Archives for posts with tag: Mobile Growth

Mobile Market Look: Tanzania

Tanzania

According to the Alliance for Financial Inclusion, mobile money accounts now outnumber bank accounts in nine African countries. Among them is the east African country of Tanzania – the next destination for MMIT’s Mobile Market Look series.


Tanzania is the second largest economy in east Africa and ranked the 6th most populous country in Africa, with just below 50 million people (2013). Although it remains one of the poorest countries in the world, the nation has a bright future with promising untapped potential. Mainly known for its gold exporting and tourism sector with Mount Kilimanjaro, the Serengeti, and the beaches of Zanzibar, the country has so much more to offer beneath the surface.

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Tanzania is growing at a faster rate then most of Sub-Sahara Africa. From 2001 to 2014 Sub-Sahara Africa has recorded annual GDP growth rates between 4% and 5%, while Tanzania has seen rates between 6% and 7%. Tanzania’s projected rates until 2017 are predicted to be 7% or higher annually. Over the years, Tanzania has transpired as a popular destination for Foreign Direct Investment (FDI) initiatives due to the political stability, location, and favorable investment regulations. The country has also been a major beneficiary of the Bill and Melina Gates foundation and continues to improve in areas of human development. Emerging industries that are increasingly gaining attention and more investment within the nation include agriculture, natural resources, transport, financial services, telecommunications, and our focus – mobile payments.

Mobile Money in Tanzania

MOBILE_PHONE-IMAGE-e1378131623527Although Kenya is the undisputed trendsetter when it comes to mobile money, Tanzania has been one of the fastest and most successful markets to adopt mobile payments systems. The first mobile payment product in Tanzania was the Kenyan mobile money transfer service M-Pesa, launched by Vodacom in 2008 just one year after its debut in Kenya.

As of last year, Tanzania surpassed Kenya in terms of transaction volumes to become the leading country for mobile payments. Tanzania has exceeded Kenya in terms of mobile money usage in 2013. According to a report by the GSMA, 44% of Tanzanian adults used some form of mobile money compared to 38% in Kenya.

The total value of transactions in 2013 was $17.7 billion (USD), which accounted for over half of Tanzania’s GDP at 54%. The number of mobile phone subscribers also continues to grow at an unprecedented rate. Mobile phone penetration was approaching 70% at the end of 2014 with an annual subscriber growth rate of over 20%. In 2014, about 55% of Tanzania’s mobile subscribers use mobile money services, with over 16 million registered mobile money users. According to the GSMA, over 11 million of these accounts are active within a 90-day period and providers are processing more than 99 million transactions per month valued at over 3 trillion TZS ($1.8 billion USD).

Tanzania mHealth 500Mobile money products within Tanzania are quickly evolving serving the population with new innovative ways to carry out transactions, some never before seen in any other market of the world. Transactions are moving beyond the traditional airtime top-ups and money transfer options offered by the likes of M-Pesa to offer more mobile money payment capabilities. Tanzanian consumers now have a plethora of mobile money payment options for salaries, bills, utilities, fuel, insurance, bus passes, micro-financing, healthcare, physical goods, and beyond.

One of the newest innovations is an interest-earning mobile money product. Customers receive quarterly interest for storing money on their mobiles, a similar concept to gaining interest in a bank account. Tanzania seems to be quickly emerging as a target market for companies to pilot new mobile innovations due to the success of mobile money and favorable market conditions. Examples of new mobile innovations targeting Tanzania outside of mobile money initiatives include Facebook’s internet.org, Tigo’s music streaming service, or Ex-Apple CEO, John Sculley’s Obi Mobile smart phone brand.

Why has Tanzania been so successful?

Nearly 6 years ago, Tanzania had one of the highest population percentages of financially excluded citizens. Lack of trust, understanding, and access to formal banking systems are just some of the reasons people are unbanked. Mobile phone ownership rates have grown rapidly in the country and the majority of the population have access to a mobile phone, creating a favorable environment for mobile payments. According to the InterMedia FITS (Financial Inclusion Tracker Survey) study in 2012, even among underprivileged households of rural, unbanked, and poor (living on less than $2 a day) – 50% of these families had access to a mobile phone and owned a SIM card.

The Central Bank of Tanzania (BoT) is openly supportive of mobile money usage and is actively engaging in related initiatives in moving Tanzania towards becoming a cashless society. The use of financial services has doubled in the past 5 years due to the mobile surge. The BoT’s goal was to increase the share of the population with access to financial services from 27% in 2009 to 50% in 2015. This goal was not only achieved but was also exceeded in 2013 at 54% – achieved 2 years earlier than planned. Tanzania has been recognized as one of the leading countries of Africa for demonstrating a favorable environment and policy for promoting financial inclusion.

The mobile money industry is regulated under structures that differ from typical financial services providers. Major players within the industry work together – the Tanzanian government, mobile network operators (MNOs), and financial services – in collaboration to develop a sustainable mobile money framework. Industry consolidation of MNOs occurred in 2011 into 2012 due to price wars and to prevent market saturation.

Tanzania’s mobile money ecosystem is ripe for interoperability and could be one of the first countries to fully capitalize on the benefits. The four largest MNOs – Airtel, Vodacom, Tigo, and Zantel, have established partnerships with the BoT and the two largest banks – CRDB Bank and National Microfinance Bank. The purpose of these partnerships is to craft regulations for the industry and as a first step in the direction of interoperability.        

What is the future of Mobile Money in Tanzania?

The absence of interoperability remains a major impediment within the mobile payment industry. Interoperability is the ability for different information technology systems and services to communicate and exchange data. Without it, consumers suffer from lack of flexibility and accessibility to a wider array of services. Customers may receive mobile money from a different service than what they currently have, which may force them to travel a considerable distance to set up a new mobile money account, wait in line, cash-out, and then have multiple mobile money options on their phones.

rural tanzania

It is estimated that 75% of Tanzanians live in rural areas, which presents a challenge for any agent network system within the country. Based on a FITS user survey many consumers have experienced issues with the current mobile money provider agents, mainly issues of inconsistency, insufficient e-float, absenteeism, or insufficient help with transactions. The easier the payment structure, the more likely they are to use it again or continue to use on a frequent basis; this will ultimately result in an increase in overall transaction volumes.

However, as commonly seen throughout Sub-Sahara Africa, many industry players refuse to open up doors to competitors – even if it could be to their benefit. Additionally, several country governments within Africa exercise forms of protectionism placing restraints on players within the mobile payments industry and their roles within the ecosystem.

The next initiative for the BoT is to find a way to link all of these mobile money users with formal banking institutions to drive up the percentage of the financially included. Tanzanians no longer need to invest their money in livestock or jewelry, but can store value on their phones and now start earning interest. Services within the market are still highly competitive and are constantly looking to introduce new mobile money options to grab a higher market share. Such innovations are benefiting consumers and changing life as they know it.

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African SMEs and Entrepreneurs – the time is now!

Africa is quickly emerging as a top contender for business expansion in large company ventures. In many ways, Africa has been referred to as the “next Asia” with strong investment growth. After all, the continent is home to 7 of the 10 fastest growing economies in the world. The future has been looking much brighter for Africa, especially in the last decade where we have seen Africa’s GDP more than double.

According to EY’s recent attractiveness survey for 2014, Sub-Sahara Africa places in second place.  Three years ago in 2011 SSA was listed 3rd from last on the same list. This year, North America is the only region that ranks ahead of Africa in terms of investment attractiveness.

Growth within these nations not only provides incentive for foreign direct investment (FDI) from all over the world, but also more importantly provides immense opportunities for African entrepreneurs across the continent. EY also cites Intra-African investment and development as a major source of growth for the continent.

Inherently Africa has a high level of risk associated with business investment with many nations battle political instability, corruption, and problems associated with the lack of proper infrastructure. All of these factors contribute to the risk in conducting business in Africa which is eminently complex. In the past, such issues have resulted in the hesitation by global companies from exploring expansion into African nations. However in present day, it appears investors have been able to see beyond negative headlines of nations such as Nigeria, Kenya, and Sudan due to the market potential outweighing many of the risks.

Africa micro business While many large size multinational enterprises (MNEs) such as Nissan, H&M, and Burger King are making headlines for their decisions to expand into Africa for business ventures, the success behind these rapidly growing countries is largely due to SMEs, small and medium sized enterprises. Several MNEs have recently been attracted to the region due to significant improvements in regulatory, legal, and business systems. However, according to IFC and World Bank reports, over 90% of all businesses in Sub-Saharan Africa are SMEs. Aside from this, there is also the informal market of micro businesses that are largely unaccounted for.

With the exciting growth of the mobile phone industry, it presents a major opportunity for Sub Saharan companies to prosper. MMIT, Mobile Media Info Tech, a Nigerian software provider of mobile payments is an example of how Nigerian entrepreneurs and SMEs can benefit from the recent growth trends. With the significant increase in cell phone users, mobile opportunities are abundant. MMIT quickly entered the market by creating M-Wallet and M-Diaspora products.  These products allowed Nigerians to use their mobile phones to pay for products, acting as a mobile wallet, and our M-Diaspora product which allowed ex-pat Nigerians in the United States and United Kingdom to send money to friends and relatives in Nigeria. MMIT saw the opportunity and benefit of mobile payments, a technology that has revolutionized the African consumers’ lack of banking access and dependency on carrying cash.

With the overwhelming majority of the business landscape being SMEs, they are instrumental to the growth of the economy within the Sub-Saharan region. African SMEs growth and development helps create the desperately needed jobs within the formal economy which can ultimately boost economic growth and stability. Although things are looking up, reports of high unemployment rates in SSA, particularly among the youth, continues to plague the continent. The need for the creation of jobs and infrastructure is still in dire need to foster the current economic growth and to sustain it.  Therefore, it is imperative that they do not ignore these rising opportunities created by the economic growth of the past years.

Business in Africa is challenging and varies significantly from country to country which further adds to the degree of difficulty for foreign entrants. African companies have many advantages that they can capitalize especially in terms of market knowledge, understanding of consumer behavior, and realizing what innovations can revolutionize the African way of life. African companies partnering with foreign companies is another smart option for both sides of the spectrum as local African business are able to fill many of the gaps that large MNEs cannot always fill. With new economic developments and increasing incomes, consumers are demanding access to more goods more than ever before. African entrepreneurs and SMEs should seize the opportunities before the MNE’s flood gates open.

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Predicted mobile growth in Africa

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