increased focus on microfinance and government programs also indicates a shift towards supporting underserved sectors, ensuring that more businesses, especially in rural areas, can thrive.

Between 2019 and 2023, Tanzania's financial landscape experienced remarkable growth, with total financial access points increasing by 130%, from 609,956 in 2019 to 1,402,609 in 2023. This expansion was driven by a 116% rise in mobile money agents (from 573,444 to 1,240,106) and a 365% growth in bank agents (from 28,358 to 106,176). The country’s financial inclusion rate improved from 65% in 2017 to 76% in 2023, showcasing the success of digital innovations and policy reforms under the National Financial Inclusion Framework. This growth underscores Tanzania's commitment to bridging the financial access gap, particularly in underserved areas.

Financial Services Providers Landscape in Tanzania

Tanzania's financial services landscape is diverse and rapidly growing, driven by digital innovations and regulatory improvements. The sector comprises banking institutions, microfinance, insurance, capital markets, and payment service providers:

Access to Financial Services

• Banking Services:
  • Number of bank agents grew from 28,358 in 2019 to 106,176 in 2023.
  • Banking access points increased to 107,238 in 2023, driven by reforms in agent banking.
• Microfinance Institutions (MFIs):
  • Access points reached 51,253 in 2023, marking a 31% annual growth.
  • Community Microfinance Groups (CMGs) dominate with 48,659 access points, reflecting a formalization trend.
• Payment Services:
  • Mobile money agents grew by 19.4% to 1.24 million in 2023.
  • Mobile money accounts increased by 34.9% to 51.72 million.

Usage of Financial Services

• Savings:
  • Banking sector savings reached TZS 6.99 trillion, an 18.1% increase.
  • Savings accounts in SACCOs decreased in value to TZS 870 billion, as some members preferred borrowing.
• Credit:
  • Total bank loans grew by 24.4% to TZS 33.10 trillion.
  • SACCOs' loans amounted to TZS 1.12 trillion, a 3.7% increase.
• Insurance:
  • Policyholders increased by 94.4% to 7.68 million, mainly due to mandatory motor insurance and health coverage expansion.
• Capital Markets:
  • Investors in securities increased by 12.5% to 907,969, supported by technology-enabled platforms.

Growth Drivers

1. Digital Financial Services: The rise of mobile money and online platforms improved accessibility and efficiency.
2. Policy Frameworks: The National Financial Inclusion Framework (2023-2028) prioritized underserved populations.
3. Regulatory Enhancements: New guidelines fostered innovations, such as digital insurance platforms and microfinance formalization.
4. Government Programs: Local Government Authority loans provided TZS 24.02 billion to women and TZS 19.92 billion to youth in 2023.

Total Number of Financial Access Points in Tanzania (2019–2023)

The number of financial access points in Tanzania grew significantly between 2019 and 2023, driven by expansion across banking, microfinance, insurance, and payment systems:

Overall Growth

• In 2019, Tanzania had 609,956 financial access points.
• By 2023, this number increased to 1,402,609, representing a 130% growth over the period.

Yearly Breakdown of Access Points

Sector-wise Contribution

1. Banking Services:
   • Grew from 29,371 access points in 2019 to 107,238 in 2023.
   • Bank agents contributed most to this increase, quadrupling during the period.
2. Microfinance Services:
   • Increased from 6,241 access points in 2019 to 53,371 in 2023, driven by the formalization of Community Microfinance Groups (CMGs).
3. Insurance Services:
   • Access points rose from 795 in 2019 to 1,495 in 2023, a 88% growth, fueled by digital platforms and bancassurance agents.
4. Payment Systems (Non-Bank):
   • Dominated the landscape, growing from 573,444 access points in 2019 to 1,240,106 in 2023, representing 116% growth.
   • Mobile money agents were the largest contributors.
5. Capital Markets Services:
   • Modest growth from 91 access points in 2019 to 380 in 2023, reflecting a focus on investment advisory and fund management.
6. Social Security Services:
   • Grew slightly from 14 access points in 2019 to 19 in 2023, limited by the niche nature of this sector.

Key Drivers of Growth

• Digital Transformation: Mobile money platforms and digital payment systems rapidly increased access.
• Policy and Regulation: The implementation of the National Financial Inclusion Framework (NFIF) facilitated formalization and innovation.
• Public-Private Partnerships: Collaboration with stakeholders such as banks, microfinance institutions, and insurers expanded reach.

Implications

The steady increase in financial access points reflects Tanzania's progress in financial inclusion, ensuring more adults live within a 5 km radius of financial services (89% in 2023, up from 86% in 2017).

Insights from Tanzania's Financial Services Providers Landscape (2023) and Financial Access Points (2019–2023)

1. Strong Progress in Financial Inclusion

The rapid growth in financial access points and the diversification of financial service providers illustrate Tanzania's consistent strides in financial inclusion. The financial inclusion rate increased from 65% in 2017 to 76% in 2023, demonstrating that more Tanzanians are accessing formal financial services.

2. Dominance of Digital Financial Services

• The exponential growth in mobile money agents (from 573,444 in 2019 to 1,240,106 in 2023) highlights how digital financial services dominate the financial landscape.
• Digital innovations, such as mobile money, are bridging the gap in rural and underserved areas, making financial services more accessible and affordable.

3. Role of Policy and Regulation

• The implementation of frameworks like the National Financial Inclusion Framework (NFIF-3, 2023–2028), along with regulatory reforms for digital platforms, insurance, and microfinance, has created an enabling environment for growth.
• This alignment between public and private stakeholders reflects a focused approach to tackling barriers to financial access.

4. Significant Growth in Banking Services

• The growth in banking agents (from 28,358 in 2019 to 106,176 in 2023) shows that agent banking reforms have effectively decentralized banking, bringing services closer to people, especially in rural areas.

5. Increased Focus on Underserved Segments

• Initiatives targeting women, youth, MSMEs, and smallholder farmers have driven tailored products, like women-friendly savings accounts and micro-loans, showcasing a shift towards inclusive financial services.

6. Opportunities in Microfinance and Capital Markets

• The formalization of Community Microfinance Groups (CMGs) and the growth of capital markets (e.g., fund managers and collective investment schemes) indicate untapped potential for rural financing and investment.

7. Persistent Challenges

• Despite improvements, certain challenges persist:
  • Social security services access points remain limited (only 19 access points in 2023).
  • Urban-rural disparities still exist, as infrastructure in rural areas lags behind urban centers.
  • Low uptake of advanced financial services like pensions and insurance, indicating a need for more public awareness and tailored products.

8. Economic and Social Impacts

• Economic Growth: With credit values increasing by 24.4% in banks and 3.7% in SACCOs in 2023, the financial sector has become a key driver of economic growth by mobilizing savings and enabling trade.
• Social Benefits: Financial inclusion efforts have empowered previously underserved populations, enhancing their ability to save, invest, and access credit.

Key Takeaways

1. Growth with Innovation: The financial services landscape in Tanzania is becoming increasingly diversified, with digital financial services leading the charge.
2. Policy as a Catalyst: The alignment of policy, innovation, and private-sector initiatives ensures sustainable growth in financial inclusion.
3. Targeted Efforts are Essential: Continued focus on underserved segments like rural populations and MSMEs is crucial for equitable economic growth.

Tanzania's banking sector demonstrated robust growth and stability in 2023, with total assets rising by 17.8% to TZS 54,396 billion, driven by increased deposits, borrowings, and retained earnings. Deposits surged by 16.9% to TZS 38,076.5 billion, reflecting heightened public confidence, while pre-tax profits jumped 63.5% to TZS 1,527.9 billion, bolstered by efficient operations and a growing loan portfolio. The sector's Non-Performing Loan (NPL) ratio improved to 4.4%, indicating stronger credit management, and its liquid assets-to-demand liabilities ratio stood at 28.8%, well above the regulatory minimum. These figures highlight the sector's resilience and its pivotal role in advancing Tanzania’s economic stability and financial inclusion.

1. Asset Growth and Structure

• Total assets increased by 17.8% to TZS 54,396.0 billion from TZS 46,159.5 billion in 2022. This was primarily financed by increased deposits, borrowings, and retained earnings.
• Asset composition:
  • Loans, advances, and overdrafts: 58.9% of total assets.
  • Investments in debt securities: 16.0%.
  • Cash and balances: 15.3%.
• Earning assets accounted for 84.4% of total assets, growing by 20.3% to TZS 45,907.6 billion, highlighting effective utilization of resources in productive sectors​.

2. Liabilities and Deposits

• Total liabilities grew by 18.1% to TZS 46,316.7 billion.
• Deposits increased by 16.9% to TZS 38,076.5 billion, with local currency deposits rising by 19.3% to TZS 24,241.0 billion, reflecting increased public trust in the banking system.
• Borrowings rose by 18.5% to TZS 5,531.4 billion, further supporting growth initiatives​.

3. Profitability

• The sector's pre-tax profits surged by 63.5% to TZS 1,527.9 billion, up from TZS 934.4 billion in 2022.
• Return on Assets (ROA) increased to 4.4% from 3.4%, while Return on Equity (ROE) rose to 20.5% from 14.2%, showcasing stronger earnings performance​.

4. Capital Adequacy

• Core capital adequacy ratio: 17.7% (down slightly from 17.9% in 2022 but above the 10% minimum regulatory requirement).
• Total capital adequacy ratio: 18.4%, meeting the 12% regulatory threshold. These metrics indicate strong shock-absorbing capacity​.

5. Asset Quality

• The Non-Performing Loan (NPL) ratio improved to 4.4% from 5.8%, staying within the desired benchmark of less than 5%. This reflects improved credit risk management and effective regulatory measures​.

6. Liquidity

• Liquid assets to demand liabilities ratio: 28.8%, well above the regulatory minimum of 20%.
• Gross loans to total deposits ratio rose to 92.5%, indicating effective deposit utilization for loan issuance​.

7. Outreach and Inclusion

• The number of bank branches increased to 1,011 (from 987), and banking agents grew by 41.1% to 106,176.
• Agent banking facilitated deposits worth TZS 74,914.4 billion, reflecting a 21% growth, underscoring enhanced accessibility and inclusion​.

Key Takeaways:

The banking sector's strong asset growth, improved profitability, better asset quality, and enhanced financial inclusion initiatives underscore its pivotal role in Tanzania's economic development. Its resilience and compliance with regulatory requirements demonstrate preparedness to sustain internal and external economic pressures.

The performance of Tanzania's banking sector in 2023 with important insights about its growth, stability, and evolving role in the economy:

1. Growth and Resilience

• The sector has shown significant growth, with total assets rising by 17.8% to TZS 54,396 billion, reflecting robust expansion in banking activities.
• Profitability surged, with pre-tax profits growing by 63.5%, showcasing improved operational efficiency and revenue growth.
• The ability to absorb shocks is evident in strong capital adequacy ratios (17.7% core capital and 18.4% total capital), both well above regulatory requirements.

2. Improved Credit and Risk Management

• The reduction in the Non-Performing Loan (NPL) ratio to 4.4% (from 5.8%) highlights better loan repayment and enhanced credit risk management practices.
• Growth in earning assets (20.3%) indicates banks' continued focus on deploying resources in productive economic sectors.

3. Enhanced Financial Inclusion

• Banking access expanded significantly, with 41.1% growth in banking agents (now at 106,176) and a rise in branches to 1,011.
• Deposit transactions through agent banking increased by 21%, totaling TZS 74,914.4 billion, which demonstrates broader outreach, particularly to underserved populations.

4. Confidence in the Banking System

• The 16.9% growth in deposits to TZS 38,076.5 billion, driven by local currency deposits, indicates increasing public trust and effective deposit mobilization strategies by banks.
• Liquidity levels remained robust, with the liquid assets-to-demand liabilities ratio at 28.8%, well above the regulatory minimum of 20%, ensuring banks can meet obligations.

5. Challenges and Opportunities

• Although capital adequacy ratios slightly declined, they remain comfortably above regulatory thresholds, suggesting room for further loan growth and asset expansion.
• The high loan-to-deposit ratio (92.5%) reflects strong credit expansion but may warrant careful monitoring to avoid over-leveraging.

What It Tells Overall:

The 2023 performance highlights that Tanzania's banking sector is a critical driver of economic growth and stability. It is effectively balancing profitability with financial inclusion and risk management. The sector's resilience amid global and domestic challenges demonstrates its readiness to support Tanzania's economic goals while adapting to evolving market needs.

Tanzania's financial sector, led by the banking sub-sector, continues to drive economic growth, accounting for over 70% of the sector's total assets. In 2023, the sector demonstrated remarkable resilience and growth, with total banking assets reaching TZS 54,396 billion, a 17.8% increase from 2022. Deposits grew by 16.9% to TZS 38,076.5 billion, supported by increased public confidence and robust deposit mobilization strategies. The sector's profitability surged by 63.5%, with pre-tax profits rising to TZS 1,527.9 billion, driven by improved operational efficiency and a growing loan portfolio. Enhanced credit risk management reduced the Non-Performing Loan (NPL) ratio to 4.4%, below the regulatory benchmark of 5%. These achievements underscore the sector's stability and its pivotal role in expanding financial inclusion and supporting Tanzania's macroeconomic stability.

Financial Sector Composition

The financial sector consists of five sub-sectors:

1. Banking: Dominates with over 70% of the total financial sector assets.
2. Social Security Schemes
3. Insurance
4. Capital Markets
5. Microfinance

Banking Sub-Sector

1. Institutions:
   • Commercial Banks: 34 banks accounted for 97.3% of total banking sector assets.
   • Development Banks: 2 banks contributed 1.9% of total assets.
   • Microfinance Banks: 3 banks, with total assets at 0.4% of total.
   • Community Banks: 5 banks contributed 0.4% of total assets.
2. Performance Highlights (2023):
   • Total banking sector assets: TZS 54,396.0 billion (17.8% growth from TZS 46,159.5 billion in 2022).
   • Total loans, advances, and overdrafts: TZS 32,011.0 billion (22.7% growth from TZS 26,095.9 billion in 2022).
   • Deposits: TZS 38,076.5 billion (16.9% increase from TZS 32,584.7 billion in 2022).
   • Profitability: Sector profit increased by 63.5% to TZS 1,527.9 billion from TZS 934.4 billion in 2022.
   • Non-Performing Loan (NPL) ratio improved to 4.4% from 5.8% in 2022.
3. Capital and Liquidity:
   • Core capital adequacy ratio: 17.7% (above the 10% minimum requirement).
   • Liquid assets to demand liabilities: 28.8% (above the 20% regulatory requirement).
4. Service Delivery:
   • Banking agents increased by 41.1% to 106,176.
   • Agent banking deposit transactions: TZS 74,914.4 billion (21% growth).
   • Branches increased to 1,011 from 987 in 2022.

Non-Banking Financial Institutions (NBFIs)

1. Social Security Schemes:
   • Total assets: TZS 18,834.1 billion (investment assets grew by 5.8%).
   • Members' contributions increased by 13.4% to TZS 4,382.4 billion.
2. Microfinance Service Providers:
   • Licensed entities (Tier 2): Increased from 1,095 to 1,579.
   • Total loans disbursed: TZS 962.3 billion (18.6% growth).
3. Mortgage Finance:
   • Total assets increased slightly to TZS 255.9 billion.
   • Loan portfolio grew by 7.8% to TZS 177.5 billion.

Credit Reference System

1. Credit inquiries: 17 million, up 197.7% from 5.7 million in 2022.
2. Credit reports sold: 9.7 million, an increase of 257.6%.

Major Developments

• Issued 484 licenses for non-deposit-taking microfinance service providers (Tier 2).
• Approved mergers and revoked licenses to enhance sector stability.

The overview of Tanzania's financial sector with key insights about its structure, growth, stability, and trends:

1. Dominance of the Banking Sub-Sector

• The banking sector dominates the financial landscape, holding 70% of the total financial sector assets. This indicates its central role in the country's economic operations and financial intermediation.
• With TZS 54,396 billion in assets, the sector has shown significant growth (17.8%) from 2022, reflecting increasing economic activities, better access to financial services, and public confidence.

2. Improved Asset Quality and Stability

• A reduction in the Non-Performing Loan (NPL) ratio from 5.8% to 4.4% signals better credit risk management and stronger financial health in the banking sector.
• Capital adequacy ratios remain well above regulatory requirements, ensuring that banks are adequately capitalized to absorb shocks.

3. Expansion and Financial Inclusion

• A 41.1% increase in banking agents (to 106,176) and a growth in branch networks from 987 to 1,011 indicate a continued push for financial inclusion.
• The significant rise in agent banking transactions (deposit transactions valued at TZS 74,914.4 billion) demonstrates increasing reliance on alternative delivery channels.

4. Profitability and Efficiency Gains

• Banking sector profitability surged by 63.5%, driven by higher interest income, operational efficiency, and growth in non-interest income.
• The cost-to-income ratio improved to 50.5%, within the desired limit of 55%, indicating better operational management.

5. Role of Non-Banking Financial Institutions (NBFIs)

• NBFIs, though smaller in scale, contribute to financial services diversity. For instance:
  • Social security schemes managed TZS 18,834 billion in assets.
  • Microfinance services expanded, with Tier 2 loans rising to TZS 962.3 billion, helping to bridge gaps in credit access for smaller enterprises and individuals.
  • Mortgage financing and leasing companies, though niche, support housing and equipment financing needs.

6. Increased Use of Credit Reference Bureaux

• A 197.7% growth in credit inquiries and a 257.6% increase in credit reports sold highlight growing reliance on credit data for lending, reducing information asymmetry and improving credit underwriting.

7. Challenges and Opportunities

• While the sector is stable and growing, issues like a slight decline in total capital adequacy ratios (due to increased risk-weighted assets) and reliance on deposits for funding (loan-to-deposit ratio at 92.5%) indicate areas needing attention.
• Regional disparities in banking access (e.g., agent concentration in urban centers like Dar es Salaam) highlight the need to enhance rural penetration.

Key Takeaways:

• Resilience: Despite global challenges, the sector remains robust, supported by favorable policies and supervision.
• Growth Potential: Expansion of financial services and digital channels demonstrates untapped potential in underserved areas.
• Strategic Focus: Regulatory advancements, such as implementing Basel II & III, show a long-term commitment to aligning with international standards.

This paints a picture of a growing, inclusive, and stable financial system with areas of improvement to enhance its role in Tanzania's economic development. 

Personal remittances from Tanzanians abroad play a vital role in supporting Tanzania's secondary income, with average quarterly transfers rising from around $90 million in 2013-2016 to approximately $138-$182 million in recent years. These inflows offer economic stability by providing a reliable income source that buffers families and communities against economic fluctuations. Additionally, remittances help sustain foreign exchange reserves, contributing to currency stability and offsetting trade deficits. The steady increase in remittances reflects strong diaspora ties, presenting opportunities for policy focus on optimizing remittance channels for national development.

Figures and Averages

• Quarterly remittances from individuals abroad fluctuate, with some notable examples being $90 million to $95 million per quarter on average across certain years. For instance:
  • 2013 to 2016: The average remittances per quarter hovered around $89 million to $96 million.
  • 2017 to 2020: Slight increases saw quarterly remittances averaging $91 million to $94 million.
  • 2021 to 2023: A gradual rise was observed, with quarterly values climbing closer to $138 million to $182 million.

Percentage Trends

• Growth trend: The remittances have shown a gradual increase over the years, with a growth trend of around 3-5% per annum in the recent periods, likely due to an increased number of Tanzanians abroad and enhanced mechanisms for transferring funds back home.

Observations

1. Stable inflow: Despite fluctuations in global economic conditions, personal remittances remained a stable source of secondary income for Tanzania.
2. Significant share in Secondary Income: Remittances consistently constitute a substantial portion of the secondary income in Tanzania’s current account, highlighting the importance of expatriate earnings in supporting the domestic economy​.

The data on personal transfers from individuals abroad offers several insights into Tanzania’s economic dynamics:

1. Economic Stability through Remittances: The steady flow of remittances provides a reliable source of income, bolstering Tanzania’s balance of payments. Even in fluctuating economic conditions, remittances appear resilient, offering a buffer that can help maintain household consumption, support families, and contribute to poverty reduction.
2. Role in Foreign Exchange: Remittances contribute to Tanzania’s foreign exchange reserves. As a stable inflow of foreign currency, they help ease pressure on the Tanzanian shilling, potentially contributing to exchange rate stability.
3. Support for Secondary Income: The substantial portion of secondary income attributed to remittances underscores their importance in balancing the current account. This inflow can offset trade deficits by compensating for outflows, such as imports or debt payments, through non-trade sources.
4. Reflects Diaspora Engagement: The consistent rise in remittances suggests a strong connection between the Tanzanian diaspora and their families or communities back home. This connection could be further harnessed for economic development initiatives, such as investment in small businesses, real estate, or infrastructure.
5. Potential for Policy Focus: Given the increasing trend, the government could develop policies that facilitate and maximize the impact of remittances, like reducing transfer fees, promoting financial literacy for recipients, or creating diaspora bonds to channel funds into development projects.

Overall, these remittances signify a positive, stabilizing force within Tanzania’s economy, providing a foundation for economic resilience and an opportunity for growth and policy innovation.

The fiscal year 2023/24 marked significant growth in Tanzania's financial sector, with bank deposits increasing by 17.7% to TZS 35,544.2 billion, largely due to enhanced public confidence and innovative financial products. The Dar es Salaam Zone dominated these deposits, holding 61.7% of the total, while the Northern Zone contributed TZS 4,327.2 billion, indicating a shift towards financial activity in other regions. Bank loans surged by 21.4% to TZS 32,089.5 billion, reflecting effective policies promoting credit access for key sectors such as trade, agriculture, and manufacturing, which accounted for 71% of the loan portfolio. Meanwhile, agent banking saw a remarkable 42.6% increase in the number of agents, totaling 120,324, facilitating greater financial inclusion, particularly in rural areas. This translated to substantial rises in transactions—cash deposits increased by 27.6% to TZS 26,485.9 billion, and withdrawals rose by 32% to TZS 14,659.4 billion—demonstrating a growing engagement with formal financial services across Tanzania.

1. Bank Deposits:
   • The total deposits mobilized by banks increased by 17.7%, reaching TZS 35,544.2 billion. This growth was attributed to efforts by banks and financial institutions to introduce innovative financial products and enhance public confidence in the banking sector.
   • Dar es Salaam Zone held the largest share of deposits at 61.7% (TZS 21,706.8 billion), reflecting its central role as an economic hub.
   • Other zones, such as the Northern Zone, saw a significant increase in deposits, reaching TZS 4,327.2 billion, which accounted for 12.5% of total deposits​.
2. Bank Loans:
   • The total loans extended by banks grew by 21.4% to reach TZS 32,089.5 billion. The Bank of Tanzania's policies to support private sector credit growth and financial inclusion contributed to this increase.
   • Lending was largely directed toward personal loans, trade, agriculture, and manufacturing, which collectively comprised 71% of the total loan portfolio​.
3. Agent Banking Operations:
   • The number of bank agents rose by 42.6% to 120,324 agents, enhancing financial accessibility, especially in rural areas.
   • Transactions via agent banking also grew, with cash deposit transactions increasing by 12% to 91.4 million transactions, and cash withdrawals rising by 14.5% to 52.6 million transactions.
   • The value of cash deposits and withdrawals reached TZS 26,485.9 billion and TZS 14,659.4 billion respectively, representing a 27.6% and 32% increase from the previous year​.

The financial sector data for Tanzania in 2023/24 with important insights into the country’s economic and financial landscape:

1. Increased Financial Inclusion:
   • The rise in agent banking operations and the significant increase in the number of agents (42.6%) reflect ongoing efforts to make financial services more accessible, especially in underserved and rural areas. The growth in agent transactions, with cash deposits and withdrawals up by 27.6% and 32% respectively, suggests that more Tanzanians are engaging with formal financial services, which supports the goal of financial inclusion.
2. Economic Confidence and Trust in Banking:
   • The increase in bank deposits by 17.7% (TZS 35,544.2 billion) indicates growing public confidence in the banking system. This growth could result from successful financial literacy programs, greater access to banks, and economic stability that encourages people to save within formal institutions. Dar es Salaam’s dominance in deposits (61.7%) highlights its role as the financial center of the country, though other regions, such as the Northern Zone, are also showing notable growth.
3. Support for Private Sector Growth:
   • The expansion in bank loans by 21.4% (TZS 32,089.5 billion) demonstrates that credit is becoming more accessible to individuals and businesses. Lending to sectors like trade, agriculture, and manufacturing suggests banks are playing an active role in supporting Tanzania’s economic sectors, fostering job creation, productivity, and economic diversification.
4. Agent Banking as a Bridge to Formal Finance:
   • The growth in agent banking shows that Tanzanians are increasingly using local agents as an entry point into the financial system, bridging the gap between traditional banking and underserved populations. This trend is essential for financial inclusion in regions where banks may not have a direct presence.
5. Regional Economic Disparities:
   • Dar es Salaam’s significant share of deposits highlights economic disparities, as it maintains its position as the financial hub. However, the Northern Zone’s increase in deposits signals potential economic growth in other areas, suggesting that financial activity is spreading to regions outside the capital.
6. Policy Success in Expanding Financial Services:
   • The overall growth in deposits, loans, and agent banking transactions reflects the effectiveness of the Bank of Tanzania’s policies aimed at financial inclusion and private sector support. These developments are critical for Tanzania’s broader economic goals, as access to credit and banking services can stimulate investment, consumption, and economic resilience.

Opportunities, Challenges, and the Road to 2030

Small and Medium Enterprises (SMEs) are the backbone of Tanzania’s economy, accounting for 35% of the Gross Domestic Product (GDP) and providing 50% of national employment. The sector, which includes over 95% of the country’s businesses, spans industries such as agriculture, manufacturing, services, and construction. Despite its scale, Tanzania SMEs face systemic barriers that inhibit their growth and sustainability. This article explores the current landscape of Tanzania’s SME sector, emphasizing market dynamics, policy frameworks, and resource access.

1. Market Distribution and Sector Dynamics

SMEs are concentrated in four primary sectors:

• Agriculture: Accounts for 40% of SMEs, playing a vital role in food security and rural employment.
• Manufacturing: Covers 30%, primarily focusing on food processing, textiles, and consumer goods.
• Services: Represents 25%, encompassing retail, hospitality, and professional services.
• Construction: Holds 5%, spurred by urbanization and infrastructure development initiatives​.

This distribution reflects the sector’s diversity and potential; however, 72% of Tanzania SMEs operate informally, limiting their access to credit and government incentives. As of 2023, only 30-50% of SMEs survive past five years, highlighting the need for increased support and formalization.

2. Financial and Resource Accessibility

The financial accessibility for Tanzania SMEs remains limited, with only 20% of SMEs obtaining formal financial services. High-interest rates (17-20%) and stringent collateral requirements make traditional financing inaccessible for many, leading most SMEs to rely on personal savings. Technological resources are also unevenly distributed, with urban areas adopting digital solutions such as mobile money at higher rates than rural areas, where infrastructure and digital literacy are lagging.

Figures:

• Formal Financial Access: 20% of SMEs​.
• Mobile Money Penetration: 53%, primarily benefiting urban SMEs​.

3. Regulatory Challenges and Policy Initiatives

High compliance costs, complex tax structures, and prolonged registration procedures discourage many SMEs from formalizing. Tanzania ranks 141st on the World Bank's Ease of Doing Business Index, with 70% of SMEs reporting compliance difficulties due to multiple tax obligations and labor regulations.

Figures:

• Ease of Doing Business Ranking: 141 out of 190 countries.
• Tax Compliance Difficulty: 70% of SMEs struggle with regulatory requirements​.

4. Investment Landscape and Opportunities

High-potential sectors, including agribusiness, ICT, and tourism, present opportunities for growth. Tanzania’s agribusiness SMEs make up 40% of the sector, benefiting from regional demand and the nation’s arable land. The ICT sector is expanding, driven by rising mobile penetration and digital adoption, creating prospects for e-commerce and digital financial services. However, challenges such as inadequate infrastructure and limited financing hinder SME investment and sectoral expansion.

Figures:

• Agribusiness Sector: 40% of SMEs​.
• Projected FDI Growth: +50% with infrastructure and policy improvements by 2030​.

5. Projections for 2030 and Conclusion

If Tanzania strengthens support for SMEs, particularly through simplified regulatory frameworks, digital infrastructure, and financing options, the SME sector’s GDP contribution could reach 45% by 2030, with employment rising to 60%. Improving access to formal financing, especially in rural areas, and expanding digital infrastructure are crucial steps for empowering SMEs to drive economic resilience and sustainability.

2030 Projections:

• GDP Contribution: 45% (up from 35%).
• Employment Contribution: 60% (up from 50%)​(SME Market Landscape).

In conclusion, Tanzania’s SMEs are essential for economic stability and job creation. With targeted policies and resources, SMEs can enhance their impact on the economy, contributing to a diversified, inclusive, and resilient Tanzania by 2030.

Growth, Challenges, and Future Prospects

Introduction

The banking and finance sector in Tanzania has transformed significantly over the past two decades, with growth fueled by regulatory changes, digital innovations, and increased foreign investment. By 2023, the sector included 49 licensed banks and a growing number of microfinance institutions, collectively managing assets of TZS 43 trillion (USD 18 billion), which represents about 20% of Tanzania’s GDP. This article explores the sector's current landscape, the challenges it faces, and its projected growth through 2030.

Sector Growth and Digital Transformation

Tanzania’s financial landscape has embraced digital banking, with mobile money playing a pivotal role. From 25.8 million accounts in 2019, mobile money has surged by 116.2%, reaching over 55.8 million accounts by 2024. Monthly transactions now exceed 310.9 million, driven by platforms like M-Pesa, Tigo Pesa, and Airtel Money. Mobile banking has also greatly improved financial inclusivity, raising the rate of financial access to 70% in 2024, up from just 16% in 2009.

While financial access is extensive in urban areas (85%), it lags in rural areas at 55%, highlighting the need for further expansion efforts. Despite digital strides, many rural residents still lack sufficient banking services, with mobile banking being the only viable option for some remote regions.

Challenges Facing the Sector

1. Regulatory and Compliance Costs: Compliance, especially with anti-money laundering (AML) and capital requirements, has added over 20% to operational expenses for banks. These high costs, combined with complex regulations, can be particularly burdensome for smaller banks and microfinance institutions.
2. Rural Financial Access Gaps: Limited branch networks in rural areas make mobile banking essential, yet 30% of the population still lacks access to formal financial services. Developing alternative delivery models will be crucial to bridging this divide.
3. High Lending Rates: With loan interest rates averaging 16%, credit access is limited, especially for small and medium enterprises (SMEs), which make up 90% of Tanzania’s businesses but only 16% have formal financing. This restricts the growth potential of private businesses.

Investment Opportunities

The banking sector’s future promises numerous investment opportunities:

• Digital and Mobile Banking: Mobile money transactions are projected to exceed 10 billion by 2030, with the digital banking sector expected to grow at an annual rate of 12%. Opportunities abound for investors in fintech infrastructure to support this growth.
• SME Financing: The SME loan market is anticipated to grow by 10% annually, reflecting unmet demand in a largely underserved business segment.
• Green Financing: Driven by environmental sustainability goals, green financing for agriculture and energy projects is forecasted to grow by 15% annually, providing opportunities for investors focused on eco-friendly initiatives.

Future Outlook: Banking in Tanzania by 2030

By 2030, Tanzania’s banking sector aims to become more inclusive and competitive, with 90% of adults expected to have access to financial services. The number of mobile money accounts could reach 90 million, and microfinance institutions are projected to hold 30% of the sector’s total assets. Increased competition among banks, regulatory improvements, and enhanced digital literacy initiatives are essential to achieving this ambitious vision.

Conclusion and Recommendations

Despite its growth, Tanzania’s banking sector faces several challenges, particularly in compliance costs, financial literacy, and rural access. To achieve a more inclusive, competitive landscape, it’s crucial to streamline regulatory frameworks, promote incentives for rural financial inclusion, and invest in digital infrastructure. By addressing these challenges, Tanzania can position its banking sector as a leader in Sub-Saharan Africa, delivering on the promise of accessible and sustainable financial services for all.

The mobile money sector in Tanzania has experienced strong and continuous growth, with total transactions rising by 9% from 285.5 million in June 2024 to 310.9 million in September 2024. Major providers, including M-Pesa, Tigo Pesa, and Airtel Money, each recorded over 80 million transactions in September. Smaller players like Azam Pesa also saw significant growth, with transactions increasing from 1.8 million to 5.05 million. This growth reflects the increasing reliance on mobile money for day-to-day transactions and highlights the critical role of mobile financial services in enhancing financial inclusion across the country.

1. Number of Mobile Money Transactions:

• The total number of mobile money transactions grew significantly, with 310.9 million transactions recorded in September 2024, compared to 285.5 million in June 2024. This represents a 9% increase in the number of transactions over the three-month period.
• Breakdown of monthly transactions during the quarter:
  • July 2024: 282.9 million transactions
  • August 2024: 310.9 million transactions​.

2. Transaction Breakdown by Mobile Money Providers (September 2024):

• M-Pesa: 89.68 million transactions (up from 86.97 million in June 2024).
• Tigo Pesa: 87.92 million transactions (up from 86.97 million in June 2024).
• Airtel Money: 92.67 million transactions (up from 89.25 million in June 2024).
• Halo Pesa: 35.04 million transactions (up from 33.19 million in June 2024).
• Azam Pesa: 5.05 million transactions (up from 1.80 million in June 2024).
• T-Pesa: 0.50 million transactions​.

3. Historical Growth of Mobile Money Transactions:

• Over the past five years, mobile money transactions have increased from 3.02 billion in 2019 to 5.27 billion by 2023, showing a 19% annual growth rate.
• Despite the growth in total transactions, the average number of transactions per user has slightly decreased from 117 transactions per user in 2019 to 100 transactions per user in 2023​.

Summary:

• Mobile money transactions grew by 9% in the quarter ending September 2024, with a total of 310.9 million transactions in September alone.
• M-Pesa, Tigo Pesa, and Airtel Money remain the largest players in the market, with each recording over 80 million transactions in September 2024.
• Over the years, the volume of mobile money transactions has expanded significantly, showing the increasing reliance on mobile money services for financial transactions in Tanzania.

Numbers on mobile money transactions with key insights into the growth and usage of mobile financial services in Tanzania

The strong and continuous growth in the mobile money sector, with more people relying on mobile money for financial transactions. M-Pesa, Tigo Pesa, and Airtel Money dominate the space, but smaller players are also showing growth. The increasing number of transactions highlights the role of mobile money in enhancing financial inclusion and providing a convenient alternative to traditional banking. It shows that mobile money is a critical tool for economic empowerment and everyday financial management in Tanzania.

1. Steady Growth in Transaction Volumes:

• The 9% increase in mobile money transactions, rising from 285.5 million to 310.9 million in just three months, indicates that more people and businesses are increasingly using mobile money services for their financial activities. This growth reflects the importance of mobile money in day-to-day transactions, such as payments, transfers, and purchases.

2. Dominance of Major Players:

• M-Pesa, Tigo Pesa, and Airtel Money dominate the market, each recording over 80 million transactions in September 2024. Their combined market presence shows that Tanzanians trust these platforms for their financial needs, indicating strong brand recognition, reliability, and widespread service availability.
• The significant increase in transactions for smaller players like Azam Pesa (from 1.8 million to 5.05 million) shows that there is room for growth among newer or smaller mobile money providers, though the big three dominate most of the market.

3. Growing Financial Inclusion:

• The rise in transaction numbers suggests that more people are being included in the formal financial system through mobile money. This is particularly important in Tanzania, where access to traditional banking services can be limited, especially in rural areas. Mobile money bridges that gap, providing financial services to underserved populations.

4. Shift in Financial Behavior:

• The sustained growth in transaction volumes highlights a shift in financial behavior in Tanzania, where mobile money has become a primary method of transferring funds and conducting transactions. The convenience, accessibility, and speed of mobile money are contributing to its increasing popularity.

5. Historical Growth Indicates Long-Term Trend:

• The historical growth in mobile money transactions, from 3.02 billion in 2019 to 5.27 billion in 2023, shows that mobile money is not a temporary trend but a long-term shift in how financial transactions are conducted in Tanzania. This steady annual growth of 19% points to mobile money becoming increasingly central to the Tanzanian economy.

Source: Takwimu za Mawasiliano Robo ya mwaka inayoishia Septemba 2024