Although macroeconomic stability contributed to Tanzania’s move from “low-income” to “lower-middle-income” country status in July 2020,1 political turmoil and the COVID-19 pandemic have chipped away at progress and bred uncertainty. In 2020, Tanzania’s GDP grew by 2%, a major downgrade from its 2019 growth of 5.8%,2 and 600,000 Tanzanians were plunged into poverty.3
Digitalization will be instrumental in helping Tanzania to make progress in economic and social development, particularly with regard to financial inclusion and economic diversification. According to 2019 statistics, around 28% of Tanzanians lack access to a bank account—with a 9% gender gap in the financial inclusion rate—and 44% of excluded people are farmers or fishermen.4 Economic diversification will prove especially crucial as climate change threatens to destabilize the agriculture-based economy.
Tanzania’s digitalization journey is in its early growth stage, with an internet penetration rate of 25%.5 The East African state has about 33 fintech startups, and faces several challenges in further developing its nascent ecosystem. According to a report by the United Nations Capital Development Fund, primary obstacles include a lack of funding, “limited availability of affordable and skilled local talent,” few partnerships between fintech startups and large businesses, and a lack of engagement between fintech startups and regulators.6
There is reason for optimism, however, as national regulators and international organizations look to accelerate digital transformation in Tanzania. This year’s digital agenda focuses on the adoption of innovative technologies, such as digital currency and blockchain, and the development of a real-time, digital payment system. President Samia Suluhu Hassan has requested the central bank to investigate the possible role of digital currency in the Tanzanian economy.7 The government is also developing a national digital economy blueprint, with a major focus on bolstering the state’s IT and connectivity capabilities.8 In May 2021, the World Bank approved USD$150 million towards the Digital Tanzania Project (DTP), which aims to boost access to high-quality broadband internet services.9 Alongside digitalization efforts, regulators must look to implement data protection and cybersecurity standards. Tanzania currently has no national data protection framework.
Financial Regulatory Authorities
The Bank of Tanzania is the central bank of Tanzania.
The Capital Markets and Securities Authority (CMSA) regulates and oversees the financial services sector.
Policy, Laws and Regulations
Amendments to the Regulations for Electronic Transactions Levy for 2021, 31 August 2021
In June 2021, the government issued the amended Electronic and Postal Communication Act, which imposed a levy of SH 10 (approximately USD$0.0043) – SH 10,000 (approximately USD$4.31) on mobile money transactions. The move, which sparked controversy, aimed to raise revenue for the 2021/2022 federal budget. In reaction to widespread outcry, the Ministry of Finance and Planning released an August statement detailing amendments to the Regulations for Electronic Transactions Levy for 2021. The amendments reduced the levies by 30%. The Ministry also held discussions with mobile service providers, who committed to lowering charges for mobile financial transactions by 10%.10
Tanzania Instant Payments System (TIPS), July 2021
The central bank began the first implementation phase of its Tanzania Instant Payments System (TIPS), an interoperable, real-time digital payment system that conducts transfers between Digital Financial Service Providers (DFSPs) across the country.11 The first phase of the four-stage implementation process will cover peer-to-peer (P2P) and person-to-business payments.12 According to the central bank’s web page on payment initiatives, “TIPS will increase financial inclusion by improving access and usage of financial services in Tanzania through promoting the interoperability of digital financial services amongst all Payment Service Providers in the country. The TIPS platform facilitates an efficient clearing and settlement platform of digital financial services transactions for all Payment Service Providers (PSPs). It will also increase the efficiency by moving from bilateral interoperability to multilateral interoperability.”13 As of December 2020, there were 32.3 million mobile money accounts in Tanzania, and cheaper and more convenient payments will boost this number even more. TIPS will house all mobile money operators—such as Airtel Money, M-Pesa and Tigo—on one platform, and users will only need to have the name of the transfer recipient in their contacts list in order to make a payment. The project was originally scheduled for a 2020 rollout, but it was delayed due to the COVID-19 pandemic and technical changes.14
Directive on Digital Currency and Blockchain, 13 June 2021
President Samia Suluhu Hassan addressed the global rise of digital currencies in a speech, and urged the central bank to begin exploring developments in cryptocurrency and blockchain.15 The central bank issued a crypto ban in November 2019, but President Hassan’s stance could soon see its reversal.16 A central bank digital currency, coupled with a national digital identity, would be instrumental in promoting financial inclusion in the emerging market.
1. “The World Bank in Tanzania.” The World Bank. https://www.worldbank.org/en/country/tanzania/overview.
2. “The World Bank in Tanzania.” The World Bank. https://www.worldbank.org/en/country/tanzania/overview.
3. “Tanzania Has an Opportunity to Ignite Inclusive Economic Growth by Transforming Its Tourism Sector.” The World Bank, 29 July 2021. https://www.worldbank.org/en/news/press-release/2021/07/29/tanzania-has-an-opportunity-to-ignite-inclusive-economic-growth-by-transforming-its-tourism-sector.
4. “1.7 Billion Unbanked - Leadership Vanguard explores financial inclusion in Tanzania.” Xynteo, 08 May 2019. https://xynteo.com/insights/latest/17-billion-unbanked-leadership-vanguard-explores-financial-inclusion-tanzania.
5. Kemp, Simon. “DIGITAL 2021: TANZANIA.” DataReportal, 21 February 2021. https://datareportal.com/reports/digital-2021-tanzania.
6. “Mapping the Tanzanian Fintech Start-up Landscape.” United Nations Capital Development Fund, 27 May 2021. https://www.uncdf.org/article/6789/mapping-the-tanzanian-fintech-start-up-landscape#:~:text=The%20assessment%20identified%2033%20fintech,finance%2C%20investments%2C%20and%20insurance.
7. Drake, Ed. “Tanzania president urges central bank to consider digital currency.” CoinGeek, 18 June 2021. https://coingeek.com/tanzania-president-urges-central-bank-to-consider-digital-currency/.
8. Thomson, Mpoki. “Tanzania: Digital Economy Blueprint Coming.” AllAfrica, 17 June 2021. https://allafrica.com/stories/202106170981.html.
9. “Tanzania: World Bank supports expanded access to opportunities and services, especially for women and youth.” The World Bank, 27 May 2021. https://www.worldbank.org/en/news/press-release/2021/05/27/tanzania-world-bank-supports-expanded-access-to-opportunities-and-services-especially-for-women-and-youth.
10. O’Grady, Vaughan. “Tanzania reduces mobile money transaction levy.” Developing Telecoms, 02 September 2021. https://developingtelecoms.com/telecom-business/telecom-regulation/11829-tanzania-reduces-mobile-money-transaction-levy.html.
11. Minja, Dativa. “Tanzania: BoT to Pilot New Payment System.” AllAfrica, 10 July 2021. https://allafrica.com/stories/202107100102.html.
12. Mirondo, Rosemary. “How sending cash will be easier, cheaper from July.” The Citizen, 12 February 2021. https://www.thecitizen.co.tz/tanzania/news/business/how-sending-cash-will-be-easier-cheaper-from-july-3289274.
13. “Payment Systems Initiatives.” Bank of Tanzania. https://www.bot.go.tz/PaymentSystem/Initiatives.
14. Mirondo, Rosemary. “How sending cash will be easier, cheaper from July.” The Citizen, 12 February 2021. https://www.thecitizen.co.tz/tanzania/news/business/how-sending-cash-will-be-easier-cheaper-from-july-3289274.
15. Shome, Arnab. “Tanzanian President Urges Central Bank to Prepare for Crypto.” Finance Magnates, 14 June 2021. https://www.financemagnates.com/cryptocurrency/news/tanzanian-president-urges-central-bank-to-prepare-for-crypto/.
16. Dausen, Nuzulack. “Tanzania cbank says it is working on president's cryptocurrency push.” Reuters, 25 June 2021. https://www.reuters.com/technology/tanzania-cbank-says-it-is-working-presidents-cryptocurrency-push-2021-06-25/.
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Last updated: November 2021