24 February 2014

Highlights on the mobile financial services landscape in Tanzania and lessons for regulators

The recent 2nd Leaders’ Roundtable meeting of the African Mobile Phone Financial Services Policy Initiative (AMPI) in Kenya was an incredible opportunity for central bankers in Africa to share their experiences and lessons learned. With the upcoming Mobile Financial Services Working Group (MFSWG) meeting in Arusha, Tanzania, central bankers and other regulators focused on e-money, mobile banking, and agent banking will have an opportunity to not only share lessons learned on a global level but also to have an in-depth look at one of the amazing success stories in Africa – Tanzania.

During the AMPI meeting, Professor Benno Ndulu, Governor at the Bank of Tanzania (BOT), shared his country’s experiences and some key lessons learned for other regulators:

Mobile Financial Service Landscape in Tanzania

The mobile financial services landscape has developed very rapidly in Tanzania. After starting in 2008 with just two non-bank e-money issuers, the sector has now grown to include four non-bank electronic (mobile) payment providers and 14 banks offering mobile banking services.

What is interesting is also the range of e-payment services that have been developed in Tanzania, which has really spurred the growth of the sector. These include everything from remittances, bulk payments, bill payments and even government payments such as taxes.

The number of accounts has steadily grown along with the expansion of various e-payment services and the agent network. It is an interesting balancing act but one that has worked well in Tanzania as this is an area where other countries have struggled. Mobile financial service uptake is closely linked to access (agents) and use cases (e-payment services). From just 211,000 registered e-money accounts and 2,700 agents in 2008, the number of registered accounts now exceeds the number of bank accounts in the country at 31.8 million along with an agent network of over 153,000 agents as of the end of December 2013[1].

In terms of access points, the 153,000 agents is much more extensive than the 500 bank branches, 1,400 ATMs, and 2,500 POS terminals, and has gone a long way in expanding access to financial services. More than 94 percent of the adult population now has an e-money account with over 49 percent actively using these services. What is also interesting to note is that the gap between registered users and active users has closed from what it was just two years ago when only one third of the users were active as compared to more than 50 percent of the registered users who now actively use their e-money accounts. In December 2013 alone, e-money providers processed more than 99 million transactions valued at over 3.1 trillion TZS (US$1.9 billion).

Role of the Regulator

Regulators have played a key role in the market by ensuring a level playing field and encouraging competition. For example, e-money providers are not allowed to enter into exclusive contracts with agents. All non-bank e-money providers were asked to open up e-money trust accounts with banks and are required to ensure that 100 percent of the float is maintained in these accounts.

Some of the critical regulatory issues faced by the regulators included:

Consumer Protection

  • Building consumer trust to use agents and e-money services;
  • Guaranteeing data privacy, data protection, security, liability and grievance redress;
  • Ensuring transparency especially for commissions;
  • Supporting complaints resolution;
  • Requiring real-time settlements;
  • Ensuring that all e-money float is subject to fund safeguarding and fund isolation measures.

Security & AML/CFT

  • Prescribing transaction security through m-PIN and end-to-end encryption;
  • Relaxed security for low value transactions (Risk reward pay off);
  • Development of e-money standards;
  • Adapted AML/CFT rules applied to low value accounts, payments and agents.


  • Leveling the playing field;
  • Dealing with market dominance;
  • Balancing between competition and co-operation;
  • Interoperability and interconnectivity.

Agency issues

  • Defining eligibility criteria for agents;
  • Use of retail agents for handling cash-in/cash-out functions;
  • Detailed guidelines on engagement of agents including non-exclusivity clauses;
  • Determining the financial services agents can offer.

Payment Systems and E-Money

  • Oversight;
  • Payment system access and participation;
  • Guidelines for issuing e-money and other stored value instruments, treatment of deposits and float.

Governor Ndulu ended his presentation by sharing key lessons learned for other regulators. These include:

  • Creating an enabling legal and regulatory environment;
    • Supporting market development and encouraging innovation.
    • Developing proportionate and risk-based regulation.
  • Partnerships and cooperation;
    • Collaborating with the telecom regulator (where and when necessary).
    • Encouraging market cooperation (non-banks and banks).
  • Encouraging government uptake & usage of MFS;
    • Revenue payments (licenses and small taxes).
  • Adoption of MFS in national financial inclusion strategies;
    • Public and private sector adoption for national financial inclusion goals.
  • Interoperability;
    • Supporting and encouraging private sector initiatives that enhance, develop, or further support interoperability.

With the tremendous success of mobile financial services in Tanzania, we all look forward to hearing and seeing firsthand how this sector has developed and the important guiding role that regulators played in overseeing the development of this market. The upcoming MFSWG meeting will also provide a unique opportunity to delve into an exchange about important issues on safety and soundness and how both the compliance teams of the private sector players and the regulators manage these challenges.

[1] Note that the number of agents is an aggregate number reported from all providers. Since agents often provide services for more than one e-money provider, the total number of agent locations is less than 153,000.

John Owens is the Senior Policy Advisor, Digital Financial Services & Financial Inclusion Policies at the Alliance for Financial Inclusion.


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