Boom time for mobile app startups in Tanzania

After a relatively slow start, Tanzania is charging ahead with digital transactions as an increasing number of startups offer a multitude of services to the country’s population of nearly 60m.


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Tanzania is fast realising the potential of fintech solutions for its unbanked population, and is putting in place drastic measures to make the playing field favourable for both domestic and foreign investors.

The Bank of Tanzania, the country’s central bank, provided a conducive regulatory environment for engagement with stakeholders with the bulk of the content coming from local players. 

Users of different mobile wallets could now transfer money from one mobile wallet to another, opening up opportunities for innovators to create a myriad of solutions. As a result, the penetration of financial services reached 65% in 2017 compared to 57.7% in 2013, according to a report by the National Financial Inclusion Council (NFIC).

The accessibility of financial services rose from 45% to 86% nationally while hitting 78% for those living in rural areas. There has also been steady growth in active mobile wallets, reaching over 21m, which are held by 16.6m Tanzanian adults, as reported by FinScope Tanzania for 2017.

This includes users of mobile banking, mobile lending and saving, money transfers, online mobile payment systems, scanning and tapping card payment aggregation, and international remittance businesses. 

Many commercial banks have now prioritised mobile banking and internet banking as creating an app or allowing a customer to use short codes has been easier than conventional approaches. 

There are six Mobile Network Operators (MNOs) in the country as at 2021, with many partnering with financial services providers to enable peer-to-peer payment through mobile wallets and digital banking services. 

Mobile money by MNOs is also playing a huge role in banking the unbanked, with services like Vodacom’s M-Pesa, Tigo’s TigoPesa, Airtel Money, Zantel’s EzyPesa, Halotel’s HaloPesa and TTCL Pesa all contributing to give millions of rural Tanzanians access to banking.

The mobile savings and loans market is also witnessing a boom, with customers now able to save and take micro-loans such as M-Pawa, which is a collaboration between CBA Bank with Vodacom, Timiza, a partnership between Airtel with Jumo and Tigo Nivushe, an initiative by Tigo and Jumo.

The government has now established the Government Electronic Payment Gateway (GEPG), which allows different government authorities to accept payments from MNOs’ mobile money services. 

Most affordable rates in East Africa

Tanzania, which boasts the most affordable rates for mobile and fixed internet in the East African region, has seen immense growth in the number of local and international fintech startups that are setting up offices in Dar es Salaam, with internet penetration averaging 46% as at March 2021.

According to this year’s Worldwide Mobile Data Pricing report, Tanzania has the cheapest data in East Africa at $0.75 for every gigabyte of mobile data, followed by Rwanda at $1.25, Uganda at $1.56, Burundi at $2.10 and Kenya charging $2.25 per gigabyte.

Companies such as Jumo have capitalised on the low internet rates to create what it calls a Masterpass Quick Response payment, a smart and cashless way to pay for goods and services online via an app. 

UK-based firm Humaniq has also created an app that can be used by feature-phone users, greatly enabling rural dwellers to cross the digital divide on banking matters.

Initially, fintech services were limited to airtime purchases, money transfers, and cash deposits and withdrawals but the fintech providers in Tanzania offer a wide range of services, including remittances, digital savings, digital lending and micro-insurance, leveraging on Big Data analytics and Artificial Intelligence. There are 33 fintech startups in the country, with 67% of them being early stage, having launched after 2016.

Gpesa, for instance, brands itself as Tanzania’s cross-border money transfer platform where users can transact via mobile wallets such as M-Pesa, TigoPesa, AirtelMoney and HaloPesa. 

ClickPesa, another solution, allows online payments, cross-border payments and bulk payments for donations, salaries, expenses and supplier payments. 

With loan servicing and debt collection being critical to banking, a fintech startup, Kollecta, provides software to banks featuring payment tracking, payment solutions, transaction monitoring and multiple collection channels.

Recognised by the Bank of Tanzania as a leading enabler of mobile banking and bill payment services, Selcom has now connected more than 30 banks to mobile banking for core services.

Crowdfunding is also popular in Tanzania, with the GateFunding donation-based crowdfunding platform allowing users to promote their campaigns on multiple social media platforms. 

Nala, which ventured into the market last year, enables users to create digital wallets that facilitate international money transfers via credit/debit cards and bank transfers. Nala Money, funded through Y Combinator, offers money transfer, bill payments, multi-factor authentication and airtime top-ups. Users can also track their finances using budgeting tools.

Insurtech startup Jamii has focused on low-cost mobile micro-health insurance to the informal sector, with minimal paperwork involved.

With 63% of the adult Tanzanian population owning a mobile phone and 39% having a mobile money account, according to a United Nations Capital Development Fund (UNCDF) survey, a nascent but growing opportunity for digital financial services exists, with financial inclusion averaging 72%.

There is also a growing pool of Tanzania-based investment actors, including individuals and companies, looking to provide seed and early-stage funding to fintech startups across specific sectors.

Missing middle

However, the same report reveals that for the country to reach the levels of its neighbour Kenya, more needs to be done as there exists a missing middle when it comes to financing startups in the early stages of development.

It notes that limited access to funding continues to curtail the growth of fintech startups in Tanzania, with only 36% having secured seed funding or growth financing, while 35% rely on bootstrapping funds from family and friends to support early-stage operations.

“Of the 19 fintechs headquartered in Tanzania only one, Jamii Insurance, has raised between $1m and $10m. Two have raised between $100,000 and $500,000, and the remaining 10 have raised less than $99,000.”

Only eight of the 14 fintech startups headquartered outside the country disclosed their total funding to UNCDF. Of those, two have total funding below $99,000, two have total funding between $1m and $20m, one has funding between $21m and $100m, and three have raised over $100m. 

Two of the three companies that have raised over $100m are pay-as-you-go lending/financing startups with operations outside Tanzania as well.

Ecosystem facilitators in Tanzania will have to rethink the support provided to fintech startups, including inviting experienced mentors from the region to mentor fintech founders, since a large percentage of the population still remains unbanked.

Though the country is on the right path towards financial inclusion and bolstering competitiveness in Africa’s fintech sector, the establishment of a publicly funded, private sector-led initiative targeting fintech startups through existing accelerators and hubs could help a great deal to contribute more to the growth of its economy.

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