The banking and finance sector in Tanzania is undergoing a remarkable transformation. Anchored by digital innovation, regulatory reforms, and increased financial inclusivity, this sector is driving significant economic growth. An exploration of its current landscape, challenges, and opportunities.

Sector Growth and Digital Transformation

By 2024, Tanzania's banking assets reached TZS 43 trillion (USD 18 billion), equivalent to 20% of the GDP. This growth has been powered by a surge in mobile banking, which saw a 116% increase in mobile accounts between 2019 and 2024. As of 2024, mobile money accounts exceeded 55.8 million, with monthly transactions surpassing 310 million. By 2030, these accounts are projected to grow to 90 million, marking a pivotal shift towards digital financial services.

Financial Inclusivity

The financial inclusion rate in Tanzania rose from 16% in 2009 to 70% in 2024, driven by mobile and microfinance services. Urban areas boast 85% financial access, but rural regions lag at 55%, reflecting significant disparities. The government aims for a 75% inclusion rate by 2025 and an ambitious 90% by 2030.

Challenges in the Sector

Despite the impressive growth, Tanzania’s banking sector faces critical challenges:

• High Compliance Costs: Stringent regulations have increased operational expenses by 20%, impacting profitability.
• Rural Access: A lack of physical bank branches in rural areas leaves many reliant on mobile banking.
• Lending Rates: High average interest rates (16%) restrict SMEs' access to affordable credit, stifling private sector growth.

Opportunities for Investment

1. Digital and Mobile Banking: Projected to grow at 12% annually, this sector offers vast potential for fintech and infrastructure investments.
2. SME Financing: With SMEs comprising over 90% of businesses but only 16% accessing formal finance, the loan market is poised for a 10% annual growth.
3. Green Financing: This emerging sector, targeting eco-friendly projects, is expected to grow by 15% yearly, particularly in agriculture and renewable energy.

Future Outlook

By 2030, Tanzania’s banking landscape will likely host 60-65 banks, with microfinance representing 30% of total assets. With streamlined regulations and targeted digital literacy programs, financial inclusivity could rise to 85-90%. Investment in key sectors like digital banking, SME financing, and green financing is anticipated to create a competitive, resilient, and inclusive banking environment.

Conclusion

Tanzania’s banking sector is at the cusp of transformative growth. Addressing compliance challenges, bridging urban-rural disparities, and fostering innovations in digital finance will be critical. With the right investments and policy adjustments, the sector is well-positioned to drive inclusive economic development and solidify Tanzania's leadership in East Africa's financial landscape.