Tanzania has taken a significant step toward fostering a cash-lite economy by abolishing all charges on payments made using debit, credit, or prepaid cards at point-of-sale (POS) machines. This groundbreaking move, announced by the country’s central bank, the Bank of Tanzania (BOT), aims to promote digital transactions and enhance financial inclusion across the nation.
In a public notice, BOT stated that card payments at POS machines would no longer incur any fees, effectively removing a significant barrier to digital payment adoption. Merchants have been explicitly instructed not to impose any charges on customers using card payment options. Violations of this directive will attract strict penalties, demonstrating the government’s commitment to ensuring compliance and fostering a seamless digital payment ecosystem.
Governor Emmanuel Tutuba, speaking on behalf of BOT, emphasized that this initiative is part of the bank’s strategic efforts to encourage the widespread adoption of digital payments. The BOT plans to expand the use of POS machines across the country, making digital payments more accessible to individuals and businesses alike. This policy aims to ensure that Tanzania remains on track toward becoming a cash-lite economy, where digital transactions replace cash as the primary mode of payment.
Transitioning to a digital payment system offers several advantages, including increased transparency, reduced risk of theft, enhanced convenience, and improved efficiency. This initiative aligns with Tanzania’s broader economic goals, promoting financial inclusion and modernizing the country’s financial infrastructure.
The Digital Payment Landscape in Tanzania
Tanzania’s economy is poised for steady growth, with the World Bank projecting a medium-term GDP growth rate of approximately 6%. Key sectors driving this expansion include manufacturing, electricity, construction, tourism, trade, and financial services. As the economy diversifies, digital payments are emerging as a crucial component of financial transactions due to their speed and convenience.
The digital payment market in Tanzania is experiencing rapid growth. According to Statista, the total transaction value in this market is expected to reach $4.43 billion by 2024. Mobile point-of-sale (POS) payments account for the largest segment, highlighting the increasing reliance on mobile technology for financial transactions.
Tanzania’s progress in digital payments is part of a broader trend across Africa. A recent report by Business Insider Africa revealed that only a few African countries have over 50% of their populations using digital channels for payments. While Tanzania ranks slightly below this benchmark, it is making significant strides, with 48.4% of its population utilizing digital platforms for transactions.
This performance places Tanzania eighth on the continent in digital payment adoption, just behind countries such as Kenya, South Africa, and Ghana, which lead the way. With continued efforts to promote financial inclusion and digital literacy, Tanzania is well-positioned to climb higher in this ranking in the coming years.
Africa’s Digital Payment Leaders
In Africa, Kenya and South Africa stand out as pioneers in digital payment adoption. Kenya leads the continent with 75.8% of its population using digital channels for transactions, followed closely by South Africa at 70.5%. Other countries with over 50% adoption rates include Ghana (63.7%), Gabon (62.3%), Namibia (58.5%), Zimbabwe (55.7%), and Lesotho (54.9%).
Tanzania’s ranking reflects the substantial progress it has made in recent years. Financial inclusion in the country has risen significantly, with 76% of the population now formally included in the financial system, up from 65% in 2017. This growth correlates with increased mobile phone ownership, which has risen from 63% to 75% during the same period.
Additionally, access to commercial banking services has improved, with 22% of the population now using these services, compared to 17% in 2017. Mobile technology has played a pivotal role in this transformation, enabling millions of Tanzanians to access financial services that were previously out of reach.
Driving Toward a Cash-Lite Economy
The BOT’s decision to eliminate card payment charges is a key milestone in Tanzania’s journey toward a cash-lite economy. By removing financial barriers, the government aims to accelerate the transition to digital transactions and encourage more people to embrace digital payment solutions.
The potential benefits of this shift are significant. A cash-lite economy offers greater security, as digital payments reduce the risk of theft and fraud. It also promotes transparency in financial transactions, which is critical for combating corruption and fostering economic stability. Furthermore, digital payments are more convenient for consumers and businesses, enabling faster and more efficient transactions.
Expanding digital payment adoption also supports Tanzania’s broader economic goals. As more individuals and businesses embrace digital tools, the country will be better positioned to attract investment, drive innovation, and enhance its global competitiveness.
Future Prospects for Digital Payments
The current trends suggest that digital payment adoption in Tanzania will continue to rise. Key factors driving this growth include increasing smartphone ownership, expanding bank account access, and rising digital literacy. These indicators point to a future where digital payments become the norm rather than the exception.
Tanzania’s commitment to fostering a cash-lite economy sets an example for other African countries looking to harness the potential of digital finance. By removing barriers such as card payment charges, the BOT has taken a proactive step toward creating a more inclusive and modern financial ecosystem.
As Tanzania continues to promote digital payments, the benefits are likely to extend beyond financial inclusion. Enhanced security, improved transparency, and greater convenience will contribute to economic growth and resilience, ensuring that Tanzania remains on a path of sustainable development.
With strong leadership, supportive policies, and a growing appetite for digital solutions, Tanzania is well on its way to becoming a leader in digital payments in Africa. The future holds immense promise, and the country’s efforts today will undoubtedly shape a more prosperous tomorrow.
