Have banks lost to mobile money in Tanzania?

June 2, 2014
This picture was taken by Michael Jacobson.
This picture was taken by Michael Jacobson.

Mobile money is gaining momentum in Tanzania. Within five years, the number of people using mobile money increased dramatically, reaching 45 percent of the adult population (Intermedia). Thirty five percent of households now regularly use mobile money to send and receive money, to transact, and also to save (GSMA). When Women’s World Banking began working with a local partner bank to grow its customer base by serving a greater share of the low-income population, a key priority was to understand how mobile money has changed the financial landscape and what role banks could play. Customer research shows that people are very satisfied with the convenience and security of mobile money. Would other financial services be able to catch up? This is the story of what we learned: that banks have a great opportunity to reach the low-income market… especially women. Time however, is running short.

Women’s World Banking visited Tanzania in October 2013 to conduct industry and customer research for the project. With the support of the Agence Française de Développement, the Women’s World Banking team interviewed financial institutions, government and other stakeholders in the industry. We also conducted focus groups and in-depth interviews with low-income, current and potential clients to understand if, how and why they were saving to fully grasp the best way for a bank to serve this segment. It was through this research that we learned, for as much as mobile money has accomplished in Tanzania, it wasn’t everything… especially for low-income women who want to save money.


What’s so great about mobile money?

With nearly half of the Tanzanian population as users, mobile money has made significant in-roads into the market for money transfer and savings. According to a survey by Intermedia, the top three uses for mobile money among Tanzanians are: receiving money, sending money and buying airtime. Just under half of users mentioned that had used mobile money to save their earnings. Many of our focus group participants felt that mobile money met their needs for saving and transacting.  As one participant put it, “My phone is my bank.” Recognizing this trend, The Bank of Tanzania launched its financial inclusion strategy in December 2013, which features a prominent role for mobile money.

Why has mobile money taken off? Answer: the convenience, accessibility and security it offers has set a new standard for accessing financial services. Tanzanians rich and poor are familiar with basic financial transactions, yet have remained outside the formal financial system because banks are too far (74 percent of the population lives in rural areas) and many hold misconceptions about how wealthy one must be to have a bank account. Enter mobile money, which is accessible through one’s own mobile phone or through one of the thousands of agents scattered around the country. Relative to banks, it is everywhere. An urban woman we interviewed summed it up nicely: “Going to a bank, standing in a queue, it’s time wasted. It’s better to pay the cost [fees charged by the mobile money provider] and be fast.”

Furthermore, only mobile money offers the convenience of saving at home with the security one would associate with a bank. Traditionally, Tanzanians save money at home, which runs the risk of loss through theft, fire or other unforeseen disasters.  Moreover, money kept at home is tempting to spend. Others use village community banks which help them save lump sums while offering low-cost loans, but also run the risk of loss through theft or poor stewardship of the money. With mobile money, one’s cash is stored in a password-protected account and is easy to deposit and withdraw any time.

What’s not so great about mobile money

Like most good things, mobile money has its drawbacks. Providers charge a fee for every transaction, which users dislike but tolerate because it outweighs the convenience offered by the service. Also, the high level of accessibility can also be a detriment—many of our respondents felt that mobile money services encourage them to spend, and  savings are easily eaten up by transaction fees. Unlike banks, mobile money providers make their money on transactions, and don’t benefit as much from money left sitting in an account. They’re strong marketers and encourage their customers to buy airtime, send money and use other transactional services. These drawbacks present the greatest opportunity for financial institutions, especially those wanting to reach the low-income population.

The opportunity: a safe place to save

As a financial service provider, mobile money has set the bar for convenience and access for this segment. However, many low-income Tanzanians would value access to a savings account offered by a bank, which is seen as even more secure with less temptation to spend compared to mobile money. This is particularly true for women as they are interested in keeping money in a safe place: “on the phone, you can use it frequently and might buy unnecessary things because you have it near you, but in a bank, it is different,” said one of our interviewees, an unbanked woman living in a semi-urban area of Tanzania. Another asked “How is M-Pesa different from a bank?” and then answered her own question, “I think, with a bank, you’ll be saving your money and then you can do something you desire.”

This was our big aha! moment: while mobile money is re-shaping the way low-income Tanzanians view formal financial services, it cannot yet offer all of the benefits of a bank account.   In our research, we found that self-employed women are economically active, already manage their money through mobile money and informal mechanisms, and are open to working with a bank. They want the ability to accumulate money, manage their finances and implement their plans, something they believe they can only do with banks. According to one woman, if only a bank would invite her to open an account, “I will stop keeping my money in a jar.” Serving low-income Tanzanian women will also help bridge the gender gap for financial inclusion in the country: 63 percent of men use formal financial services while only 51 percent of women do (FinScope). This opportunity comes with a big caveat however: any institution that seeks to serve this market must be able to offer products that match or exceed the levels of accessibility and convenience that this population is used to, thanks to mobile money. In addition, self-employed women see banks as a way to achieve their dreams for their family. However, they feel as though banks are ‘out-of-reach’ for them so in order to serve them, banks must make these women feel that banking is for them.

Financial inclusion requires both access to and ability to use services that meet one’s financial needs. Here at Women’s World Banking, we believe that an important tool in a low-income woman’s financial toolbox is savings and that sometimes, this can even be a gateway to accessing other financial products and services. The rapid growth of mobile money is re-shaping the financial landscape of Tanzania and setting the standard of quality of service and convenience for financial services. According to Jennifer McDonald, Savings Manager at Women’s World Banking, it is time for banks to “[w]ake up! Mobile money is covering the market but banks still have the opportunity to serve this market with new tools. But they need to do things differently if they want to compete and reach a market that remains unserved: low-income women.”

The Women’s World Banking team returned to Tanzania in February to use these insights to develop a mobile savings product that for low-income women in this market. We look forward to reporting back in a few months on the progress we’ve made on advancing financial inclusion for low-income women in Tanzania.


This project benefits from the Agence Française de Développement support. The analysis, views and opinions expressed are those of the author and do not necessarily reflect the position of the Agence Française de Développement.