Abstract
The primary motive of this paper is to examine the determinants of financial inclusion in Tanzania. The paper borrows data from a household survey conducted by TWAWEZA. Employing the probit regression, the findings of this paper reveal that gender, education, age and income are the pertinent factors which affect the financial inclusion in Tanzania. The paper further shows the following: First, if you are a man, financially stable, have a good education and are relatively older, you then stand better chances of being financially included. The results show that, as the level of education increases, the individual is more likely to be financially included. The possible reason for this observation may be clearly linked with the financial ability of educated individuals to afford holding bank accounts and presenting personal guarantees when required by the banks during loan application because the level of education goes parallel with the income level. In addition, the results confirm a gender gap in formal financial inclusion, and this may be due to the factors such as inability of women to show collateral, their poor financial education awareness and lower business experience. Second, the paper also shows that the factors which affect traditional banking services are the same as those affecting mobile banking services (gender, age, income and education), and that there is a negative trend and a clear departure of customers’ usage from banking retail services to mobile financial services. Although this gap has been narrowed recently, the best option with the banking sector is to create more new delivery channels while using mobile financial services as an infrastructure to deepen financial access reaching more un-banked population. The paper, therefore, recommends banks to create more delivery channels while using mobile telecommunication network as an infrastructure to deepen financial access reaching more unbanked people rather than competing with mobile network operators. The findings of this paper may also be used as a wake-up call for policy makers to put more emphasis on women and young people who are often left behind during Government’s effort toward reaching the entire population as far as financial inclusion is concerned.
Highlights
Financial inclusion does not have a single acceptable definition around the world, but different countries refer to financial inclusion based on their own market perspective
The national financial inclusion recognizes that the access strand to financial services in Tanzania has improved from 11.2% of adult population accessing formal financial services in 2006 to about 17% after evolution of mobile money service in 2009
According to FinScope Tanzania report [4], about 65% of the adult population in Tanzania is formally financially included. This abrupt increase in financial inclusion is acknowledged by the national financial inclusion framework to be contributed highly by what is referred to as the introduction of non-traditional players in delivery of financial services in Tanzania—the mobile network operators (MNOs) who have revolutionized the landscape of financial services delivery in the country by reaching the majority which was originally left aside and financially excluded in the country
Summary
Financial inclusion does not have a single acceptable definition around the world, but different countries refer to financial inclusion based on their own market perspective. The strategies which are termed superior and successful, according to World Bank [2], are those which complement efforts with those of the major financial inclusion stakeholders, provide clear responsibilities of each stakeholder, and highlight transparently resource planning by giving priority targets. Such strategies should be able to encourage a more effective and efficient process of achieving substantial development of financial inclusion. This abrupt increase in financial inclusion is acknowledged by the national financial inclusion framework to be contributed highly by what is referred to as the introduction of non-traditional players in delivery of financial services in Tanzania—the mobile network operators (MNOs) who have revolutionized the landscape of financial services delivery in the country by reaching the majority which was originally left aside and financially excluded in the country
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