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Exploring the Mobile Banking Revolution in Tanzania

Jason KohnBy Jason Kohn, Contributing Columnist

In most developed economies, people can be forgiven for taking banks for granted. After all, an ATM machine is rarely more than a couple blocks away with easy access to funds. People can easily connect with their banks online to pay bills without ever handling cash, and loans and lines of credit are readily available.

In much of the developing world, however, this infrastructure simply doesn’t exist. Thabiso Mochiko recently laid out the latest statistics on the issue at Business Day:

“More than 2.5-billion adults — the majority of whom live in developing economies — do not have access to a formal bank account, according to the World Bank.

This means about 48% of the world’s adult population is not able to access basic financial services in order to save, borrow or transact, says GSMA.”

Of course, the flip side of this kind of huge market need is a huge market opportunity. And with rapid expansion of mobile networks and mobile phone ownership in the developing world — the Cisco Service Adoption Forecast projects mobile data traffic to grow in the region at a rate of 104 percent — the tools are now available for smart companies to capitalize on it.

Vodacom, the largest mobile service provider in Tanzania, was among the first and most successful to embrace this market opportunity with its M-Pesa mobile banking service. I spoke with Rene Meza, managing director of Vodacom Tanzania Limited, to find out why mobile banking is taking off in such a big way in Tanzania and elsewhere in Africa.

“The banking infrastructure in Africa is not as developed as it is in the West,” says Meza. “Furthermore, a lot of our customers cannot meet the minimum banking requirements. This called for an alternative transaction model. The convenience of mobile services, adoption of mobile telephony in Africa, and the merging of technologies has created an infrastructure that allows for money transfer services, in our case, M-Pesa.”

Image: Vodacom Solutions

Image: Vodacom Solutions

A Mobile Banking Revolution 

The combination of maturing cellular technology and a real need among people who can’t access traditional banking services has led to rapid growth for the M-Pesa service. According to Mochiko, M-PESA had attracted more than 4.7 million customers as of December 2012. And TelecomPaper.com recently reported that Vodacom plans to attract more than 600 small and medium-size companies by the end of this year.

“Ideally, our aim is to get every SME to use M-Pesa,” says Meza. “Most small businesses in Tanzania currently rely on cash, which exposes them to pilferage, robbery, and theft. On M-Pesa, their money is secure and electronic. Furthermore, all financial transactions on M-Pesa are traceable, which will help small businesses with their audit trails and transaction record-keeping.”

M-Pesa’s small business customers already include retail stores and supermarkets, restaurants, savings and credit societies, schools, and many other organizations across Tanzania. In addition to the advantages Meza describes, these businesses — as well as individual customers — benefit from the ability to access financial services and pay bills 24 hours a day, securely save money electronically instead of in cash, and access financial services like insurance and social security that they otherwise could not easily use.

Expanding the Service

Vodacom’s mobile financial services continue to expand, and make a real difference for businesses and individuals. Tanzania’s Daily News, for example, recently described how thousands of people will now be able to pay their water bills with any of 40,000 M-Pesa agents across Tanzania:

“At least 500,000 residents in the Arusha Municipality are now able to pay water bills through M-Pesa, a move that has made queues at the water authority a thing of the past. This follows the partnership between Vodacom Tanzania and Arusha Urban Water and Sewerage Authority (AUWSA), that will enable water bill payments to be made through M-Pesa.”

And Vodacom is committed to growing M-Pesa, both geographically and in the services it can offer. As reported at Business Day, Vodacom launched M-Pesa in the Democratic Republic of Congo last year, and will expand to Mozambique and Lesotho in 2013. And Reza told me that customers can expect a variety of new services in the coming months as well.

“Going forward, M-Pesa will seek to tap into the areas where customers continue to be under-served by existing financial services,” he says. “Retail payment is the next space, and we are looking to expand mobile savings, credit facilities, and insurance instruments for ordinary Tanzanians.”

As mobile phone usage continues to grow in the coming years, expect services like M-Pesa to grow as well — and to help kick start new economic growth in Tanzania and across the African continent.


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