Bridging the Financial Inclusion Gap: The Bank of Tanzania’s…

The Bank of Tanzania is addressing a 24 percent financial inclusion gap using a multifaceted approach involving digital innovation, improved access, financial literacy, and supportive regulations. Despite significant growth in digital financial services, many adults still rely on informal channels. The aim is to achieve 85 percent formal financial inclusion by 2028, focusing on tailored services for underserved populations.

The Bank of Tanzania (BoT) is implementing a strategy to bridge the 24 percent gap in financial inclusion among adults in Tanzania. The governor, Mr. Emmanuel Tutuba, highlighted the necessity for a multifaceted approach utilizing digital innovations, alternative banking channels, enhanced financial literacy, and improved regulatory measures at the recent Tanzania Bankers Association Conference on Financial Inclusion.

Digital financial services are significantly altering the Tanzanian financial landscape, with over 40 million mobile money accounts driving this revolution. Mr. Tutuba noted the transformative role of mobile money and fintech solutions in enhancing access to financial services, especially for underserved populations, despite the need for traditional banking integration.

Agent banking is becoming increasingly relevant, as it reduces geographical barriers by providing over 60,000 outlets across Tanzania. This accessibility is crucial for rural areas, and Mr. Tutuba stated, “Agent banking brings services closer to people, particularly in remote areas where traditional banks may be few and far between.”

The challenge of financial literacy persists, with a focus on national campaigns aimed at educating the public on budgeting, savings, and investment. Mr. Tutuba underscored the importance of education in reducing reliance on informal financial services, stating, “Without educating people, they will keep resorting to unofficial channels for loans and other financial services.”

Another vital factor is the interoperability of payment systems. The introduction of the Tanzania Instant Payments System (TIPS) facilitates seamless transactions among various financial service providers, thereby promoting the use of formal financial channels. “This system enhances convenience and broadens the adoption of formal financial channels,” Mr. Tutuba added.

Regulatory support for digital innovation is essential in expanding financial services. The BoT aims to create an environment conducive to the adoption of new technologies by financial institutions. The Governor’s objectives align with the Digital Economy Strategic Framework established in 2024, which integrates digital technologies across sectors, ensuring enhanced connectivity across Tanzania.

As a result of concerted efforts, the adoption of formal financial services has grown from 65 percent in 2017 to 76 percent in 2023. However, only 22.2 percent of Tanzanian adults utilize traditional banking services, leading to both challenges and opportunities for the sector. The goal remains to achieve 85 percent financial inclusion by 2028.

Mr. Theobald Sabi, chair of the TBA, emphasized the importance of financial inclusion for national development. The ongoing meetings focus on ensuring all citizens benefit from accessible financial services and are protected from the pitfalls of informal credit services.

Financial experts assert that thriving digital innovation, improved financial literacy, better payment systems, and supportive regulatory frameworks will be crucial in reaching the goal of 85 percent financial inclusion by 2028. Expert Aisha Mkwawa highlighted the need for tailored financial products to address the specific requirements of different demographics, advocating for increased investment in fintech solutions for traditionally underserved groups.

The Bank of Tanzania’s comprehensive strategy aims to address the 24 percent financial inclusion gap through digital innovation, improved accessibility, and financial literacy. While mobile services have driven participation in the financial system, a significant number of Tanzanians remain reliant on traditional banking. Efforts need to focus on education and tailored financial products to ensure every citizen can access and benefit from formal financial services.

Original Source: www.thecitizen.co.tz