1.7 Billion Unbanked - Leadership Vanguard explores financial inclusion in Tanzania

8 May 2019

Senior leaders from some of the world's largest companies, including Shell, Mastercard and Unilever, recently visited Tanzania with the Leadership Vanguard to deepen their understanding of financial inclusion issues. The group explored the financial ecosystem and met with fintech enterprises, banks, corporates and NGOs to understand how they might be able to work together to promote access to financial services and products for base of the pyramid customers.

Globally, an estimated 1.7 billion adults are "unbanked", without an account at a financial institution or through a mobile money provider. Sub-Saharan Africa has some of the largest populations of unbanked people, with over half of people considered to be excluded from formal financial institutions. Tanzania has made great strides towards financial inclusion thanks to progressive policies and the promotion of digital services for those without bank accounts. Yet, 28% of Tanzanians lack access to a bank account and 69% of adults that borrow are informally borrowing through their networks or savings groups.

This hinders the ability of individuals, families and small business owners to save and access financial services that can help them to invest and to grow. With its network of global companies and their access to talent and resources, the Leadership Vanguard aims to work with enterprises and initiatives supporting financial inclusion and support them to overcome barriers to scale. To build an understanding of the challenges and opportunities, the field trip included sessions with a range of experts, practitioners, NGOs and enterprises working to improve financial inclusion for Small and Medium Enterprises (SMEs), women and smallholder farmers.

Improving financial access for women and SMEs

Tanzania has a 9 percent gender gap in formal financial inclusion. This has been driven by social and cultural norms leading to lower levels of education, a lack of land and property rights and less gender sensitive financial products. Many enterprises and organisations across Tanzania are working to improve financial literacy and uptake of existing technology among base of the pyramid customers.

Women's savings groups promote collective financial literacy, encourage saving and provide access to localised and informal credit
Women's savings groups promote collective financial literacy, encourage saving and provide access to localised and informal credit

One such organisation is Care International, which works with local communities to develop and support Village Level Savings Associations to promote financial literacy and savings. In Tanzania, 33,000 of these groups exist, 70% of which are made up of women. The group visited a women's savings group to witness how they operate and to discuss the challenges they face in accessing formal financial services and their aspirations for growing their businesses.

Tanzania has more than 3 million SMEs, contributing 29% to GDP, but they face challenges in gaining access to credit and financial services. To explore these barriers the team met with Sarafu, a digital enterprise with an online real-time payments platform, working with small retailers to improve their access to goods and capital. Whilst meeting Saarafu, the team engaged with small shop owners around Dar as Salaam to understand their businesses and financial needs.

Working towards financial inclusion for smallholders

The group also met enterprises and organisations providing financial inclusion for smallholder farmers. Tanzania's agriculture sector is critical to rural economic development and contributes to a quarter of GDP, 85% of exports and employs an estimated 65% of the work force. However, productivity is low, and smallholders often focus on subsistence, rather than growth. 44% of Tanzanians excluded from access to financial services are farmers or fishermen.

Providing smallholder farmers with financial access has the potential to transform Tanzania's agriculture. Greater financial inclusion could enable them to invest and grow their farms and obtain quality seeds, fertilisers and machinery. It could also promote market access, improve logistics and develop aggregation services. 

Parts of the Financial Inclusion team – Michael Grazio, Silvia Wada, Jennifer Bash, Founder of Agri Soko by Alaska Tanzania, Noel Clarke, Sola Olarewaju, with theme lead Nick Moss
Parts of the Financial Inclusion team – Michael Grazio, Silvia Wada, Jennifer Bash, Founder of Agri Soko by Alaska Tanzania, Noel Clarke, Sola Olarewaju, with theme lead Nick Moss

The team visited Southern Agricultural Growth Corridor of Tanzania (SAGCOT), a platform encouraging investments into the agricultural value chain. At SAGCOT, the team met with Tanzanian Agricultural Development Bank (TADB), the Alliance for Green Revolution in Africa (AGRA), insurers and investors to get their perspectives on smallholder challenges and the work being done to improve financial access and investment in various value chains.

Having got the national view of the agriculture sector, the group then explored challenges in various value chains. They visited wholesaler Alaska Foods, which is working to improve the prices smallholders receive for produce and provide greater market access. Alaska Foods provided useful insight into the challenges that smallholders face in gaining financial access, but also highlighted the need to develop new commercially viable markets in urban areas for farm produce.

Tanzania – a hub for fintech innovation

Mobile based technology and accompanying financial services such as mobile payments are evolving in Tanzania. Mobile technologies can allow unbanked users to access payments, insurance and credit through their mobile phone. This mobile-only model has delivered results elsewhere, such as the 194,000 households in Kenya that have used mobile payments to lift themselves out of poverty. 

Mobile payments can provide small merchants with access to financial services and promote access to credit and working capital.
Mobile payments can provide small merchants with access to financial services and promote access to credit and working capital.

To investigate the developments in mobile payments and fintech, the leaders met experts and mobile money operators such as Selcom to learn how they work to reach marginalised customers with mobile payment solutions. They also visited one of Tanzania's largest banks, National Microfinance Bank (NMB) to hear how it tailors solutions to reach different market segments. The leaders also met with some promising start-ups, such as Nefrids Africa, Chemoka (an initiative of CARE International) and Ubia Soko, to understand their business models and barriers to growth. These organisations have the potential to positively impact financial inclusion in Tanzania - if they manage to secure the resources and networks they need to scale.

Fintech enterprises are key for financial inclusion

The enterprises and initiatives the Vanguard team visited, in collaboration with the local banks, NGOs and more established businesses, have the potential to contribute to giving more people in Tanzania financial access. Yet, these enterprises face challenges such as lack of access to business and technology talent, poor customer information, a nascent policy and regulatory environment, limited availability of seed and venture capital and the predominance of large mobile operators in the sector.

The Leadership Vanguard Financial inclusion team's leaders can contribute in many ways, including via their business expertise, networks, technology and access to supply chains and potential financiers. Critical to this will be promoting an ecosystem of services that not only promote financial inclusion, but also support the development of critical sectors such as agriculture and SMEs. Following this visit, the Vanguard team will seek to identify the most promising enterprises working on financial inclusion in Tanzania and work with them to assess if there are opportunities to help their business models grow. By bringing together different businesses, technologies, networks and skillsets, the Leadership Vanguard is hoping to find opportunities to bring new business models and initiatives promoting financial inclusion in Tanzania to scale.

This blog is authored by Nick Moss, Principal – Development at Xynteo. Thanks to Aida Sykes for giving an insightful presentation in Dar es Salaam, providing much of the data and contextual overview in this blog.  

About the Leadership Vanguard

  • Xynteo's 12-month acceleration and leadership development experience brings together leaders from Unilever, Tata, Shell, Mastercard, ICRC, HSBC, Energias de Portugal, Baker Hughes, a GE Company, and BASF.
  • Under CEO sponsorship, participants collaborate intensively and combine capabilities, networks and knowledge to accelerate impact enterprises and develop new markets.
  • Participating 'Catalysts' are divided into three themes, each focusing on a global challenge. In 2019, these challenges are:
    • Financial Inclusion, supported by Mastercard
    • Low Carbon Cities, supported by Shell
    • Revaluing Plastics, supported by Unilever

The Leadership Vanguard Revaluing Plastics team recently completed a field trip to Bangalore to deepen their understanding of plastic waste management systems and the impact enterprises driving change, and the Low Carbon Cities team went to Bangalore to explore solutions for mobility and waste management.