Tanzania will establish a law to oversee mobile money and Internet banking transactions now being actively entered into by more than half of the country’s mobile phone subscribers. The number of active users of the services in Tanzania is set to increase from the current 55 per cent to 60 per cent of the population in 2015.

Kenya and Rwanda have recently enacted similar legislation to protect consumers against mobile money fraud, while Uganda is in the process of doing so.

Ministry of Finance sources said the National Payment Act will be tabled in parliament early next year for review to align it with new modes of settlement such as money transfers and mobile banking, which an estimated six million subscribers use to save.

The value of money transacted using mobile phones in Tanzania hit Tsh28.9 trillion ($17.93 billion) last year, as four providers reached out to customers who did not have access to formal banking facilities, Bank of Tanzania (BoT) data shows — a rise of 65.74 per cent in the 12-month period ended December 2013 from Tsh17.41 trillion ($11.03 billion) for the period ended December 2012.

The exponential growth over the past six years happened as commercial banks started offering services through agents, though these services were still concentrated in urban areas and were still inaccessible to many.

Vodacom operates the M-Pesa platform, Airtel offers mobile money services on Airtel Money, MIC Ltd operates Tigo Pesa and Zantel provides the service on Ezy Pesa.

READ: Cross-border cash transfers for Airtel subscribers

“The use of electronic payment systems, especially the mobile payment systems, has grown significantly over time and contributed towards wider outreach of financial services to unbanked populations in both rural and urban areas of the country,” notes the Bank of Tanzania in the latest Banking Supervision Annual Report.

Commercial banks, hoping to tap into the mobile money services, have been partnering with the four telecommunication providers. The banks increased their network of agents by 57.12 per cent to 153,369 as at the end of last year, from 97,613 the year before.

The banking regulator last year allowed banks to start offering services through agents in an effort to increase access to financial services for more people. Five commercial banks —CRDB, Tanzania Postal Bank, DCB Commercial, Equity Bank Tanzania and Amana Bank — registered a total of 591 agents, but 375 or 63.45 per cent of them were concentrated in Dar es Salaam, Arusha and Mwanza.

The three cities have historically had more than half of the total commercial bank branches and automated teller machines (ATMs) and even in these urban areas the cost of accessing financial services has remained prohibitive for many individuals, who have opted for the mobile payment services.

“The mobile financial services operated by banking institutions and mobile network operators have now enabled 90 per cent of the adult population in Tanzania to have access to mobile money accounts with 43 per cent (9.8 million adults) being active users. Most of these, however, are still unbanked,” said BoT Governor Benno Ndulu.

The commercial bank branch network had risen to 642 as at the end of December last year, from 556, and the ATM network increased to 1,526 from 1,361 over the same period.

Dar es Salaam, Arusha and Mwanza had a total of 328 bank branches and 806 ATMs while areas such as Lindi, Manyara, Njombe, Kigoma, Singida, Rukwa, Geita, Simiyu, Pemba island and Katavi had fewer than 10 bank branches with some areas having as few as two. Lindi had 15 ATMs, Manyara had 23, Njombe 18, Kigoma 15, Singida 22, Rukwa 15, Geita 16, Simiyu 11, Pemba Island 14 and Katavi three.

Rukwa had five commercial bank agents as at the end of the year, Shinyanga four, Njombe and Singida had three bank agents each, Manyara, Simiyu, Tabora, Pemba and Unguja had two commercial bank agents as at the end of the year, while Katavi had one bank agent.

Prof Ndulu said that during the first year of operation, total deposits and withdrawals registered by CRDB, Tanzania Postal Bank, DCB Commercial, Equity Bank Tanzania and Amana Bank agents reached Tsh28.37 billion ($17.63 million) and Tsh4.14 billion ($2.57 million) respectively.

“Despite a notable performance in the banking sector, access to financial services for most of the bankable population is still low,” he said.

Banks have been allowing Internet and short messaging service transactions, but amounts transacted using those methods are dwarfed by those transacted over mobile payment platforms offered by the four telecommunication providers. The preference for mobile payment services is high because of their ease of use and the wide availability of mobile phones.

“Although mobile financial services have their limitations as they are still widely used for payment-based services only, initiatives are being deployed to expand their use as a platform to deliver other financial products from mainstream banking services,” said Prof Ndulu.

The exponential growth of mobile money services in Tanzania has been similar to that in Uganda and Kenya.

In Uganda, the value of money transacted by six mobile money service providers — MTN, Airtel or Warid, Uganda Telecom, Orange, M-Cash and EzeeMoney — rose by 59.87 per cent to Ush18.65 trillion ($7.38 billion) for the period ended December 2013, up from Ush11.66 trillion ($4.34 billion), according to Bank of Uganda’s latest annual supervision report.

Uganda’s banking sector regulator said that the percentage of financially excluded adults fell to 15 per cent last year, from 30 per cent in 2009, the major driver being mobile money.

The Central Bank of Kenya in its latest Bank Supervision Annual Report disclosed that the level of financially excluded Kenyans dropped 25 per cent in 2013 from 33 per cent in 2009, while the proportion with access to formal financial services increased to 67 per cent, from 41 per cent over the same period.

In Kenya, the amount of money transacted by mobile money operators Safaricom, Airtel, yu, Orange, Tangaza and Mobikash rose by 23.1 per cent to Ksh1.9 trillion ($22.03 billion) for the full year ended December 2013, up from the Ksh1.54 trillion ($17.96 billion) transacted during the period ended December 2012.

The proportion of Tanzanian adults with accounts in formal financial institutions in 2006 stood at 9 per cent, 12 per cent in 2009 and 17 per cent in 2012 or 22 per cent if savings and credit co-operative societies (Saccos) are included.

At the end of last year, the Prof Ndulu stated that the target was to increase formal access to financial services to 50 per cent by next year; in July, he disclosed that the target had been surpassed due to the continued uptake of mobile payment services.

Additional reporting by Eric Kabendera