Tanzania is a country with a low education index, low technological standards, a middle-income standard, and a highly backward in every measuring standard, but in a few years, it has recorded a fine and aggressive speed of upliftment. How do they get it done? Well, all this has become possible because of the financial inclusion frameworks.
With the high-end financial inclusion frameworks, Tanzania came up with impressive results; they have bypassed the issues of low education, technology, and many more things. All in all, an agriculture-based economy looking for financial upliftment launches new reforms and gets impressive results—the national financial inclusion framework in Tanzania has proved that everything is possible with hard work and a far-sighted plan.
Well, Tanzania has been added to the global records because of the less time it has taken to upgrade its economy with new financial inclusion frameworks. The country has experienced continuous and significant financial growth over the consecutive years since the implementation of the framework. Let’s look at the blog below to understand the financial inclusion framework in Tanzania.
What is the National Financial Inclusion Framework in Tanzania?
Tanzania’s economy is a middle-income economy. Thus, Tanzania needed new financial reforms as it was an urgent need of the hour. Hence, in 2013, the Prime Minister of Tanzania decided to implement high-end financial reforms based on sustainable aims for future generations. At the G20 summit, the Prime Minister of Tanzania promised to bring financial inclusion plans to the country.
This financial inclusion plan includes the upgradation of social life, making banks accessible to the consumer, creating awareness among people, upgrading the financial education plans, increasing the employment rate within the country, and making people believe in the security of the banks. These all were the aims that the Tanzania government wanted to achieve in the coming years.
However, the Tanzania government brought some major changes after implementing the first financial inclusion plan in the country. Hence, they came up with a second plan to upgrade the things that were left in the first plan. Well, this framework comes with enterprising goals of extending the economy in terms of giving access to every person from the economy.
Why Tanzania Launches National Financial Inclusion Framework?
Tanzania has a lower middle-income economy highly dependent on agriculture, but it has grown its dimension drastically by imposing new reforms and policies. The most overwhelming thing about Tanzania’s economy is that it focuses on growth and thus comes up with the national financial inclusion framework. This way, they can transform their agricultural-based economy into a market-based economy.
The only reform that any government brings into their nation is for the upliftment of the nation and its financial situation. Similarly, the main focus of Tanzania’s government is based on the upliftment of the nation’s economy. Moreover, the upliftment of the strata stands last in terms of their financial capabilities.
In 2013, Tanzania’s government launched a national financial inclusion framework to power up the financial state of its citizens. We have seen in many countries how Financial inclusion has played an important part in providing income and employment to those who are out of money. Thus, the Tanzania government felt the need of the hour and launched the program.
Aims for Tanzania National Financial Inclusion Framework
Due to the downfall of the economy, Tanzania feels the need for financial inclusion. However, financial inclusions have worked drastically when it comes to boosting the economy. A lot of countries have tried this and come up with some amazing outcomes. Hence, the global NGOs and the organization feels that this should be implemented worldwide. Therefore, the prime minister of Tanzania feels the need for this new plan.
In 2012, at the G20 summit, over 17 countries pledged to implement financial inclusion policies. There were many countries that had already trusted financial inclusion plans to upgrade their economies, but the cautionary tale of India’s financial inclusion pushed Tanzania to do so and experienced some positive outcomes in its economy, then came up with the second financial inclusion plan. Let’s check all the aims that Tanzania’s prime minister wants to fulfill.
- Fifty Percent Account Ownerships: This plan is highly focused on the aim of giving exposure and access to almost 50% of the population. The plan will end in 2016, the time they planned to upscale the facilities for the people who are unable to reach banks. In order to perceive the aim, the government of Tanzania worked on it too. Tanzania’s government has made the banking service online and easily accessible to every stratum of society.
- Consumer Protection Advancements: Another key focus of the framework was providing security to consumers’ money. Policymakers have already found that making banking facilities accessible to the consumer is easy, but dragging consumers to deposit their money is difficult. Hence, the policymakers have made protection a separate aim. Without making consumers believe in the safety of money, it is impossible to upgrade their banking systems and approach. Client protection law and regulations in microfinance become the primary focus while working on the plan.
- Handling fundamental Barriers: Another key area that the Tanzania council has to work on is to take the basic barriers coming the way for consumers to get into the bank. So they try to resolve them too. They have to tackle the high costs and rates of banking services, the far distances of banks from the residential villages, and the asymmetries of information of banks and their facilities to the consumer.
- New Opportunities for Service Providers: Council wants to frame the newer opportunity for the people who don’t have money even for their basic livelihood. In order to enhance the facilities for all the consumers, the government started giving opportunities to those who wanted them, and this filled the gap between the poor and the rich.
- Financial Services for Small-holder Farmers: Through this framework, Tanzania wants to develop the entrepreneurial minds of the farmers, as the farmers are the major part of their economy. Tanzania’s economy is highly based on agriculture. Hence the government wants the agriculture sector to be advanced, so they came up with a plan for financing services for the farmers.
How Did Tanzania Council Work?
It was hard for the government and council to work on the framework as they had to face so many challenges due to the backwardness of their people. But they worked tremendously hard, which is quite difficult because they have faced challenges like low literacy, making people believe in them, etc.
Well, the Tanzania council worked in three layers; the council made a three-level hierarchy-based structure. One is the very primary and fundamental structure, banks; the second hierarchy is the ministerial committee which ensures all the government policies; and the third and the last is the Private sector, which enables the basic fulfillment of their duties.
Well, UNSGSA has said earlier that the monitor mechanism is a much-required thing when it comes to implementing any policy. Hence, Tanzania has to make a working hierarchy for implementing the policy. However, this hierarchy enables efficient implementation. Africa board fellows deliberate have come to the conclusion that the framework has brought essential and significant changes because of the efforts that the Tanzania government made.
Tanzania National Financial Inclusion Framework Result
The results are truly extraordinary. Hence, they came up with framework II in 2016. There is no doubt about the efficiency of the plan and the Tanzania government’s work. They really have worked hard along with spending without fearing the consequences. Nevertheless, the result is in front of us all. The aims that the government and the global community want from Tanzania are not exactly the same as expected but a bit extra than what they have expected.
- Increased Access for Women: Tanzania government just wanted to give access to all its citizens, but the policymaker didn’t have any idea prior that the participation of women would come up with these extraordinary results. Well, somehow, the result comes with very good participation in the country.
- Money Services Increased to 90 Percent: The aim of the plan was to enhance bank participation within the country so that the money transfers would be heightened. Hence, the money service in the country rolled up quite higher, and the result was unexpected as the money transactions increased by 63 to 90 percent.
- 25% of Adults Enrolled Within Two Weeks: In the very first two weeks after the plan was implemented, Tanzania noticed huge participation of its citizens as the banks were accessible to local people; hence they started trusting banks easily, and the 25% of adult enrolled in the accounting facilities in the first two weeks.
Risks Associated With Tanzania National Financial Inclusion Framework
Upgrading Tanzania’s economy with financial inclusion plans was not that easy, but the plan worked out extraordinarily. There were some of the many firm challenges standing in front of the way going to development and enhancement. Let’s see what the challenges were and how they tackled them.
- Lack of Education: The very first challenge was that half of the population was not well educated, so the accounting facilities given to them have gone unnoticed many times. Hence, policymakers have to rethink the accessibility of accounting facilities to the illiterate sector as well. This has hindered the financial inclusion plans in the country.
- Low Technology: Tanzania wants to have a digitalized economy by incorporating technical advancements. But the problem was neither the population was educated enough to run the technology, nor the country had the technical advancements. Hence, technology becomes a huge challenge in implementing the financial inclusion framework.
- Regulatory Requirements: Regulatory requirements such as credit bureaus were not present and accessible to the local consumers; hence the cases of money laundering and loot increased, which ultimately affected the consumer’s beliefs in banks. Thus, Tanzania’s government has to work on that too.
- High Costs and Rates: The banks were new, and to complete all their expenses, banks possessed higher fees on every financial transaction; a higher cost would not let the poor sue the banks. Thus, this becomes a challenge for Tanzania in implementing financial inclusion framework. They are required to harmonize the fees and charges in order to make all the banking facilities accessible for every stratum of the community.
Second National Financial Inclusion Framework
After the completion of the first financial inclusion plan, the government launched the second financial inclusion plan. Let’s check what they have covered and want to cover in the second financial inclusion framework. The second plan makes the government reimagine the study of financial inclusion to bring some of the major results that have been left in the first framework.
As the first plan has impressive results, Hence, Prime Minister Kassim Majaliwa comes up with the second financial inclusion framework, which enables digitalization as the primary focus for the upliftment of the country. The aim of the second financial inclusion plan is to make all digital payment platforms accessible to every consumer. They have launched a new KYC policy and easy digital payment methods. Savings a key to merchant payments in developing countries has gotten too much attention in that era. Thus, Tanzania feels the need for digital payments.
Another important aim of the second plan is to increase financial inclusion. The overall rate of the inclusions in the country was 65%, and they wanted to raise it up to 75%. Moreover, they launched a plan to create a more conducive infrastructure to increase accessibility for local consumers. Well, the second plane had also shown some positive and impressive results. Most countries have already launched their digital payment platforms, such as Myanmar’s first e-commerce platform.
Frequently Asked Questions
Q1. What is Tanzania’s National financial inclusion strategy?
Tanzania’s financial inclusion strategy was to drag at least 50% of its population into the banking service. Although, this was truly a big task for them, as the population is not so literate, and their economy is highly based on backward agricultural practices. Hence, the government has to start from the fundamentals, and they do so too. Moreover, they aimed for more accessibility for consumers to fulfill the plan.
Q2. What is Tanzania’s financial inclusion rate?
Almost 50% of the population have reached the bank and trusted the government bank source for lending money and depositing their money. But due to the 13% gender gap, things become difficult to execute. Hence, the government comes up with the second financial inclusion plan, which enables the upgradation of females within the country.
Q3. What are the major problems facing financial institutions in Tanzania?
Various problems have been faced by financial institutions while working for the financial inclusion framework. As the population was not that high-end educated thus, they didn’t believe in the advancements and the new technologies, which made it difficult to get them into the bank. Let’s check all the major challenges.
- Lack of money
- Repayment issues
- Low business succession rates
- Dropouts while business failures
Every nation’s government wants the nation to be at the top in every aspect, whether the economy, military, or science. Thus, they prepare various policies and reforms to uplift their status in the world. Hence, to uplift the status of their economy, Tanzania brought financial inclusions to their nation. First, in 2013, after getting a productive result from the first framework, they launched a second national financial inclusion framework to uplift the other part of society.
In the above article, we have discussed the launch of the national framework of financial inclusion in Tanzania. From the definition and the meaning of the financial inclusion framework launched by Tanzania’s government, its aim, and the productive result it brought to the economy. If you’re still left with any doubts, then you can connect to our experts anytime.
- Jonas Taylor is a financial expert and experienced writer with a focus on finance news, accounting software, and related topics. He has a talent for explaining complex financial concepts in an accessible way and has published high-quality content in various publications. He is dedicated to delivering valuable information to readers, staying up-to-date with financial news and trends, and sharing his expertise with others.