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Friday, October 24, 2008

The Unbanked in Tanzania

Hello Peter,

This will make an interesting discussion on your blog.

I got news that we have about 1,800,000 bank accounts in Tanzania, meaning less than 5% of the population is banked.

What conclusions can be drawn from this information?

- The unbanked are too poor to leave money in banks?
- They lack basic finance literacy?
- Existing banks are not aggressive enough in conquering the market (fewer branches, limited marketing initiatives, bank products out of touch with needs of the unbanked, ...)

... what else?

Many thank yous Mdau Mboma for this discussion topic!


Anonymous said...

Peter , the decission you made of not puting anything in your(our) blo, especially at this time of "very need" caught me in a big surprise. This world has for the first time in our life and knowledge made us able to see the financial crunch that did happened, and I believed that your blog will be the first one to share and discuss with us daily on what is happening.
I am sure nobody for now has the right answers or solutions to this problem , even asst secrestary of Treasury Neil Kashkari but with discussion we would know what really is ahead of us.
Hey show youre a "uchumi na fedha" na sio kutuacha wakati kama huu wa uchumi na fedha.
I am sure shule iko busy , but give yourself even 10 min and post something and leave us discussing it or surf for some clues .
Anyway apologize accepted.

Anonymous said...

Hiyo idadi uliyosema (1,800,000 bank accounts) ndio Market Demand ya watu ambao wanauwezo wa kuweka fedha benki katika TZ. Ambao ni wafanyabiashara na wafanyakazi na wakulima wachache sana na wanafunzi wa vyuo.
Na Market share hiyo yote imechukuliwa na mabenki yote yaliyopo hapo Tanzania, hakuna tena namna ya kuongeza wawekezaji fedha katika benki, period.
kwa nchi kama TZ ambayo asilimia 60 ya watu wake, au takribani ya watu milioni 18 ,mtu anaishi kwa dola 2 mpaka nne kwa siku, atawezaje kuwa na fedha za ziada za kuweka benki?
Waliobaki ndo hao bora wanunue simu ya mkononi ili kupata mawasiliano maana ukimwambia achague kuweka fedha benki au kunua simu , atachagua simu maana atawasiliana na watu huku na pale.
Ndo maana cell phone users tazania ni wengi kuliko holders wa akaunti za banks.
Ndo hali halisi

stephen said...

Mdau hapo juu umetoa statement ya nguvu.....more cell phone subscribers than bank account holders. The truth of the matter is that the demand for banking services is huge, especially in rural areas. I remember reading one article about rural folk somewhere in the south,I think it was Lindi, there was only one branch in the whole district and on that particular day the bank's servers collapsed causing a halt in operations. The effect was catastrophic to the particular community, which mainly relied on cashew nut farming....it was high season and demand for banking services was peak.

Another incident that is interesting to note is the recent NMB IPO which was oversubscribed by more than 100 million dollars! Money that was out of the banking system, because people were not allowed to take loans....but even if a large portion of this amount is in saving accounts...it is a serious sum if lets say 30 million dollars was not in saving accounts...or out of the banking system.

My view is that 1. the demand for banking services is huge. But a majority of the banks who are foreign owned, want to make as much profit with as little risk as possible. Banks with sizable local ownership have made attempts to tap in the rural folk although at a very slow pace, and have reaped large rewards in the process. A good example is crdb's strategy of engaging saccos societies and community banks, through various loan products. Crdb and Exim are active in financing agriculture particularly commodities like cashew nuts and cotton and so they have branches where most banks do not venture, deriving lucrative returns.

2. What is lacking is innovation and basically the will to entice the 95 percent of the population to at least open savings accounts. incomes are low for the majority but think about this if you could attract new customers,lets say 500 000, and mobilize them to open accounts where they can save 1000 shillings a month, you have over 500, 000 dollars a month in deposits...not small money, but of course there are things to consider such as costs in managing the service. But such simple and humble models were used by what was a small building society in Kenya called equity bank, in a decade it has become one of Kenya's Largest financial institutions, playing a critical role in the livelihood of the majority of Kenya's rural folk.

Equity from the beginning focused on the the neglected segment of the market, the segment that was un bankable, the people than live on less than a dollar a day....the ones who would rather buy a phone than open an account!

An important reason for their success I believe was the fact that, the bank is 100% locally owned. So the owners were willing to be patient, and take on long term risks.

So what is needed is more local banking institutions willing and able to take long term risks in banking the non urban population. Elaborate market strategies need to be used to create banking products that make sense to this particular segment....mobile banking could be one. People want a financial institution to work for their interests....siyo mtu ana deposit hela halafu kesho akitaka kufanya transaction , aje kupanga foleni.....to access his own money!