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An exploratory study to evaluate the adoption of mobile banking among the unbanked segment of the population in Tanzania

A Research Report

presented to

The Graduate School of Business

University of Cape Town

In partial fulfilment of the requirement for the

Masters of Business Administration Degree

By

Tamryn Combrink

December 2011

Supervisor: Dr Mills Soko

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PLAGIARISM DECLARATION

1. I know that plagiarism is wrong. Plagiarism is to use another’s work and pretend that it is

one’s own.

2. I have used a recognised convention for citation and referencing. Each significant

contribution and quotation from the works of other people has been attributed, cited and

referenced.

3. I certify that this submission is all my own work.

4. I have not allowed and will not allow anyone to copy my work with the intention of

passing it off as his or her own work.

Signed: Tamryn Combrink

Date: 9th December 2011

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ABSTRACT

Tanzania has a very low banked population but a high domestic remittance rate as

money is sent from urban to rural areas. The traditional means of sending money are

inefficient and expensive. Mobile banking has evolved to become a new way of sending and

storing money that is safe and easy to use. Even though Tanzania is a relatively poor country,

mobile phones have become a necessity and have allowed individuals to avoid having bank

accounts and to instead adopt mobile banking.

The rapid growth of M-PESA in neighbouring Kenya has made Tanzanian

stakeholders excited about the future prospects of mobile money in Tanzania. Mobile banking

represents an opportunity for previously unbanked people to have an affordable and safe way

of storing their money, something that has not previously been available to them. Non-

governmental organisations (NGOs) and micro finance institutions (MFIs) are able to improve

their operational efficiency and potentially increase their reach through the adoption of mobile

money.

This thesis is an exploratory study evaluating the adoption of mobile banking among

the unbanked segment of the population, focusing on the challenges and benefits of adoption

as identified by numerous stakeholders. The challenges include: distribution, education, the

need for change management, awareness and interoperability. The benefits include: ease of

use, safety and cost. Each factor is examined in detail. Despite the challenges, the research

findings were unanimous in highlighting the future benefits of mobile money in Tanzania.

Keywords: Tanzania, mobile network operators, interoperability, micro finance institutions, mobile money, unbanked, mobile banking, branchless.

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ACKNOWLEDGEMENTS

I would like to express my sincerest gratitude to the following people:

- Dr Mills Soko, my supervisor, for his guidance and valuable advice throughout this

research process.

- My family for their support and encouragement while researching and writing this

research report as well as for their understanding and compassion throughout this

challenging year.

- All respondents interviewed who generously gave their time and provided me with

valuable insight.

- My friends for their continued support.

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CONTENTS

LIST OF ACRONYMS ......................................................................................................................... vi 

LIST OF FIGURES .............................................................................................................................. vii 

LIST OF TABLES ................................................................................................................................ vii 

1  INTRODUCTION .......................................................................................................................... 1 

1.1  Research area and problem ....................................................................................................... 3 

1.2  Research questions .................................................................................................................... 4 

1.2.1  Primary research question ................................................................................................. 4 

1.2.2  Secondary research questions ........................................................................................... 4 

1.2.3  Scope ................................................................................................................................. 5 

1.3  Structure of the report ............................................................................................................... 5 

2  LITERATURE REVIEW .............................................................................................................. 6 

2.1  Definition of mobile money ...................................................................................................... 6 

2.2  Relevance of mobile banking .................................................................................................... 6 

2.3  Types of mobile banking .......................................................................................................... 7 

2.3.1  M-Remittances .................................................................................................................. 8 

2.3.2  M-Payments ...................................................................................................................... 8 

2.4  Opportunities for MNOs ......................................................................................................... 10 

2.5  Why mobile banking is relevant in Africa .............................................................................. 11 

2.6  Mobile money industry ........................................................................................................... 14 

2.6.1  Banks .............................................................................................................................. 14 

2.6.2  Consumers....................................................................................................................... 15 

2.6.3  Agents ............................................................................................................................. 17 

2.6.4  Government ..................................................................................................................... 17 

2.6.5  NGOs .............................................................................................................................. 18 

2.7  Current mobile banking trends in Africa ................................................................................ 19 

2.8  Adoption of mobile banking in Tanzania ............................................................................... 20 

2.9  Conclusion .............................................................................................................................. 24 

3  METHODOLOGY ....................................................................................................................... 25 

3.1  Research approach and strategy .............................................................................................. 25 

3.2  Data collection methods and research instruments ................................................................. 26 

3.3  Sampling ................................................................................................................................. 27 

3.4  Research criteria ...................................................................................................................... 27 

3.5  Data analysis methods ............................................................................................................. 28 

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4  RESEARCH FINDINGS, ANALYSIS AND DISCUSSION ..................................................... 29 

4.1  Benefits of Mobile Banking .................................................................................................... 29 

4.1.1  Ease of use ...................................................................................................................... 29 

4.1.2  Safety .............................................................................................................................. 30 

4.1.3  Cost ................................................................................................................................. 32 

4.2  Challenges with the adoption of mobile money ...................................................................... 33 

4.2.1  Building awareness ......................................................................................................... 33 

4.2.2  Education ........................................................................................................................ 36 

4.2.3  The need for change management .................................................................................. 38 

4.2.4  Distribution ..................................................................................................................... 39 

4.2.5  Interoperability ................................................................................................................ 41 

4.3  Penetration of mobile money .................................................................................................. 43 

4.4  Analysis and Discussion ......................................................................................................... 44 

5  RESEARCH LIMITATIONS ...................................................................................................... 49 

6  CONCLUSION ............................................................................................................................. 50 

7  FUTURE RESEARCH DIRECTIONS ....................................................................................... 54 

8  BIBLIOGRAPHY ......................................................................................................................... 56 

9  APPENDICES ............................................................................................................................... 63 

9.1  Appendix A – Interviewee Profile .......................................................................................... 63 

 

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LIST OF ACRONYMS

ATM Automatic Teller Machine

CBRT Community Based Rehabilitation in Tanzania

CGAP Consultative Group to Assist the Poor

GDP Gross Domestic Product

GSMA Global System for Mobile Communications Association

ID Identification Document

ICT Information and Communication Technology

IFC International Finance Corporation

KPI Key Performance Indicator

MFI Micro Finance Institution

MNO Mobile Network Operator

NGO Non-Governmental Organisation

NMB National Microfinance Bank

PIN Personal Identification Number

SACCO Saving and Credit Cooperative

SIM Subscriber Identity Module

SMS Short Message Service

STK SIM Tool Kit

USSD Unstructured Supplementary Service Data

WAP Wireless Application Protocol

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LIST OF FIGURES

Figure 1 Research process followed

LIST OF TABLES

Table 1 Factors affecting the adoption of mobile money

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1 INTRODUCTION

Africa is one of the fastest growing economic regions in the world, increasingly

attracting foreign direct investment. However, despite the improved economic growth, poverty

is still widespread. Most of the population lives below the US$2 poverty line with no access to

infrastructure or financial services, which makes it difficult to escape the poverty trap

(McKinsey Global Institute, 2010).

Africa has the highest growing rate of mobile phone adoption levels in the world

(Ondiege, 2010). The increased mobile phone penetration levels have enabled Africa to

globalise and become more interconnected (Carmody, 2009). Mobile phones can facilitate

growth and alleviate poverty (De Silva & Zainudeen, 2007), as an increase in mobile phone

connectivity can lead to an increase in a county’s gross domestic product (GDP) (Goetz,

2009). Thus the growing use of mobile phones on the continent is a positive economic and

social change. Mobile phones are helping businesses to be more effective and to conduct

transactions. For instance, Tanzanian fishermen are using mobile phones to call villagers with

news of their latest catch (Myhr & Nordström, 2006).

Although rich in minerals, Africa has one of the lowest levels of infrastructure

investment in the world, making economic growth difficult, as transportation and

communication costs are exorbitant compared to those in developed countries (Aker & Mbiti,

2010). The lack of infrastructure can be overcome through the use of mobile phones, as smart

phone technology allows more advanced functions than just sending voice and text messages.

Mobile phones have encouraged many people to start small businesses, as the owners now

have an effective way of contacting customers and suppliers. These small businesses all

contribute to Africa’s economic growth.

As phone costs continue to decrease, mobile phone ownership will also increase in

Africa, which will make access to financial services possible to millions of previously

unbanked people. The unbanked are people that do not have bank accounts and who only use

cash; they are limited in their ability to take out loans, maintain savings or make remote

payments. These constraints can inhibit their economic opportunities (Medhi, Ratan &

Toyama, 2009). Currently, 90% of people living in developing countries do not have access to

formal financial services (Hinson, 2011). The financial services industry needs to be cognisant

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of the fact that several barriers prevent the successful uptake of mobile banking. For example,

the lack of understanding of formal financial services, low levels of customer technical

knowledge and weak customer trust in mobile banking and bank cards are all barriers to

adoption (Cohen, Hopkins & Lee, 2008).

The poor need to be connected to the financial systems, so that the whole economy and

country is able to benefit and grow (Christen & Mas, 2009). Financial institutions allow

individuals to save safely and then use the money to invest in assets that generate returns.

There is a misconception that poor people are too poor to save and thus do not need bank

accounts. Although the amounts that the average African saves may seem low, collectively

they amount to a large sum of money. The Consultative Group to Assist the Poor (CGAP)

found that the use of financial services by low-income households leads to improvements in

household economic welfare and growth, and that access to financial services enables

households to plan and save for the future rather than living day to day (Littlefield, Morduch

& Hashemi, 2003). Poor people find it difficult to escape poverty, but by being able to save

small amounts they are able to save their way out of poverty and can avoid expensive loans.

Poor people do in fact save, but mostly in informal ways and invest in assets that can

be easily exchanged for cash, such as animals and jewellery. However, informal savings have

limitations because selling only a portion of an asset for cash is not always possible. For

example, it is not possible to sell the leg of a cow and keep the cow alive. Informal savings can

also fall prey to disease, acts of God or theft, while changes in commodity prices (such as

copper) also affect the value of poor peoples’ assets (Kendall, 2010).

Informal financial services remain the most common method of transacting and saving

in Africa because, although they offer increased safety, reliability and interest on savings,

formal institutions have limitations. These include high transportation costs and minimum

balance requirements, which means that for most people the costs outweigh the benefits of

using the formal institutions (Deshpande, 2006). The high transaction costs and/or

inaccessibility mean that many households still have no access to any forms of financial

services, although microfinance has grown significantly in Africa in recent years (Ruzuidzo &

Oosthuysen, 2011).

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Branchless (or mobile) banking has the potential to reach a vast number of the under-

banked and unbanked worldwide population at significantly lower rates than the formal

banking sector can provide. The Global System for Mobile Communications Association

(GSMA) is currently tracking 79 mobile money deployments, of which two-thirds have been

launched since 2009, indicating a growing worldwide trend towards mobile banking. Unlike

the majority of the formal banking institutions in Africa, mobile banking is easily accessible,

affordable, quick to use and provides a solution to the current dearth of financial services in

Africa. It has already been successful in Kenya (M-PESA) and is growing in popularity in

Uganda (MTN Mobile Money). Tanzania could benefit substantially from the successful

implementation of mobile banking. At the moment mobile banking is experiencing difficulty

in attracting customers but people will hopefully come to recognise its benefits (McKay &

Pickens, 2010).

1.1 Research area and problem

This research sets out to evaluate whether mobile banking has been successful in

Tanzania in targeting the unbanked segment of the population. The need for mobile banking is

there, as only 11% of the population has a formal bank account, of which 16% is from urban

areas and only 4% from rural areas (Finscope, 2006). It is therefore important to determine

why the unbanked segment is not using mobile banking. Furthermore the research identifies

the challenges faced by banks, telecommunications companies, retailers, NGOs, MFIs and

individuals when implementing and using mobile money.

What makes branchless banking work is the information and communication

technologies that enable customers, banks and retail agents to record and transact details

quickly, reliably and cost effectively over large distances. The Tanzanian population has

limited access to financial services, which reduces growth opportunities, and alternatives to

banking are limited. In Tanzania, the National Microfinance Bank (NMB) is a popular choice

for many, but the requirements for opening an account include being referred either by an

employer or by a local authority. These requirements make it difficult for many people to open

an account, as Tanzania has a high level of unemployment (Camner & Sjöblom, 2009). Other

alternatives include sending items such as sugar or clothes that can be sold and converted into

cash, but the downside is that the transportation costs are high and the risk of theft is great.

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Mobile network operators (MNOs) and banks are increasingly recognising the

opportunity that exists with the unbanked population in rural areas of developing countries

where formal financial services are rare. Mobile banking is an opportunity for millions of

unbanked people to benefit from financial services and has the potential to extend financial

services to unbanked and poor communities (Lyman, Ivatury & Staschen, 2006). However,

very little research has been done to establish whether mobile banking successfully attracts the

poor, unbanked population.

1.2 Research questions

1.2.1 Primary research question

Has mobile banking been successful in attracting the unbanked segment of the population in

Tanzania?

1.2.2 Secondary research questions

Banks

i. Is the unbanked population in need of traditional banking services?

ii. Are the costs of branchless banking lower than those of traditional banking for the kind

of transactions made by low-income and unbanked people?

iii. Do people trust e-money as much as cash?

iv. What are the perceptions of the growth and future prospects of mobile banking?

v. How have banks planned or prepared for operating in the mobile banking industry?

NGOs

i. Are NGOs seeing substantial cost savings as a result of mobile money?

ii. How was money sent to poor people prior to mobile money?

iii. What are the impacts on households’ disposable income?

iv. Is less money being lost through remittances than previously?

v. What are the limitations of mobile money?

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MNOs

i. Does branchless banking reach large numbers of unbanked customers?

ii. What portion of the customers use mobile money?

iii. Have they had an increase in customers since implementing mobile money?

iv. Why has M-PESA Kenya’s success not translated into similar success in Tanzania?

v. What challenges is the industry currently facing?

1.2.3 Scope

This research report focuses specifically on mobile money in Tanzania and does not

look at other countries’ models. Tanzania has been chosen because a low portion of the

population has access to financial services, and four MNOs offer mobile payment options:

Vodacom (M-PESA), Airtel (Airtel Money), Tigo (Tigo Pesa) and Zantel (Z-PESA). The

mobile penetration rate within Tanzania is growing dramatically, which suggests huge

opportunities for mobile banking.

1.3 Structure of the report

There are six sections in this report. The first section is a comprehensive literature

review, which starts with a definition of mobile money, then outlines the opportunities that it

represents and discusses the current situation in Tanzania. In the second section the research

methodology used for this study is described. The third section contains detailed discussion

and analysis of the research findings, in relation to the posed research questions. The fourth

section outlines the research limitations. This is followed by the research conclusion. Lastly

the research concludes with suggestions for future research.

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2 LITERATURE REVIEW

2.1 Definition of mobile money

According to Donner (2007):

The terms m-banking, m-payments and m-finance refer collectively to a set of m-

commerce applications which enable people to use their mobile telephones to

manipulate their bank accounts, store value on an account linked to their handset,

transfer funds to people or merchants, or even access loans or insurance products

(p.3).

Mobile banking involves combining financial services with mobile technology (Chung

& Kwon, 2009). It is a subset of e-banking in which customers access a range of banking

products via electronic channels. The mobile phone is used as a point-of-service device to

communicate with banks and retail outlets, in the same way that computers in retail outlets

communicate with banks to authorise payments. Users need to hold a deposit account, to and

from which payments or transfers can be made (Porteous, 2006). If the user does not have a

bank account, then the process involves either creating a bank account or creating an account

that is held by the telecommunication provider (Donner, 2007).

A distinction can be made between additive and transformational mobile banking

models. Additive models are aimed at the developed, or more high-end, customers as an extra

feature, whereas the transformational models target unbanked people (Goetz, 2009).

2.2 Relevance of mobile banking

It is anticipated that mobile banking will change the financial service industry (Rask &

Dholakia, 2001); firms will be forced to participate in mobile banking or risk losing out on

opportunities. Mobile money will create value through the networks between the banks,

telecommunications and other firms because of the increased competition (Kim, Shin & Lee,

2009). The mobile phone has the potential to be more than just a communication tool; it has

the potential to increase economic value to users (Waverman, Meschi & Fuss, 2005).

Mobile banking capitalises on the information and communication technologies that

exist to deliver a service quickly, reliably and cost-effectively over vast distances. Mobile

phones can be used to send instructions to transfer money from one account to another.

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Airtime dealers are used to change cash to electronic money and vice versa (Lyman et al.,

2006). Mobile money has the potential to be more convenient, reduce opportunity costs (such

as travel) and increase the safety of transactions. However mobile banking can only be

successful if cash agents are distributed throughout the country to convert e-money into cash

because without cash agents consumers will not be able to make use of the mobile banking

services (Mas & Kumar, 2008).

Although the value proposition of mobile banking is strong, its success is not

guaranteed (McKay & Pickens, 2010). Many countries, such as South Africa and India, have

failed to attract customers to mobile banking because of the low levels of awareness among

customers about the availability and features of the mobile banking. Customers also trust cash,

as they are familiar with it, whereas they are unsure that digital money will reach the recipients

(Medhi et al., 2009).

2.3 Types of mobile banking

There are three types of mobile banking. The first is the non-bank led model (also

referred to as the mobile-dominated model) in which customers do not need to have a bank

account to transact and send money. Customers deal with either a MNO or a prepaid card

issuer, and the agents serve as the customer contact point. Customers keep money stored on

the non-bank’s server and exchange cash for e-money credit. The non-banks typically use

commercial banks to hold the e-money and to earn a return while still keeping the funds liquid

(Lymanet al., 2006). Under the mobile-dominated approach, the MNO takes responsibility and

control of the infrastructure and system. Examples include M-PESA (Kenya) and GCASH

(Philippines).

The second model is the bank-led model in which a user’s bank account is linked to the

mobile, and transfers and payments can be done through the user’s bank account. The bank

delivers financial services through a retail agent. The retail agents are responsible for all

customer interaction and do the depositing and withdrawing of the customer’s cash. The retail

agent transmits all transactions back to the bank. The third model is a hybrid approach,

whereby a MNO and a bank form a joint venture.

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Mobile banking can be delivered using either the SIM Tool Kit (STK) platform or the

Unstructured Supplementary Service Data (USSD) platform. The STK interface can be

accessed directly from the user’s phone through the built-in application on the user’s

subscriber identity module (SIM) card. This requires a new SIM card but offers the user high

levels of security. The USSD interface is accessed by dialling a short number from the mobile,

which activates the menu. The downside of the USSD interface is that it is time-consuming

because, after each input, the data has to be resent to the server and then a new menu will load

on the screen (Mas & Kumar, 2008).

2.3.1 M-Remittances

A remittance is a transfer from person to person or place to place. Migrants typically

use remittances to transfer payments back home. The World Bank estimates that remittance

flows to developing countries reached US$338 billion in 2008, of which US$21 billion was

transferred to sub-Saharan Africa (World Bank, 2009). However, the United Nations estimates

that 20% of remittances are lost along the way (“The power”, 2009) because of additional

costs charged by agents (such as the Post Office or bus drivers) for transferring the funds. Due

to the informal methods used to transfer many of the remittances, very little regulation is in

place and thus theft is fairly common (McKay & Pickens, 2010).

Mobile money systems have the potential to change the remittance systems by

increasing the speed, duration and frequency of transactions, thereby enabling households to

have improved business opportunities and income (Yang, 2008). According to Aker and Mbiti

(2010), although mobile banking has the potential to create a new form of currency, the

greatest potential for the mobile money system lies in international remittances because the

commission currently charged on international remittances is very high.

2.3.2 M-Payments

Mobile payments are payments made for goods and services with a mobile device

(Dahlberg, Mallat, Ondrus & Zmijewska, 2008). It is a type of payment where a mobile device

is used to initiate, authorise and pay for a transaction (Au & Kauffman, 2008). The payments

fall into one of two categories: payments for daily activities, or payments for bills. Mobile

payments evolved because consumers wanted to have the convenience of being able to pay

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anywhere, anytime, for bills or products, and the mobile phone was able to meet these

requirements (Pousttchi & Wiedemann, 2006).

Mobile payments are available using two different technologies: Wireless Access

Protocol (WAP) internet-based access, and cell phones with an embedded chip-set. WAP

enables content to be sent from web pages to mobile phones (Kim et al., 2007).

Wireless Application Protocol

The limitation of this protocol is that web browsers and an internet facility need to be

available on the mobile phones, which restricts the focus to a narrower market. Payments are

made via web pages.

SMS-based transactions

The benefit of the SMS-based transactions model is that most mobiles are able to send

and receive text messages. The process involves the user sending a text message to a specific

number, and a premium is then charged to the user’s account. The merchant involved is

subsequently informed of the successful payment and the goods are released (Mas & Kumar,

2008).

Near Field Communication

This protocol is used mostly when paying for purchases made in physical stores or

transportation services. A consumer, using a special mobile phone equipped with a smartcard,

waves his or her phone near a reader module. Most transactions do not require authentication,

but some require a PIN to be used before the transaction is completed. The payment could be

deducted from a pre-paid account or charged to a mobile or bank account directly. This

protocol is very popular in developed countries, but because of the infrastructure requirements

is not a suitable option for developing countries.

Direct Mobile Billing

With direct mobile billing, payments are added directly to the mobile bill. This option

is unlikely to be successful in Africa because most of the consumers are prepaid customers.

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2.4 Opportunities for MNOs

Telecommunication companies are aware their growth is determined by what value-

added services they can offer to existing and potential customers (Hammond, as cited in

Napier, 2010). This realisation has spurred the telecommunications industry to invest in

mobile money. However, the launch of a mobile money platform takes a large financial

investment, as MNOs need to invest in an m-wallet platform, upgrade their SIM or USSD

access gateway and decide whether to embed the application into the SIM (Davidson &

Leishman, 2010).

Several factors contribute to the sustainable delivery of financial services, as the World

Economic Forum (2011) highlights:

a) low-cost widely distributed networks of local agents

b) trust in service provider

c) personal relationship users have with agent

d) endorsement from peers.

MNOs are able to take advantage and utilise many parts of their existing operating

structure to build a mobile money network, as the airtime distribution network has many

similarities. These include the ability to reach remote parts of countries and a brand name that

is well-known to many rural people. Another important attribute is the MNOs airtime resellers

are trusted by consumers, who willingly hand over cash and are confident that their airtime

will be credited to their account (Alexandre, Mas & Radcliffe, 2010).

MNOs already operate a ubiquitous real-time communications network and a fully

encrypted smartcard-based network through the use of SIM cards embedded in mobile phones.

The MNOs have access to a large customer base, many of whom do not have access to

financial services. MNOs are also better known in rural areas than banks, as they use a mass

market approach for targeting customers and try to target all citizens (Alexandre et al., 2010).

Furthermore, MNOs have experience in transactional-based revenue rather than the

fixed-based revenue typically charged by banks. Poorer users will be more likely to afford

paying per transaction instead of paying a flat fee. MNOs run a high-volume, low-margin

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business that depends on reliability, which is very similar to the requirements of the mobile

money platform.

MNOs have an opportunity to promote mobile money as a way in which customers can

top up airtime afterhours when they are unable to purchase scratchcards. Customers are able to

top up in small increments when it is convenient rather than having to purchase a larger

amount from airtime vendors (Davidson & Leishman, 2010). MNOs can benefit by selling

their airtime directly through the mobile money platform, and thereby reduce the commission

that they pay their agents for selling airtime. Moreover MNOs could save on manufacturing

scratch cards (Davidson & Leishman, 2010).

By taking advantage of the mobile banking opportunities, MNOs are able to offer an

additional service to current customers and attract more customers and, in so doing, increase

their market-share and revenue. Customers with e-money accounts are less likely to switch

providers and are more likely to encourage other users to join the network (Wishart, 2006).

Nevertheless MNOs do not have experience in the broader range of products that

consumers are now demanding such as savings accounts and insurance policies, and thus if

MNOs want to be adequately prepared to meet client demands then joint ventures with banks

may be preferable to non-bank led models (McKay & Pickens, 2010).

2.5 Why mobile banking is relevant in Africa

In Africa, the opportunity for mobile banking is tremendous because of domestic

migration patterns and underdeveloped retail networks. People need to regularly transfer

money in the form of remittances, and yet a large part of the population does not have access

to formal financial services.

Alvarez, Janssen and Avons (2009) highlight four factors that help enable an

environment for m-commerce:

a) presence of an addressable rural population

b) poor infrastructural backbone

c) high proportion of mobile phones as communication devices

d) presence of migrant population

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Across the developing world there is a higher probability of people having a mobile

phone than a bank account (Porteous, 2006). Mobile phones are the first technology in history

to have more low-income than high-income users, a result of the dramatic decrease in the price

of mobiles (Laugtag, as cited in Lewis, 2010). In 2009, Africa had an estimated 300 million

mobile phones - a penetration rate of 37.5% - and by 2012 the number of mobile phones is

expected to reach over 500 million.

The adoption of the mobile phone has been the first successful uptake of technology in

Africa. In comparison, the adoption rate for internet subscribers is approximately 9% and even

lower for fixed lines, at around 2% (Goodman & Harris, 2010). The success of the mobile

phone has been the result of the lower infrastructure needs and reduced handset costs. Thanks

to the mobile phone’s cost-effectiveness and ease of use, Africa is increasingly becoming the

epicentre for mobile phone adoption and has the fastest growing mobile market in the world

(Carmody, 2009). Aker and Mbiti (2010) argue that:

As the price of both handsets and airtime continue to fall, the mobile phone

will complete its transformation from an elite status symbol to a necessity for adults

at nearly all income levels. The challenge is now to ensure complementary access

to public goods and development of appropriate policies to evaluate and propagate

the benefits of mobile phones throughout the continent (p.31).

Mobile phones have empowered Africans in the 21st century, as mobile technology has

enabled them to leapfrog landline technology (Jack & Suri, 2010). While mobile tariffs remain

comparatively high in Africa, with the average cost of US$10 for a mobile phone beyond the

reach of most people, organisations have been encouraging villagers to share phones and save

collectively (Lewis, 2010). Mobile phones also provide a means of enabling the poor to

become banked due to the high penetration rate of mobile phones among the poor and the

affordability of transactions

For most poor people around the world, banks are simply out of reach, both from a cost

perspective and because banks are not easily accessible. Poor people do not benefit from

formal financial services because of both the inconvenience and high cost involved in

accessing these services relative to the more local and informal alternatives they have

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traditionally used (Alexandre et al., 2010). Banks do not find it cost effective or economical to

set up automatic teller machines (ATMs) or branches in rural areas; they tend to target areas

where the majority of people live and work.

Mobile banking was initially targeted at the developed world as an extra convenience.

However, users in the developing world are attracted to mobile banking not for convenience

but for its affordability and accessibility (Wishart, 2006). The mobile money services provide

increased flexibility, security and eliminate the need for users to carry large amounts of cash,

thereby reducing theft (Baguma, 2009).

Ghate (1992) finds that poor people tend to have little interaction with formal financial

institutions and are inclined to prefer informal options. Microfinance was developed by NGOs

and governments as a way of addressing the growing poverty in developing countries.

Microfinance organisations provide poor people with access to credit and saving facilities.

Although microfinance options have grown considerably over the years, the service is only

able to benefit a small portion of the poor due to funding constraints. The shortage of

microfinance institutions and the high levels of unbanked people (Cohen et al., 1998) have

seen mobile banking develop in rural Africa (Porteous, 2006).

The poorer a household is, the greater its need for financial services (World Economic

Forum, 2011). Saving on a regular basis provides poor people with several benefits: firstly,

poor people can save small amounts towards new tools to improve their productivity.

Secondly, poor people are able to compensate for their erratic income streams. Lastly, saving

enables users to make provision in the event of unexpected setbacks.

Increased competition in the telecommunication sector should result in reduced tariffs,

increased connectivity, better coverage and ultimately greater efficiencies (Bohnstedt, 2008).

As the mobile penetration rate increases, more people will potentially have access to mobile

banking, and therefore they will have access to a formal savings system.

Until recently, migrant workers had very limited choices for sending their money back

to their families in the rural areas (Muwanguzi & Musambira, 2009). The resale of airtime

vouchers is a method that certain rural people use to send money. However, the vouchers sell

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for between 10 and 40% below face value due to retailers’ tax, and thus a significant portion

of the money is lost during the process (Montex & Goldstein, 2010).

The rapid adoption of mobile phones in Africa, in both urban and rural areas, is a

source of renewed hope for the attainment of economic growth and development (Hinson,

2011).

2.6 Mobile money industry

2.6.1 Banks

Banks have historically focused on the high-end markets, which were perceived to

generate the largest margins; the low-income segments of the economy were avoided, as they

were perceived to be unprofitable (Alvarez et al., 2009). Most of the African population are

low-income consumers, many living on less than US$2 a day. By only targeting the high

income market the banks have excluded the majority of the population.

Banks experience bureaucratic delays in processing transactions (Hinson, 2010), which

result in several hours spent in queues for clients for simple transactions such as depositing or

withdrawing cash. African people who have access to bank accounts have reported their

dissatisfaction with the service they receive, primarily as a result of long queues to withdraw

or deposit money, and consequently most resort to using informal, unregulated banking

services to complement their banking needs (Ivatury & Mas, 2008).

Prior to the launch of mobile banking, banks relied on satellites and fixed lines to

connect branches and ATMs (Wishart, 2006), which was challenging because of the low

fixed-line penetration rate in Africa. Mobile banking has enabled banks to extend their target

market to a broader segment without incurring drastic set-up costs. As bank branches require

significant investment in infrastructure, skills and security, banks typically confine their

branches in city centres. Branchless banking eliminates the high infrastructure costs and

reduces congestion in branches (Lyman et al., 2006).

Mobile banking has several benefits: the number of a bank’s customers increases while

operating costs decrease; the additional cash can help strengthen a country’s economic

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situation; and robberies are reduced, as cash is no longer carried around by people (Wishart,

2006).

Banks also benefit by being able to sell more services to current customers through the

use of the mobile phone (Mas & Kumar, 2008). This enables banks to retain their current

customers in an increasingly competitive market. Mobile banking additionally benefits the

banks by enabling them to expand their customer base while giving unbanked users access to

the conveniences of modern-day banking (Urbach, 2007). The most important benefit that

mobile banking brings to banks is the dramatic reduction in costs, which means they will be

able to offer services at significantly reduced rates. By being able to reduce tariffs, banks will

attract customers away from competitors (Mas & Kumar, 2008).

Banks need to decide which communication channel, such as the SMS or USSD

platform, they want to use, bearing in mind the communication channel determines the speed,

reliability, cost and security of the mobile banking platform. Banks also need to decide on

encryption methods, as security is essential both for the bank and the customer. Furthermore,

the bank needs to design a user interface that is simple and easy to understand so that

customers can use the interface easily (Mas & Kumar, 2008).

For banks, the negative aspect of mobile banking is the outsourcing of many operations

to third-party agents. If an agent underperforms or robs a client, the bank’s reputation suffers

(Lyman et al., 2006). Moreover banks rely on the agents to report suspicious money-

laundering activities, but agents may not be trained enough to know what to look for.

2.6.2 Consumers

Connectivity problems are the greatest concern facing consumers. People need access

to a mobile phone in order to use mobile banking services. This financial constraint is limiting

for many potential mobile banking consumers.

Consumers find mobile banking very confusing when they first use it, if they have not

been previously exposed to the technology. The lack of banking and technical knowledge is

challenging for consumers to initially overcome in the adoption of mobile banking (Mas &

Kumar, 2008). However, the more frequently consumers use the application, the better they

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understand it and the higher it is valued. A survey conducted by the Consultative Group to

Assist the Poor (CGAP) with WIZZIT (South African mobile banking platform) users found

that non-users perceived mobile banking to be expensive and complicated (Ivatury & Pickens,

2006).

A lack of knowledge about banking, and in particular mobile banking, is a major

stumbling block for customers (Luarn & Lin, 2005). Financial literacy is a concern for

consumers, but Chung and Kwon (2009) found that mobile banking support and technical

assistance are associated with increased use. Although branchless banking seems an obvious

way to overcome the lack of formal banking infrastructure in developing countries, if banking

is too rare then financial literacy is insufficient for users to learn m-banking (Camner &

Sjöblom, 2009).

Mobile banking is not exempt from crime or without limitations and dangers.

Customers may not be aware of their rights when they interact with agents instead of directly

with banks (Lyman et al., 2006). Africans may also fall victim to cyber-attacks, which could

potentially destroy an entire family’s life savings (Goodman & Harris, 2010). MTN Uganda

has struggled with numerous cases of fraud with their agents (Wakefield, 2010) as well as a

lack of liquidity, resulting in agents being unable to pay customers when they arrive to collect

money. Criminals in Kenya are using the mobile money services to kidnap people and then

demand payment using the system (Semakula, 2010). However customers have few

alternatives, and mobile money is a significant improvement on the informal and traditional

banking services available (Mas & Morawczynski, 2009).

Many rural people are unable to afford the minimum balances required by banks.

Wilson, Harper and Griffith (2010) found that members of informal saving groups in Nairobi

are making use of M-PESA as a saving mechanism. Most mobile banking services do not

require consumers to hold a minimum balance.

Rural people trust the mobile money agents more than formal banks because they build

up a relationship with the agents when buying airtime. Ivatury and Pickens (2006) found that

users feel more relaxed if they have face-to-face assistance and instruction on how to use

mobile banking. The agents offer knowledge to the users on how to use the mobile banking

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system. Although mobile banking does make transferring money easier, customers can only

convert cash to e-money and e-money to cash when in the physical presence of an agent.

Ray (2007) affirms that mobile banking creates a more secure environment and helps

reduce market inefficiencies. Mobile banking enables consumers to access financial services

that they may not otherwise have had access to.

Mobile banking has the potential to enable growth and reduce poverty by expanding

the financial systems (Levine, 2005). However although mobile banking provides poor people

with access to banking facilities where previously they had none, most of the accounts provide

no interest and users still incur costs when making transactions. Aker and Mbiti (2010) argue

that economic growth will only result when the interest issue has been addressed; if the

consumer is not compensated for inflation (through interest), their savings will erode year after

year if left in a bank account and there may be no incentive to save.

2.6.3 Agents

Airtime resellers typically have no fixed costs and therefore have low operating costs.

They are used to handling cash and distribution, and so the adjustment to the mobile money

networks would not be too much of a challenge (Davidson & Leishman, 2010). Agents are

paid on a variable basis. The commissions have to be generous enough to encourage the agents

to invest in float, learn the relevant processes and to serve the mobile money customers.

2.6.4 Government

Electronic payments benefit governments because the e-payment systems offer a

substantial cost saving compared to printing money (Agarwal, Kaharpa, Menezes & Uchat,

2007). Furthermore mobile payments have been shown to reduce leakages and increase the

probability of payments being received by the correct person (Pickens, Porteous & Rotman,

2009).

The mobile banking system is appealing because it is a way of reducing market

inefficiencies and enabling a more secure market environment (Ray, 2007). However mobile

phones alone cannot be seen as the tool to bring millions of people out of poverty (De Silva &

Zainudeen, 2007).

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Nevertheless mobile banking leads to increased benefits both to the government and to

consumers: with a larger segment of the population being banked, the poverty levels will

decrease, tax collections will increase and consumption and GDP levels should increase

(Alvarez et al., 2009).

2.6.5 NGOs

NGOs typically struggle with sending money to intended recipients due to the low

levels of people with a bank account on the African continent. NGOs are a crucial component

of poverty alleviation, skills training and basic healthcare in Africa. However, without the

ability to easily to transfer money across large distances, NGOs struggle to direct their funds

to people in need (World Economic Forum, 2011).

NGOs acknowledge that mobile banking is the easiest way to extend their reach into

poor communities. Although not all people have access to mobile phones, phones are easily

shared in communities, whereas banks are hard for people to reach. The cost of transferring

payments and sending money is substantially reduced through the mobile banking system, and

consequently many NGOs are adopting the system for their day-to-day operations (Odell,

2011).

An example of one NGO using the mobile banking system is the mWomen programme

that was established by the Global System for Mobile Communication in October 2010.

Supported by the US Department of State and the US Agency for International Development,

the programme highlights the potential of mobile phones to improve women’s economic

status, and the health and the well-being of families (Fistulacare, 2010). Transfers are made to

women to pay for their transport to the hospital using mobile money.

The largest charitable organisation in the World – The Bill and Melinda Gates

Foundation - has been so encouraged by the future of mobile banking that they donated US$5

million in 2009 to further increase poor people’s access to bank accounts through mobile

banking (Muwanguzi & Musambira, 2009).

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One of the concerns that Aker and Mbiti (2010) raise about NGO mobile payment

transfers is the system has the potential to discriminate against users who do not own a mobile,

or money may be sent to the wrong people.

2.7 Current mobile banking trends in Africa

In South Africa the three main mobile banking companies are Wizzit, Nedbank/M-

PESA and MTN Mobile Money. All of the other banks are now actively starting to promote

their mobile banking. Wizzit uses ABSA Bank’s ATMs and Post Office branches for

withdrawals and deposits, whereas MTN and M-PESA are joint ventures with local banks.

Thus the South African model is different from that of Tanzania because it does not rely on

retail agents for the cashing in and out of accounts, but uses existing bank infrastructure and

follows the bank-led model (Lyman et al., 2006). In South Africa, many of the unbanked are

still without access to banking because formal identification is required to set up a bank

account (including branchless accounts) – an estimated 1.5 million people do not have any

form of identification. More than 75% of Wizzit’s customers already had a formal bank

account, indicating the unbanked population is not benefitting much from the mobile banking

in South Africa (McKay & Pickens, 2010).

In Kenya, Safaricom (the leading mobile operator in the country) established M-PESA.

Customers set up an M-PESA account, but the account is linked to the customer’s SIM in their

mobile phone. Safaricom has now developed M-KHESO, which is an interest-bearing savings

account and linked to the Equity Bank of Kenya, thereby giving customers access to the full

range of the bank’s products. Safaricom has also helped set up insurance policies for farmers

via M-PESA. M-PESA’s success is attributable to its strong branding and easy-to-use service

(Mas & Morawczynski, 2009). No minimum balance is required, deposits are free and

customers are now also able to withdraw from ATMs. Safaricom also forced the agents to sell

exclusively M-PESA and Safaricom products.

In Uganda, MTN’s Mobile Money has been highly successful, taking just 14 months to

yield a profit and to reach a customer base of 400,000 and growing. MTN has seen significant

benefits through the establishment of their mobile money platform, most notably an increase

of 12% in their gross profits as a result of selling airtime directly on the platform and not

having to pay agent commission. MTN’s success in Uganda is also due to their enabling of

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transfers to be sent across networks and unregistered recipients. MTN has found that transfers

from registered users to unregistered users are more lucrative than registered to registered

transfers. Not only has MTN increased the number of transactions across their network by

using this option, but they have structured the pricing so that the users pay more to send to

unregistered recipients, thus increasing MTN’s revenue (Davidson & Leishman, 2010).

An important trend is the move to enable all users to transact across networks and

banks. Nokia and Paypal are jointly investing in technology that will allow users to transact

regardless of network or bank. Nokia is the world’s largest mobile phone manufacturer, and

Paypal is an online payment processor. The potential for this joint venture is huge and could

deliver even greater benefits to consumers (McKay & Pickens, 2010). Visa recently purchased

Fundamo for US$110 million as part of their global expansion strategy. Fundamo originated in

South Africa and is a mobile financial services company with 50 different types of services

across 40 countries, of which 27 are in Africa. Even though Fundamo has only five million

registered users, Visa believes the number of users will increase to 180 million within a couple

of years. In addition to purchasing Fundamo, Visa also bought Monitise plc, which is a UK-

based mobile financial service company aimed at developing countries (“Visa acquires

Fundamo”, 2011).

Another example of a joint venture is the Mobile Banking Accord that Ethiopia’s

Commercial Bank recently signed with IBM. IBM gave the bank US$3 million for the

modernisation of the bank and to increase the customer base through mobile banking

(“Ethiopia’s Commercial Bank”, 2011).

2.8 Adoption of mobile banking in Tanzania

Until recently, communication was difficult in Tanzania, as the country is large with a

widely dispersed population of approximately 40 million (Camner & Sjöblom, 2009). Many of

the population still lives in rural areas, making access to financial institutions a problem.

Customers who live in more remote locations must travel to branches in bigger, distant towns

and then must queue, sometimes for a whole day, to transact at bank branches (Heyer & Mas,

2009). As there is a high level of unemployment in Tanzania, many people cannot afford to

waste several hours queuing just to withdraw or deposit money.

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Bank-to-bank transfers are free of charge in Tanzania, which is of little benefit as such

a limited section of the population has access to bank accounts. Therefore most of the

population resort to more expensive ways of transferring money. The money remittance

options that exist in Tanzania are very costly and come with a significant risk of theft

(International Finance Corporate [IFC], 2010). Examples include the money sent through bus

companies (McKay & Pickens, 2010).

Payments play an important role in enabling informal economic activity. The initial

uptake of mobile money from the rural retailers was strong, as they found it an easy method

for sending payments to urban wholesalers. Domestic remittances are common in Tanzania,

especially as a method of paying for schooling. Mobile banking has also enabled the

remittances from urban to rural areas to continue to develop (Heyer & Mas, 2009).

Traditionally, the most popular payment mechanism in Tanzania is through airtime

transfers, even though this practice is illegal. The sender buys prepaid airtime and transfers it

electronically to the recipient. The airtime is exchanged for cash by “cash-out” outlets. The

agents do not exchange the airtime voucher for the full amount of cash, as they charge a fee

for their service. The service is very expensive but highly convenient and has the added

benefit of not being restricted to one network. Although airtime transfers are not legal in

Tanzania they are very popular and are competing strongly with the mobile banking operations

within Tanzania (Heyer & Mas, 2009).

The development of prepaid airtime, coupled with the lack of a fixed-line telecoms

infrastructure, has led to the mobile phone expansion in Tanzania. Prepaid subscribers

represented 97.1% of subscribers in 2004 (Dutt, 2006). The MNOs have become the primary

telecommunication provider, as fixed-line communication is inaccessible to the vast majority

of the country (for both cost and infrastructure reasons), whereas mobile phones are easily

affordable and available. Vodafone estimates that, in rural Tanzania, mobile phone

connections cost around 50% less per connection than fixed lines, making it impossible for

fixed-line operators to compete with the lower costs offered by MNOs (Dutt, 2006).

Although Tanzania has one of the highest adoption rates of mobile banking worldwide,

there are concerns for its sustainability given the high periods of inactivity. Without

transactions taking place, the mobile banking system is unsustainable because the companies

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generate their revenue through the consumers’ transactions. Tanzania has underdeveloped

consumer protection legislation, and end users have low levels of empowerment because of

the limited credit information and high degree of corruption. Yet inefficiencies as a result of

misappropriated funds could be reduced in the government system by using mobile financial

services for payment disbursements (World Economic Forum, 2011). There is currently no

legislation for mobile banking in Tanzania, although the government is working on revising

the current banking laws (“Tanzania working”, 2011).

Five network providers currently operate in Tanzania: Tigo, Vodacom, Airtel,

Tanzania Telecommunication Company Limited (TTCL) and Zantel. Vodacom has a 45%

market share and is the leading mobile banking provider with M-PESA (Camner & Sjöblom,

2009).The increase in network providers, from only one in 1990, has resulted in dramatically

decreased costs for users and an increase in mobile penetration rates.

The implementation of mobile money in Tanzania faces many challenges, including

the lack of financial literacy (World Economic Forum, 2011). The majority of Tanzanian

people do not know what an ATM machine or a current account is, 54% don’t use any form of

financial services and only 9% have access to formal financial services (IFC, 2010). Mobile

banking has not had a large uptake by the unbanked population. For those who have used

mobile money before, 70% had had access to a bank account, only 18% were previously

unbanked, while the remainder had access to informal accounts (Bowen and Goldstein, 2010).

Furthermore, many people do not have national identification documents (IDs), which

makes mobile banking registration a lengthy process with numerous delays. One solution is to

use voter registration cards as an alternative to the national IDs. Under the money-laundering

laws, a further delay occurs when users want to transact above $1300, although this is unlikely

to affect the vast majority of the population (IFC, 2010). Fortunately the new know-your-

customer legislation that was passed in 2009 requires all mobile users to show a formal ID to

register their SIM. Thus, going forward users will find it easier to register for mobile banking

as they will already have the necessary documentation.

Mobile banking has already brought benefits to Tanzania, improving the ease with

which money can be transferred across the country. This has helped many families in

Tanzania, particularly as there is invariably one breadwinner for each family who sends

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money back to the family. The use of mobile money reduces the transportation cost, increases

the speed and improves the reliability for families. However the potential downside for many

families is that because of the ease of transferring money, they may not return home as

frequently as they would otherwise (Donner, 2007).

The new mobile payment system has the potential to revolutionise the savings amount

that Tanzania can generate, thereby helping strengthen Tanzania’s economic growth. It has

enabled users to save US$1 or US$2 at a time, when previously they were unable to save such

small amounts because of the costs involved of around 30 cents a deposit (Ripley, as cited in

Lewis, 2010).

The ability to effectively direct money to intended recipients is benefitting many social

programmes in Tanzania. For instance health organisations use mobile money to send money

to patients so they can pay for bus tickets from the rural areas to Dar es Salaam, the country’s

capital. As a result, the number of women being treated for fistula has dramatically increased.

CCBRT has also made use of these initiatives to provide free treatment to patients. Without

mobile money the organisations would not be able to treat so many women (Fistulacare,

2010).

A constraint for mobile banking in Tanzania is the limited agent network, especially

when compared with Kenya’s extensive network. This is because the business licensing

requirements imposed on agents include a licensing fee; the agent is also liable for tax, which

is not the case when operating informally (IFC, 2010). However agents who are able to deposit

and cash out mobile money have benefitted indirectly through the increased foot traffic to their

stores, where customers buy other miscellaneous items and airtime.

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2.9 Conclusion

The advances in technology, with mobiles evolving from communication devices to

effective tools to facilitate business and financial services, have caused mobile penetration in

Africa to surge. However while the number of mobile phone users has increased dramatically,

mobile banking has yet to attract the large proportion of the unbanked population.

It is clear that mobile banking presents an opportunity for all Tanzanians to access an

affordable savings account, but the lack of financial literacy and understanding poses a

problem. The fact that there is a high mobile penetration rate in Tanzania does not necessarily

translate into successful mobile banking. While the government and NGOs have demonstrated

increased interest in the service, there has been little uptake from the unbanked population

who are meant to benefit from this service. Mobile banking has been incredibly successful in

Kenya with M-PESA, but the two countries are very different and what works in one country

may not work in another.

Academics agree the uptake of mobile banking has been very disappointing in Africa

and has not matched the anticipated success. Ultimately the lack of infrastructure makes it

unlikely that bank branches and ATMs will reach all corners of the continent, and so mobile

banking seems the best solution to enable affordable and easy access to financial solutions to

all. Financial solutions benefit not only the individuals who are able to put money aside

regularly as savings, but also countries whose national savings rate increases.

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3 METHODOLOGY

3.1 Research approach and strategy

According to Leedy and Ormrod (2010), when little information exists on a topic and

when the variables are unknown, a qualitative approach is the best to use for determining what

is important. Qualitative data refers to all data that is non-numeric. Qualitative research

enables the researcher to gain an understanding about a particular phenomenon (Leedy &

Ormrod, 2010) and gives as clear and detailed account of actions as possible so that the

researcher can gain a better understanding of the world (Henning, van Rensburg &

Smit,2004). Qualitative research allows researchers to gain insight into a complex scenario

without forcing them to predict what those scenarios are (thus influencing the outcome of the

research) before the research commences (Denzin, 2000). The research followed the inductive

approach, as the research studied the mobile banking sector in Tanzania in depth (Terrblance,

Durrheim & Painter, 2006).

Due to the diverse and ever-changing information and communication technology

(ICT) sector in Africa, a case-study approach was used for evaluating the qualitative data.

Leedy and Ormrod (2010) find that a case study is useful for learning more about a poorly

understood situation. Yin (2009) suggests that case studies provide an easy way to understand

complex social phenomena. By using the case-study approach, the researcher was able to gain

a better understanding of the elements within the mobile banking sector in Tanzania. The

advantage of the case study as a method of research is the inclusion of a variety of evidence

such as interviews, observations and documents. However the disadvantage of case studies is

they are very specific, may not be generalised to other scenarios and can be influenced by the

researcher’s own personal biases (Yin).

A case study is “an empirical inquiry that investigates a contemporary phenomenon in

depth and within its real-life context” (Yin, 2009, p.18). Case studies are preferred when

“how” and “why” questions are asked; this research was based on a “why” topic and thus a

case study approach was used (Saunders, Lewis & Thornton, 2009).

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Figure 1: Research Process Followed Source: Adapted by author from Bryman and Bell (2007, p.406)

3.2 Data collection methods and research instruments

Data was collected by interviewing key stakeholders in the mobile money industry.

These were one-on-one semi-structured interviews, which were done face-to-face or, in the

case of geographic limitation, done telephonically. Elite people within the ICT, banking and

NGO sectors were chosen for the interviews. Welch, Marschan-Piekkari, Penttinen &

Tahvanainen (2002) define elite people as those who have a broad network, are senior or

middle management employees and have considerable industry experience.

Interviews allow interviewees to elaborate further than they otherwise could on a

questionnaire form (Leedy & Ormrod, 2010). Yin (2009) finds that interviews form the most

important source of case study information and, as such, they formed the basis of this research.

The interviews were used to provide deeper insight into the industry. Given the exploratory

nature of this research, the interviews were semi-structured using open questions rather than

closed questions, which allowed questions to be explored in more depth. Open questions are

based on predetermined themes and do not require a specific answer (Saunders et al., 2009).

The open questions gave the interviewees flexibility with how they interpreted and responded

and allowed the author latitude to ask further questions (Bryman & Bell, 2007). The

disadvantage of having used open questions, as opposed to closed ones, is the author needed to

Research Questions

Select Participants

Collection of data

Interpretation of data

Identify themes and categories

Findings and Conclusions

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code the data after the interview, which was time consuming (Bryman & Bell). Bryman and

Bell (2007, p.475) state that in semi-structured interviews “the emphasis must be on how the

interviewee frames and understands issues and events”. Careful attention was paid to selecting

the appropriate interview candidates and formulating the interview questions.

After the interviews, they were transcribed and analysed using coding. Connections

between categories and themes were used to deduce theories about the mobile money industry.

3.3 Sampling

Purposive sampling was used to select key informants (Bryman & Bell, 2007). Leedy

and Ormrod (2010) defined purposive sampling as choosing specific people or units for a

specific purpose. Eighteen people were interviewed to ensure the data is credible. The

candidates included existing stakeholders and potential stakeholders in the ICT industry in

Tanzania as well as other major players from the ICT business in Africa, certain NGOs and

MFIs from Tanzania that are using mobile payments, and people from the banking sector. The

candidates are industry specialists and provided their insight into the industry.

3.4 Research criteria

Saunders et al. (2009) points out four issues of using semi-structured interviews as a

data source: reliability, bias, validity and confirmability.

Reliability refers to the extent to which the data collection techniques yield the same

results if replicated by another researcher (Bryman & Bell, 2007). To meet the test of

reliability, the researcher ensured that all procedures followed and materials used during the

research were documented. The researcher found no environmental changes during the

duration of her trip to Tanzania and consequently no impact on the research was found to

exist.

For case study research, four tests should be used to assess the validity of the research

design, : construct validity, which identifies the appropriate operational measures for the

concepts being studied; internal validity, which seeks to establish a causal relationship;

external validity, which defines the domain to which a study’s findings can be generalised; and

reliability, which ensures that subsequent researchers studying the same topic and following

the same methods would reach the same conclusions (Yin, 2009).

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To meet the test of construct validity, a researcher must cover two steps: define the

concepts, and then identify measures which match the concepts (Yin, 2009). The concept for

the researcher’s project was to assess whether mobile banking has been successful in

Tanzania, and the measures used were interviews with people who have been involved in the

mobile money sector within Tanzania and in Africa.

Bryman and Bell (2009, p.411) affirm that research needs to comply with

“confirmability”, which means it needs to be confirmed by other people. The researcher

ensured neutrality during the data collection and analysis stages, and solicited the assistance of

another researcher to look for any errors.

Leedy and Ormrod (2010) highlight an additional criteria for research, namely that the

research needs to be repeatable. All attempts were taken to avoid bias in the data, and

consequently the research should be repeatable.

3.5 Data analysis methods

Once the data was gathered from the primary and secondary sources and the interviews

had been conducted, the next step was to conduct an analysis of the data. The transcribed

interviews and the detailed notes and observations all formed a critical component of the

analysed data. The data was first divided into segments and analysed to identify common

themes. This was done several times until the number of themes was reduced. Next the

interconnections were established between the themes to determine the conditions that give

rise to the theme and the context in which the theme is found. After reviewing and finalising

the interconnections, the themes and interconnections were combined to form a storyboard that

explained the research (Leedy & Ormond, 2010).

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4 RESEARCH FINDINGS, ANALYSIS AND DISCUSSION

The interviews gave an understanding of the mobile banking situation within Tanzania,

the various challenges that companies face to reach the unbanked population and the benefits

of using mobile banking. The research identified eight factors that affect the mobile money

industry in Tanzania: ease of use, safety, cost, awareness, education, the need for change

management, distribution and interoperability. The factors are described below and

summarised in Table 1 at the end of the chapter. The factors have been broken down and

classified into benefits and challenges to enable the opportunities and challenges to be

contrasted.

4.1 Benefits of Mobile Banking

4.1.1 Ease of use

All respondents felt that mobile banking has enhanced peoples’ ability to transact and

send money by transforming the ease with which money can be stored and sent. The

simplified user-interface that is designed for the mobile phones along with the ability to do

instantaneous transactions and to transact anywhere at any time are all reasons as to why

mobile money is perceived as being easy to use (van Rensburg, 2011).

The simplicity of the interface has enabled the user to adapt quickly to the new

technology and has thus been effective in building user adoption (Taylor, 2011). Designing a

simple user interface, which can be understood by people with no education is part of the

reason why mobile money has had a successful uptake throughout Kenya and other developing

countries (Rowlinson, 2011).

The current alternatives to mobile banking include storing money under a mattress or

sending money through airtime. Although these alternatives may not be the safest or cheapest

methods they are easy for the poorer people to understand and therefore, to attract users,

mobile money had to be simple and easy to use.

Using the interface is as simple as uploading airtime, a concept that is familiar to most

people in Tanzania. The straightforward interface allows people who previously had no

concept of banking to easily comprehend how to store and send money. The product has been

tested on uneducated, poor people to ensure that the interfaces are easily understood

(Hodgson, 2011). The successful designs of the interfaces have been pivotal in growing

penetration and increasing adoption in Tanzania.

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Mobile banking transfers reflect instantaneously in the recipient’s account whereas

traditional bank transfers take a minimum of 48 hours to reflect in another person’s account.

This feature of mobile money appeals to the poor because the poor want to know that when

they send their money that it gets where it is meant to go as poor people do not have the luxury

to wait for the money (Rowlinson, 2011). Mobile banking reduces a lot of stress for poor

people. People used to spend a couple days thinking about how they would send money to

rural areas but now they do not need to worry about finding ways of sending the money.

Furthermore an important feature of mobile banking is that users have the ability of

transacting from the comfort of their homes. This has meant that people no longer have to

spend many hours (up to a whole day) each month walking to get airtime or to send money

home via a bank. Typically sending money home for the migrant workers is a very time

consuming and costly process. Migrant workers work long hours and get limited breaks thus

they do not have the privilege of spending hours in a queue. Queues and travelling can be

avoided by simply using mobile money. Mobile banking has been embraced by urban workers

as it is a reliable, easy and safe way of sending money home (Twissa, 2011).

4.1.2 Safety

A driving factor in the adoption of mobile banking in rural Tanzania is that people

have an overwhelming trust that their money is safe (Taylor, 2011). As Tanzania is a cash-

based society, theft can be a problem. Traditionally people use informal saving devices such as

tin boxes, food sacks or their mattresses, all of which have no security barriers to protect them

from theft. Mobile money has offered people increased safety by eliminating the need to carry

and store large sums of cash, by having the accounts protected through a PIN and ensuring that

the technology is designed for simple phones. Additionally it allows organisations and

companies to easily monitor theft and ensure transparency through a simple reconciliation

process (Stratham, 2011).

Mobile banking is a much safer option for people to store their cash, as people can

carry their mobile wallet with them at all times and not worry about being a target of theft. If

the mobile phone gets stolen, the person will not lose their money (provided the PIN has not

been given to the thief). An additional benefit of mobile money is that people cannot see how

much money is on a mobile phone and so the user does not need to panic about people seeing

the cash (Stratham, 2011).

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Microfinance institutions (MFIs) such as BRAC struggle with theft from and safety of

their loan officers who distribute loan disbursements throughout the rural areas of Tanzania.

The high cost of distributing money to rural areas, makes mobile money a very appealing

proposition to many MFIs. Several regional managers have become hijack targets and victims

because BRAC has many extremely remote branches to which cash for borrowers needs to be

taken. The company lost over 500 million Tanzanian shillings (approximately US$280,000)

last year through theft and hijackings (Ahmed, 2011). Tujijenge Tanzania makes all loan

repayments via M-PESA compulsory for individual loans less than $1800, as they recognise

that it is a safer and easier way of making small loans (Stratham, 2011). Therefore mobile

money allows MFIs to safely transact money without being vulnerable to attacks. As a result

of reducing theft and operational inefficiencies, MFIs could increase their borrowing in

Tanzania.

Although criminals are able to steal money from a user’s mobile money account, theft

can only occur if the criminal knows the user’s PIN. Encouragingly rural people have

responded well to e-money because they are able to understand the concept of a PIN, which is

the most important concept for users in Tanzania, as mobile money is run off USSD platforms

that require the user to enter a PIN for authentication (van Rensburg, 2011). The MNOs have

been pro-active in training users not to share their PINs but some older people have entrusted

their pins to others and had money stolen from their accounts. Fortunately Vodacom has

reinstated accounts of people who had mistakenly given away their PINSs, as the MNO did

not want to risk the users losing trust in the product (Machunda, 2011).

Most of Tanzania uses simple phones, which are phones that cannot connect to the

internet, are the most secure phones and least likely to be hacked. Simple phones are much

safer than smart phones as the latter have had a lot of the logic removed from their operating

systems; the more logic removed from the firmware, the more opportunity for hacking by the

criminal. Simple phones are designed for a secure architecture, and so the rural user is more

protected than the wealthier user that has a smart phone.

In general, MFIs in Tanzania struggle with their reconciliations, as the transactions are

primarily cash based and, when cash is the basis of a transaction, opportunity is created for

corruption. Increased transparency can be achieved by using a mobile money platform to send

payments which can reduce fraud in transactions. Corruption is a well- known problem in

Tanzania, which is why it is encouraging that income tax can now be paid through a

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transparent system like e-money. The benefit of mobile banking is that it generates an audit

trail that is quick and easy to follow.

4.1.3 Cost

For consumers, mobile banking is not only a cheaper alternative to traditional banking

and other remittance methods but also a cheaper banking model for the banks. Banks avoid the

traditional fixed operating costs and, like the MNOs, are able to leverage their current

infrastructure to offer the service.

Mobile banking reduces substantially the cost, which typically (together with access) is

the major complaint of banking consumers. However, mobile banking addresses both of these

concerns. The NMB is trying to encourage customers to persuade their friends to set up NMB

accounts because, although customers can send money to a non-NMB account holder, the

person sending the money pays a large fee, whereas fees are negligible when sending money

between NMB accounts (Kassim, 2011).

Under the traditional remittance methods, individuals would pay a premium of up to

25% to send money (van Rensburg, 2011). With the advent of mobile banking, users no longer

need to send their money through risky and unreliable services that charge a high premium;

they can instead use mobile money. Although mobile banking charges approximately 1%, it is

by far the cheapest method of sending money. Some users are not aware that the cost of

mobile money is less than that of informal methods or worse being robbed.

Cash is a major problem for the banks because it is costly to manage. Banks do not

charge a fee to deposit money, only to withdraw cash. While banks recognise that mobile

money could potentially be a huge cost saving, at the same time they are cognisant that cash is

the traditional means of transacting within Tanzania and thus people will be reluctant to move

away from it (Kamwendo, 2011; Kassim, 2011).

The MNOs’ distribution system removes much of the cost from the traditional banking

model by simply using agents to cash-in and cash-out the e-money. Yet, although the mobile

money model is substantially cheaper than transacting through a bank, people in rural

Tanzania have limited money and many live below the poverty line. This means that any extra

cost is viewed with scepticism even though it is actually saving people money. BRAC believes

that although the cost of mobile money is substantially lower than other forms of transacting,

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it is still too high for the poorer person (Ahmed, 2011). Their borrowers do not want to bear

any costs to transact.

The MFI distribution model relies on frequent, direct contact with people in hard to

reach locations, which is very costly and time consuming. These costs can be dramatically

reduced by enabling the borrowers to transact through their mobile phones. The borrowers

also receive a cost benefit by paying through mobile money, as previously the MFI group

meetings would require the borrower to be away from their work or business for many hours.

This is because the counting of money is a lengthy process as there has been a problem in

Tanzania with fake bank notes so extra vigilance is required by the loan officers. There is now

more time to discuss actual business problems (Stratham, 2011).

4.2 Challenges with the adoption of mobile money

4.2.1 Building awareness

All of the MNOs felt the lack of awareness is a major bottleneck to achieving mobile

money success in rural Tanzania and increasing adoption among users. However, building

awareness is not as simple as putting up a billboard in every village in Tanzania; it is about

effective marketing campaigns, face-to-face promotions via field agents and word of mouth

(friends and family). Banks and MNOs may have different approaches and emphases to

building awareness, but they all agree on the importance of awareness for increasing the use of

mobile money (Taylor, 2011). Agents are the face of MNOs and thus a critical component in

building awareness.

Even though promotions are the backbone of building awareness, effective marketing

is needed for mobile money services to reach an economically viable scale. The MNOs’

objective is to persuade consumers to register and become regular users of mobile money

services. The first step in getting a consumer to use mobile banking is the awareness

campaign, which is followed by the knowledge phase during which field agents educate the

consumers (Hodgson, 2011).

The marketing approach taken in Tanzania appears to have been less aggressive than in

Kenya, with the MNOs and banks initially not fully recognising the huge potential of mobile

banking (Kamwendo, 2011). The less aggressive promotions when mobile banking first

launched in Tanzania has contributed to the awareness not being as high as it could be.

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The MNOs and banks have adapted their strategies to include radio, road shows and

giveaways. Print and television advertisements can be effective in attracting certain users, but

these consumers are a minority. Radio is the main medium in rural areas. However, as a

limited number of people have access to radio, road shows are a vital way to attract and inform

people. MNOs often use road shows with music, dance, drama, product demonstrations and

giveaways to spread the message about their products.

Road shows have been very successful in remote areas because the campaign teams

manage to gather a whole community with relative ease, as the local people are invariably

curious as to what the promotion is about. Campaign agents inform spectators at local football

matches of the upcoming promotions. The key to a successful road show is having enough

trained representatives to interact personally with potential customers and demonstrate the

product (Taylor, 2011; Hodgson, 2011). Vodacom has targeted women in some of their rural

road shows, as women are perceived to be the “thought-leaders in the community” (Taylor,

2011). To ensure that sufficient numbers of people attend, Vodacom tries to hold a road show

at the same time as a sporting event such as the University Games, which M-PESA sponsors,

or soccer events. Tigo has included social responsibility initiatives to attract the rural users, by

for instance offering free eye testing next to where they promote Tigo Pesa.

Promotions based on giveaways are also a very popular way of building awareness. M-

PESA’s “Recharge and Win” promotion, where customers who used M-PESA to top up their

airtime were entered into a draw to win prizes, generated substantial interest with users.

Similarly Tigo’s promotion strategy of giving away free minutes each time cash is transacted

or cashed out through Tigo Pesa has been very well received (James, 2011).

Agents are another form of promotion that is critical in building awareness, as they are

the main contact point with the potential users. MNOs have had to adjust their commission

strategies to encourage agents to sign up. However, although big commissions are first offered

to encourage agents to become agents, as the volumes of transactions increase the commission

will decrease. There is a lack of awareness from the user and the agent, as not all agents are

aware of how the commission structures work (Cosp, 2011).

MNOs have adjusted their promotions to focus on agents; an example of this is Airtel.

Recognising the importance of the agent network, Airtel focuses their promotion more on the

agent than on the consumer. Airtel believes that if agents are incentivised to sign up and join

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the system, they will promote the model themselves. The mobile money model does not work

without agents, and so agents are important for Airtel’s future success (Twissa, 2011).

Although direct promotions by MNOs and banks is the cornerstone of building

awareness, friends and family play an important role in educating new customers about mobile

money. It is particularly pronounced given the fact that remittances tend to be from one family

member to another. People trust family members and are more likely to use a product if a

family member tells them about it. The MNOs try to encourage a family member to get all of

his or her family signed up to a mobile money account as it is an easy way of securing brand

loyalty.

The interviewees showed that banks and MNOs have a very different approach to

promoting mobile money. The MNOs target the unbanked segment, which the banks do not

actively target. Unlike the MNOs, banks do not actively seek new customers, but prefer to let

the customers come to them. NMB is an example of a bank that has not tried to promote

mobile money to its customers. The branches were meant to be actively encouraging

customers to use NMB mobile, but did not because the staff’s Key Performance Indicators

(KPIs) had not been updated to include mobile banking. Therefore branch staff do not

currently consider promoting mobile banking to be part of their jobs. It is difficult for the

banks to build awareness of mobile banking if the employees are unwilling to promote it.

Taylor (2011) stated that what Vodacom has done in their M-PESA campaigns is to

place the emphasis on increasing awareness, focusing the marketing on the benefits the user

can receive from using mobile money. Since it first started, M-PESA has grown tremendously,

partly because “the brand now speaks for itself” (Goldstruck, 2011). M-PESA’s success in

Kenya has made people aware of the brand, which is synonymous with cash transfers and the

brand of choice for the majority of Tanzanians (Stratham, 2011). However, although people

are aware of the M-PESA brand, the majority are not aware of what the service offer is or how

to join the service because they learned about the brand through word of mouth and not

through direct interaction with the service

A real opportunity for MNOs lies in the agricultural sector where currently farmers

have limited awareness of the benefits of mobile money (Stratham, 2011). Farmers are

becoming the focal point for the MNOs promotions, as farming organisations are structured

and have a need for mobile money because of the large sums of cash they need to distribute

over vast distances (Twissa, 2011). The MNOs need to create a strong value proposition to

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convince the farmers. MNOs have opted to become part of the agricultural Savings and Credit

Cooperative’s (SACCOs) events because, although recognising the huge potential, they

acknowledge that farmers cannot be forced to use mobile money. The SACCOs represent

large numbers of farmers who, if they signed on collectively, could bring in billions of extra

revenue for MNOs. “We have just scratched the surface in the agricultural areas” (Kelvin

Twissa, 2011).

MNOs such as Tigo have not tailored their promotions to specific areas because they

want to achieve economies of scale with the promotions (Cosp, 2011). Making special

advertisements for each area would be a very costly process, increasing their mobile money

rates, which would defeat the purpose. Despite not tailoring their promotions to specific areas,

MNOs are adjusting their target market. Tigo has historically focused on the youth, but are

now targeting older customers who have money and appreciate the benefits of using a product

such as Tigo Pesa.

The MNOs have all placed different emphasis on promotion. Airtel has not been

aggressive with its money promotions, as it is about to re-launch and believes a certain

adoption rate will occur naturally without any promotions (Twissa, 2011). Instead Airtel wants

to increase the promotions when the uptake starts to slow. Conversely, as the last MNO to

launch their mobile money platform, Tigo has been very aggressive with their promotions in

order to build awareness and brand loyalty. Even though it launched only a year ago in

Tanzania, more than two years after M-PESA, Tigo Pesa has managed to achieve phenomenal

growth, indicating the huge potential for mobile money (Hodgson, 2011).

Another variation in promotion techniques is the one used by Vodacom. Vodacom

changed their awareness campaigns to be above the line, to communicate the benefits of the

product, combined with intensive agent training and more resources allocated to field

marketing. The change in their promotion has helped increase awareness, but a gap still exists

between awareness of the brand and awareness of how to use mobile money (Taylor, 2011).

4.2.2 Education

Very closely linked to awareness is education, and the one cannot be discussed without

mentioning the other. Educating potential users is a challenge for the banks and MNOs, as

many of the rural and unbanked people struggle to understand the benefits that mobile money

offers. Without a comprehension and appreciation of the benefits, banks and MNOs find it

hard to convince people to sign up. “The worst part of Tanzania is that people are not very

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prone to technology” (Ahmed, 2011). There is a definite reluctance from some people to

embrace mobile money as they don’t understand the technology, but with the education comes

awareness. Education is carried out by agents on behalf of the MNOs, with MFIs providing an

additional source of education to their members.

Mobile banking is a completely different product from the traditional services sold

through the MNOs such as voice calls and SMS. Therefore, customers and the public need to

be educated differently to ensure they understand the usefulness of the product. The MNOs

first need to convince the customer to join Tigo, Vodacom, Zantel or Airtel; only thereafter

can they try to sell them the mobile money (Rowlinson, 2011).

Although there is still a long way to go in terms of consumer education, Vodacom has

made the process considerably easier through its extensive campaigns (Hodgson, 2011).

MNOs are leading the education of consumers in mobile money through their various

promotional techniques, such as using their field agents to inform and educate consumers

about the benefits. On the downside the agents, who are often the face of the MNO, sometimes

fail to deal adequately with issues such as network failure in a way that leaves the customers at

ease. Agents are given training manuals and taken on intensive training courses to ensure they

fully understand the product but even this does not guarantee that they will correctly inform

the users.

Unlike MNOs, MFIs educate their borrowers through weekly meetings held across the

country. The meetings are a way of interacting with and informing the borrowers about the

benefits of mobile money. The meetings form a crucial component of the MFIs’ education

strategy as the organisations feel their members are sufficiently educated about mobile money

(Ahmed, 2011).

Several MFIs have found that awareness and training is a big limitation to customers’

adoption of mobile money. Time over and above a normal meeting time has to be allocated to

training members about the functionality of mobile banking. Time is invested in training

borrowers and creating informational pamphlets with simple language, as the literacy levels in

Tanzania are very low. Time is also spent explaining and facilitating the e-money transactions

on behalf of the borrowers as the awareness was not sufficient (Stratham, 2011). The low

levels of education, and general belief that mobile money is more complicated than it really is,

have allowed entrepreneurial people to take advantage of un-informed people. For example,

certain people in rural areas are able to charge a premium for paying other peoples’ electricity

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bills through mobile money, which is a simple-to-process service that should not merit a

premium. People’s ignorance is being taken advantage of, primarily as a result of limited

education about using the mobile money services. Increased education is essential to

encourage users they do not need to pay a premium to get the benefits of the service (Twissa,

2011).

4.2.3 The need for change management

The process of adapting mobile banking can be a complex one, particularly as

organisations have built their entire operations around cash management. Changing to mobile

banking is not a quick process and requires careful internal change management that can be

daunting and complex to oversee. The challenge of migrating systems is a major obstacle to

the MFIs and organisations embracing mobile banking.

Mobile money is still a very new concept and requires a completely different way of

thinking. Organisations have a natural reluctance to change, which is why consultants are

frequently needed to help facilitate change. MFIs cannot change without buy in from the board

of directors and managers, which is often a lengthy process. The whole change process can

take about two years from start to conclusion as lots of readjustments have to take place

(Ahmed, 2011).

MNOs do not have the experience in understanding how MFIs are structured and run,

which makes it difficult for them to tailor a sufficiently appealing product offering to the

MFIs. The MNOs believe they are providing a platform and a service, which the MFI can just

easily link to. They do not appreciate that the MFIs have been sustainable for many years prior

to mobile money and are not going to simply move in this direction just because it is available.

The MNOs are unable to offer the support for the change management process for the MFIs;

instead consultants are offering this support. The MFIs need guidance on how to change their

internal systems, what problems to expect, how to ensure sufficient agents are available and

how to educate their staff and borrowers. Without this guidance there is reluctance to adopt

mobile banking (Stratham, 2011).

The challenge facing MFIs is that their staff are used to operating with cash, and

switching to e-money requires a new reconciliation process and IT system, which is different

from the normal book entry systems. Consequently a change management process needs to be

undertaken within the organisations. For example, BRAC recognises the value in mobile

money, but migrating to a new system is a very long and challenging process (Ahmed, 2011).

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Therefore, the organisation wants as much support as possible from the MNOs before being

willing to contemplate implementing the mobile money system.

4.2.4 Distribution

A proper distribution strategy is the most vital component of a successful mobile

money deployment (van Rensburg, 2011). Companies that have had limited mobile money

success or failed, have done so because of insufficient distribution. The current mobile money

distribution network within Tanzania is not fully optimised, with the MNOs and banks relying

on their current footprints to expand their mobile money networks.

Distribution involves not only ensuring that mobile money is readily available in all

geographic locations throughout Tanzania, but also building relationships and managing

people to ensure that agents have sufficient cash float to meet the demands of the consumers.

The distribution of mobile money centres must be built around a strong agent network that can

be responsive to users’ needs. What is critical and difficult is to make sure that the agents in

the remote areas are well supported and can easily access virtual cash. The distribution

strategies employed by the various MNOs and banks vary and so to do the results.

The biggest obstacle is the lack of geographical penetration. Most of the country’s

population is scattered throughout inaccessible rural areas where banks do not have a large

footprint. Furthermore, mobile phones have only a 47% penetration rate. Although high

considering the per capita GDP of Tanzania, the fact that just over 50% of the population does

not have access to mobile phones poses challenges for growing mobile money.

The distribution channels could be significantly improved if they were expanded to

include retail outlets. Currently Tanzania has approximately 500 ATMs across the country and

over 200,000 retail outlets. Of these outlets, 50% sell GSM products and the vast majority are

found in rural areas. Expanding the current distribution channels to include retail outlets will

not only be cost effective but also benefit the outlets and consumers by making mobile money

more accessible (Twissa, 2011).

MNOs use agent aggregators to manage the agent network distribution channel.

Aggregators are people that are appointed by the MNOs to oversee and manage regions of

agents. The aggregators play an important role in ensuring that agents’ cash float levels are

sufficiently maintained. To manage the agent network, the MNOs use aggregators, as it is

easier for the MNOs to manage several aggregators than 10,000 individual agents.

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Aggregators help agents manage cash liquidity problems (Hodgson, 2011), as although

agents generally only operate in areas where there is a bank within a reasonable distance,

liquidity problems can arise. Agents situated in busy rural areas can run out of cash if they

don’t actively manage their float because most people in rural areas choose to cash-out their

mobile money rather than leaving it on their mobile wallets. If the agents are not close to a

bank, managing their cash floats can be challenging. If the agent has insufficient cash float, it

reflects badly on the agent and the MNO.

MNOs struggle to have an even distribution of agents throughout the country. If they

have too many agents, the agents fight with each other and the model becomes unsustainable.

MNOs not only need to ensure equal distribution but also must be careful about not expanding

too quickly because of the pressure that the increase in transactions put on the MNOs mobile

money platforms. Vodacom is one example of an MNO struggling to balance growth with

platform performance (Taylor, 2011).

Vodacom’s agent network is continuing to grow each month; however the growth in

M-PESA transactions has placed immense pressure on Vodacom’s mobile money platform.

The platform has had technical difficulties resulting in it crashing for an hour or two at a time,

which means that no e-money can be loaded or cashed out during these periods. Individuals

and organisations struggle when the platform is down, as they are unable to transact, a

problem that did not exist with cash. The limitations to the platform have meant that Vodacom

has not been as aggressive with increasing their distribution as they otherwise would have

been. However, Vodacom claims that a new platform will be ready imminently (Taylor, 2011).

The MNOs have all adopted different distribution strategies. Thanks to its

understanding of the economy and distribution demands of the company, Vodacom has the

largest market share in mobile money within Tanzania (Taylor, 2011). Vodacom focuses its

distribution strategy on the money corridors, or the areas where the money is and where the

money moves to.

In contrast, Airtel (the first company to launch mobile money) had a flawed

distribution system in terms of the commission structure they offered for the retailers – it was

open market. The cost to cash-in or cash-out was market driven: the fee was higher when there

was a shortage of cash and lower with a surplus of cash (Twissa, 2011). Airtel has since

changed its distribution strategy and added a fixed commission structure. They now target the

trade areas within communities, based on the theory that even people who live in mountainous

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areas will need eventually to come and trade. This has resulted in an improved penetration,

though they still lag M-PESA. Tigo has built their strategy around the big cities and coastal

areas and, while they have approximately 10,000 agents, their distribution in the rural areas is

weak (Hodgson, 2011).

As mentioned earlier, the MNOS have begun working with SACCOs and MFIs to

extend their reach into the rural areas. They recognise that the agricultural SACCOs and MFIs

have a tried and tested sustainable model, which has been built over many years. For instance,

BRAC has 112 branches across the country, of which 25 are located in remote areas not

serviced by banks

Like MNOs, banks have long struggled with growing their footprints within Tanzania

but are now recognising potential for reaching rural areas without the need for brick and

mortar branches. The move is for branch distribution to become more like a hub, decreasing

the number of branches to allow for greater cost efficiency. Banks also do not need to maintain

their traditional distribution structures, but can follow an agent distribution structure in the

rural areas (van Rensburg, 2011).

4.2.5 Interoperability

The limited interoperability among the networks, retail agents and banks is a major

obstacle to the wide spread adoption of mobile banking. This is primarily the result of the lack

of trust that exists between the banks and MNOs and the unwillingness to cooperate. The lack

of interoperability is constraining the market and making it difficult for individuals and

organisations to transact. Only a few places accept mobile money as a means of payment. For

instance, currently e-money cannot be sent from one service provider to another service

provider in Tanzania, for example from M-PESA to Tigo Pesa. E-money can only be sent M-

PESA to M-PESA or Tigo Pesa to Tigo Pesa. This limitation means that if the recipient of the

money does not have the same account, they will have to set up an account or only be allowed

one-time cash-out option at a higher premium (Hodgson, 2011).

As the current system does not allow for interoperability between the banks and service

providers, it is very challenging for organisations to set up their internal systems. MFIs have

expressed frustration with the current system, as they are not prepared to force their borrowers

to have a certain SIM. To integrate all the payment systems into one system is a hugely costly

process and too complex for NGOs and microfinance organisations to comprehend. Yet, as the

case of Kenya has shown, interoperability is possible.

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A large part of the success of mobile banking in Kenya has been the interoperability

that exists between Equity Bank and M-PESA, and the increased functionality that it offers the

user. Equity Bank in Kenya managed to “change the way it viewed the market” by accepting

that a traditional banking approach would not succeed in attracting the unbanked population.

Equity Bank saw the potential for the partnership with Safaricom and was open to the idea of

cooperating with an MNO. Consequently the M-KESHO savings account in Kenya has now

become hugely successful (van Rensburg, 2011).

The situation in Tanzania is very different to that in Kenya, where Safaricom had over

75% market share and was able to dictate terms to the vendors and the marketplace when

launching M-PESA. In Tanzania, the market is more liberalised and fragmented. Therefore,

operators in the market are going to need to cooperate. “At the moment it is very cumbersome,

you have to use an agent to cash out to send to a different provider. It should be ‘what’s your

number?’ They send you money and you receive it” (Hodgson, 2011).

An additional problem with the limited interoperability is that the places where people

can use mobile money are limited. Currently, mobile money only works as a remittance

system: the money needs to be cashed in or out repeatedly, at a charge. Although widely

acknowledged to be a safer system, people do not want to have to repeatedly take their money

out of the system, as the costs are very high for the rural person (Ahmed, 2011).

The MNOs believe the banks view them as a threat, which is why the two sectors are

not yet cooperating. “The banks are saying that they want a piece of that but they are not sure

how much risk they are willing to take, they want a piece of the business but they don’t want

to compromise their existing business”( Hodgson, 2011). Most banks have been slow to adapt

to mobile banking, but this changed with the launch of M-PESA. Banks became more aware

of what mobile money could do for them. However, at the same time, the banks are not

actively trying to link up with any MNOs as they fear cannibalising their own products.

The MNOs have repeatedly urged the banks to interface with them, but the banks have

shown no interest. There is a lack of trust between the banks and mobile network operators,

“everyone is trying to figure out how to crack the market”, but without any emphasis on

collaboration, although this will become inevitable (Kamwendo, 2011). There could be a lot of

cooperation if the banks facilitated the entry and exit of the virtual money to the actual

currency, for example if you could transfer from your bank account to your Tigo Pesa account.

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Banks are in a position where they would like to play in the mobile money space, but they

cannot accommodate the resulting volume of people through the banking world.

Nevertheless, as in Kenya, interoperability is likely soon in Tanzania. “This phase is

land grab until growth is stagnant then the real value of mobile money will be unlocked” (van

Rensburg, 2011). The relatively high number of active mobile financial service deployments

in Tanzania makes interoperability an important goal. The overwhelming need for better

cooperation in the market is being driven by the Bill and Melinda Gates Foundation. Although

mobile money has been successful thus far in Tanzania, it is not as successful as it could be,

which is partly the result of the competitive behaviour of the numerous players.

4.3 Penetration of mobile money

To date the response to mobile banking has been prodigious. The numbers of rural

customers keep growing, with a large movement of money from the urban to the rural areas.

The growth in the rural is higher than urban areas because, although the average growth rate

per outlet is almost the same, rural areas have more outlets and therefore collectively more

new users (Twissa, 2011).

MNOs are trying to launch mobile money as another way of successfully tying a

customer to a network, which can reduce the churn from 30% to 5%. It is not an overnight

adoption process, but a “long-haul approach” and patience is required (Taylor, 2011). Even

though mobile money is widely recognised as adding value to many unbanked people, a large

percentage of the MNO subscriber base do not use any of the value-added services (such as

SMS) let alone mobile money. Despite the fact that “it is a quantum leap even in a first world

environment” (Cosp, 2011), the success has been phenomenal within a short period of time.

The growth in the mobile money industry is evident from the value of daily

transactions and the number of agents. Penetration within Tanzania is about 20% and

increasing month-to- month, and the number of agents is doubling each year. Vodacom’s

penetration is around 31%, trailed by Tigo at 20% and Airtel at slightly less than 5%. Daily

transactions are 700 million Tanzanian shillings (approximately US$ 400,000) for Tigo Pesa

and about 3–4 billion Tanzanian shillings (approximately US$ 2.2 million) for M-PESA. M-

PESA recently reached the US$1 billion mark for transactions since launching.

Although Ahmed (2011) recognises the huge potential for BRAC, the process of

rolling out mobile money will be slow because only 42% of BRAC’s borrowers have mobile

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phones. Those who do not have a phone cannot afford to take out a loan to buy a phone.

Currently, the 3–4% of BRAC’s 115 000 borrowers who use mobile money are the more

economically active people who have businesses in the semi urban areas. Thus BRAC has not

seen a high uptake to date in the rural areas as is described by Vodacom.

Banks have found the adoption to e-money quite slow, with mainly the young and

trendy clients opting to use the service. Despite this NMB has managed to increase the number

of NMB mobile customers by 300,000 this year (Kassim, 2011).

4.4 Analysis and Discussion

The findings suggest that “distribution” acts as the biggest inhibitor to adoption of

mobile money in Tanzania, specifically the distribution of the mobile money agents.

Education is also a challenge for the banks and MNOs, although it has improved significantly.

While the MFIs and NGOs clearly recognise the benefits of mobile money, the usefulness is

meaningless without a sufficient distribution network.

Although the mobile banking user interfaces have been designed to be simple, the

MNOs and banks also need to understand the customer and ensure that the system caters to the

needs of the user. MNOs must build consumer understanding by communicating how mobile

money is useful through showing that it allows for increased safety. People are not always

motivated to use something just because it is easy to use.

Most of the MFIs are planning to set up mobile banking, but to date very few have

actually managed to implement the process. Network coverage is not a problem for MFIs, as

Airtel and Vodacom both have really good penetration and coverage throughout the country.

Although mobile money is undoubtedly a cheaper way of sending money, both MFIs and

individuals are constrained by the fact that no transaction can exceed two million shillings;

this means that multiple transactions have to be performed instead of only one transaction.

Innovations in mobile banking products are continually aimed at increasing the

consumer’s perceived ease of use. Even though some of the recent innovations by the MNOs

and banks, gives the user the ability to pay their electricity, water, television and tax bills all

through their mobile banking accounts, these innovations are likely to only impact the

wealthier urban user. Yet, as Twissa (2011) notes, urban areas are the first focal point that

need to be targeted because most of the money moves from the urban to the rural areas and

one urban person supports an average of four rural people. Moreover if urban users can be

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attracted to use mobile money because of convenient services then hopefully they will also use

it to send money home, thereby attracting four more members to the services.

Mobile banking is not only a simple and easy-to-use process that promotes financial

inclusion but also helps improve the quality of peoples’ lives. An example of a successful

mobile health initiative is the CCBRT hospital, which has been able to double the number of

cleft and fistula patients it treats every year (from 300 to 600) because of the mobile money

system. CCBRT realised that the biggest obstacle to patients seeking treatment was

transportation and thus, with the help of the Bill and Melinda Gates Foundation and M-PESA,

set up an M-PESA account that sends money to cleft and fistula patients in need of treatment.

Banks and MNOs need to analyse consumers’ current practices so that they can offer

products and services that fit into existing behaviours. The key is to follow the money,

understand what it is used for, how it is stored, and to build on what people want through new

product innovations. By understanding the consumers’ unmet needs, companies can gain

insights that will drive product ideas. Innovative products include the potential for e-money to

be used across borders by MFIs and individuals as an alternative to Western Union which is

currently not the case. In addition, Tanzania could have an uptake of smaller, much more

usable insurance products; similar to those now available in Kenya through M-PESA.

Furthermore there is limitless potential for farmers to increase their yields through innovative

mobile money products such as insurance, seed crop loans and forward selling of crops.

For the market space to continue to evolve, interconnections must be established

between banks and MNOs. Banks and MNOs are very untrusting of each other and, although

the banks have not responded aggressively to the mobile money launch, they are refusing to

cooperate with the MNOs as they are fearful of cannibalising their own business. The lack of

interoperability between the banks and MNOs is frustrating for all of the organisations and

NGOs, as currently the systems cannot be integrated and mobile money is only accepted in a

few places.

The MFIs and NGOs all recognise the value that mobile banking represents, however

they are discouraged by the limited interoperability as it makes setting up their systems highly

complicated and expensive. It is expected that going forward the market will evolve to allow

for greater cooperation and acceptance of mobile money as this will facilitate a win-win deal

for all parties involved.

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Road shows are an effective way of building awareness in rural communities,

gathering large crowds and informing them face-to-face about the benefits of mobile banking.

Billboards and radio alone do not attract the rural customers to use mobile money, direct

communication through field agents and event staff are the most popular way of gaining

awareness.

It appears that the MNOs have recognised the value of targeting the agricultural

SACCOs and are focusing their efforts more on the rural areas, as penetration in the urban

areas is nearly 100%. Representatives from the MNOs all commented that their agent

networks are growing at an optimum rate to ensure that the agents are sustainable. The number

of agents has doubled each year and is expected to continue to do so for the coming years. It is

essential that agents give a good level of customer service because a frustrated or annoyed

agent could give the MNOs a bad image.

Ultimately the drive is going to come from the MFIs as they have face to face contact

with the rural communities. The MNOs have contact with rural people but it is through the

mobile phone, not a face to face dealing. The danger is that mobile money could undermine

the human relationships that are built in microfinance.

The MNOs plan on actively bringing the MFIs onto their mobile money platforms, but

they cannot go and recruit them when the platforms are struggling to stay alive. The MNOs

see tremendous growth in this area of their business and are very excited by the prospects.

“For us the product gets exciting if we can stop cash entering and exiting the system so that it

is maintained and circulated” (Hodgson, 2011).

Despite Morawczynski (2007) highlighting the risk of banks losing customers to

mobile money models, the banks interviewed in this research do not believe they would lose

customers to any of the mobile money platforms. Porteous (2007) explained that banks need to

spend time explaining to their customers the benefits of mobile banking if the banks want to

achieve an uptake in the services. Unfortunately, due to NMB not properly informing its

branch staff of NMB mobile and the implications that it would have for the branch staffs’

KPIs, NMB mobile has been unable to promote this service to its customers and therefore is

not actually getting the uptake that it should be.

Banks have not tried to promote their mobile money services throughout the unbanked

population as a way of increasing their subscriber base. This goes against Ivatury and Mas

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(2008), who stated that one of the main motivators for banks to set up a mobile banking

platform is to increase its subscriber base, particularly among the poor.

FNB’s (a South African bank) mobile wallet is an example of how a bank has

successfully made use and benefitted from the mobile channel. One of the reasons that FNB’s

mobile wallet has been successful is because they recognised the potential of mobile for their

business and consequently actively promoted it to their customers. This has not been the case

in Tanzania.

Mobile banking is available to all people who own a SIM card and is a far more

financially inclusive system than the traditional banking models, which only have a 14%

penetration rate. This is in comparison to the mobile phone penetration rate of 42% which is

growing each year. The market is very liberalised and fragmented and consequently

cooperation is needed to achieve maximum growth. Unlike Kenya, Tanzania has four MNOs

that are driving growth and thus potentially could grow faster than Kenya in the coming years.

Although the literature emphasised the increase in the number of subscribers that the

banks and MNOs should register from launching mobile banking, the reality has proved to be

somewhat different. Only Vodacom M-PESA commented that they feel that some of the

increase in their subscribers could be attributed to M-PESA, all of the other MNOs and banks

interviewed agreed that as of yet the mobile money platforms have not contributed to an

increase in their subscriber numbers.

The overwhelming response both in the literature and from the interviewees is that

mobile money is benefitting the poor in Tanzania but that it is not having the impact that it

could be. The interviewees seem to believe the market will evolve to become more

cooperative once the stakeholders have finished vying for market share.

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Table 1 Factors affecting the adoption of mobile money

Factor Contributing items Effect on adoption

Distribution Lack of agents to cash-in

or cash-out

Agents have float

problems

Negative

Interoperability You cannot send from

Tigo Pesa to M-PESA

Mobile money is not

accepted as a form of

payment is many places

Negative

Education Agents educate users

about the product.

Positive

Awareness Road shows

Give-aways

Positive

Change Management MFIs and NGOs need to

completely adapt all of

their processes before

mobile money can be

implemented

Negative

Ease of use Instantaneous

Simple user-interface Positive

Safety Cash cannot be stolen Positive

Cost Cheaper than bank

accounts and

Saves time in queues

Positive

Source: Author, 2011

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5 RESEARCH LIMITATIONS

Due to the time allocation and nature of research conducted, the research is limited to

the opinions expressed by the respondents interviewed. The researcher has used the data from

the interviews to make generalisations about the market that are likely not to apply to every

individual. The generalisations that have been drawn are the most important in the opinion of

the researcher.

Research was restricted to mobile banking in Tanzania, thus case generalisations and

assumptions cannot be made about the operations in other countries globally. The researcher

was restricted to ten days in Tanzania, so only a limited number of people were interviewed.

The research also had its limitations as to the amount of information provided by some of the

interviewees regarding mobile money distribution.

The study viewed the challenges facing stakeholders in adoption of rural users of

mobile banking. Further research could look at conducting a more thorough study that would

look at a specific company or organisation and its strategy for increasing mobile banking users

in rural Tanzania.

In addition not all MNOs and banks that use mobile banking in Tanzania were

interviewed for this research. As the research was obtained through interviews, there is a

chance that the data may be biased by the interviewees’ biases. No unbanked people were

interviewed as part of the research and thus the views of the stakeholders may not be

representative of the unbanked. The time constraints and inaccessibility of rural areas were a

major factor in deciding to limit the research to industry experts rather than the unbanked

users.

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6 CONCLUSION

The purpose of this research was to conduct an exploratory investigation to evaluate

the adoption of mobile banking among the unbanked segment of the population, focusing on

the challenges and benefits of mobile banking. In particular the research looked at three MNOs

in Tanzania, as well as several banks, NGOS, MFIs and other industry experts. The research

endeavoured to understand how specific industry challenges and benefits shaped peoples’

decisions to use mobile money. The literature review was used as a basis for forming the

questionnaire to identify the obstacles and benefits to mobile money being adopted by the

unbanked segment of the population.

Interviews with stakeholders revealed the industry was facing a number of challenges

in attracting the unbanked population. The main challenges are awareness, education,

distribution, the need for change management and interoperability.

Generating awareness for the mobile banking products is a major challenge for the

MNOs and banks. Mobile money is aimed at the unbanked and banked populations and

requires promotional campaigns that are accessible to all people. Rural people do not

necessarily have access to television, radio or billboard advertisements, so road shows have to

be rolled out that target events such as soccer games and allow the potential customer to be

directly informed about the product.

The road shows have proved to be an effective way of promoting mobile banking

within rural areas. Similar promotional activities should be applied in other developing

countries as they are a way of using face-to-face education and building brand awareness.

Mobile banking is a completely different product to the traditional ones sold through

the MNOs or banks. It is essential for people to be educated about the benefits of mobile

money because without understanding the benefits, they are unlikely to use the product.

Education is not something that will happen overnight but will continue to increase,

provided agents are trained properly to facilitate consumer education. Raising awareness is the

biggest battle in convincing consumers to use mobile banking but as more people use it they

will inform their friends and relatives of the benefits.

The distribution of the agent network is difficult for MNOs, as most of the population

is scattered in difficult-to-reach rural areas. The MNOs are aware that agents are pivotal to

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increasing mobile banking, but are also conscious of the fact that they have to grow the agent

network at a sustainable rate. This is because if the agents do not get enough commissions,

they will eventually lose interest, which will be detrimental to the MNO’s brand. Agent

aggregators are used to assist the many agents who are not situated near a bank and so may

have difficultly managing their float. For many MNOs, particularly Tigo and Vodacom, the

expansion of their distribution channels has also been limited by their struggle to establish a

stable mobile money platform that does not crash when volumes increase.

The MNOs are gradually recognising that MFIs and SACCOs have a much greater

reach in the rural areas then they do and consequently are trying to team up with organisations

to promote mobile money. This is proving a challenge as many of the organisations are

reluctant to undergo change. MFIs are daunted by the thought of having to undergo an internal

change management process without the support of the MNOs. The limited interoperability

among banks, retailers and MNOs makes it challenging for individuals to send money, as they

have to ensure the recipient has the same mobile money account as they do. Mobile money is

not accepted in many places and thus people have to continually cash out if they want to buy

items such as food. Cashing out incurs a fee each time and requires the user to visit an agent,

which is viewed as an unnecessary transaction and waste of time. Many rural people do not

see the need to use mobile money because of its limited acceptance by retailers. Moreover the

banks and MNOs are not trusting of each other’s business and as a result there has been no

agreement reached on cooperation.

The benefits that were highlighted by the research are: ease of use, safety and cost.

The mobile money system is quick and easy to use. The user interface is designed for

people with no education and is very simplistic and easy to understand. People can send

money from the comfort of their home without having to travel and stand in long queues at

banks, or pay substantial premiums for using traditional remittance methods such as reselling

airtime or bus transfers. Unlike traditional banking transfers, which takes over 48 hours, the

mobile money transfers are instantaneous. This is essential for people living close to or below

the poverty line.

Any emerging market contemplating launching a mobile money platform must ensure

the devices are easy to use and that there is a demand for the product. As mobile phone usage

expands, so will the opportunities to bank the unbanked. Mobile money saves people from

using their scare time and resources to travel to distant bank branches. Mobile money also

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represents a real opportunity for developing countries to increase financial inclusion, as more

people have mobile phones than bank accounts in the developing world. Part of the reason

why M-PESA has not been as successful in South Africa is because over 60% of the

population is banked and so the need is not as great as it is in Tanzania where only 14% have

bank accounts. Understanding the customer value proposition is fundamental to achieving

success.

Mobile money is a safe way of storing cash. Even if a person loses or has their phone

stolen, the money is still safely stored in the account. Previously people would carry large

sums of cash with them. With mobile money, no one is able to see how much money they are

carrying. Theft is a big problem in Tanzania because of the economy being cash- based.

However mobile money enables organisations and individuals to safely send cash across the

country.

Lastly, mobile money is the most affordable way of transacting and transferring money

within Tanzania. The informal remittance transfers charge a premium of up to 25% to send the

money, which is a lot of money for most Tanzanians. The transaction cost for mobile money is

around 1% of the value, which is significantly less than alternative methods.

However, although mobile money definitely represents a cost-saving cash transfer

system, it is not all that simple for companies, MFIs and NGOs to switch from cash to e-

money. MNOs need to accept that it is not straightforward for organisations to switch across.

In fact it would be more appealing for organisations to adopt mobile money if the banks or

MNOs assisted them with the change management process and with educating their members

and employees.

The study indicates that mobile money is slowly attracting the unbanked population of

the country. It is encouraging that the MNOs have acknowledged the potential of the

agricultural SACCOs as this means that a greater emphasis will be placed on drawing rural

consumers to mobile money. The study highlights that banks are not doing enough to promote

mobile money or promoting cooperation with the MNOs.

The significance of this research for emerging markets is evidence that mobile money

represents a tangible opportunity for countries with a low banked population. Tanzania does

not have the same key success features exhibited by Kenya, such as one dominant provider

and, a higher density population. Yet despite these limitations Tanzania has managed to

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achieve success, which should be encouraging for other emerging markets in Africa and the

developing world. Both Kenya and Tanzania have shown that awareness and distribution are

critical success factors.

Going forward Tanzanian banks need to be more responsive to consumers’ needs and

embrace mobile money, which represents not only a way of increasing their customer base but

also a way of decreasing their operating costs and increasing their revenues. Equity Bank has

had phenomenal success and growth from adapting its model to create an M-PESA linked

savings account. If the banks agree to cooperate with the MNOs it could be a win-win

opportunity for both sectors as it was in Kenya. Admittedly the fact that Kenya only had one

dominant MNO has forced the market to cooperate far sooner than otherwise would have been

achieved.

There have been numerous obstacles in achieving adoption of mobile money in rural

areas in Tanzania. Despite these challenges the market is continuing to evolve and grow and

should eventually allow for greater use of e-money in retail outlets. For a country that has up

until recently been solely cash-based with low literacy levels, having adapted to mobile money

highlights the potential that exist for other developing countries in Africa and globally.

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7 FUTURE RESEARCH DIRECTIONS

This study adds to the literature and knowledge surrounding mobile banking, a topic

which is still relatively new in Africa. The research’s purpose was to assess the adoption of

mobile banking among the unbanked segment of the population in Tanzania, focusing on the

challenges and benefits of adopting mobile banking. The results as detailed throughout this

report predominantly focus on the rural people and MFIs.

This study reveals that there is need for future research with regard to small medium

enterprises and businesses as there is a huge opportunity for businesses to become more

competitive and efficient by enabling mobile banking. There is a need for businesses to adopt

mobile banking and accept e-money as a form of payment because this will increase the

interoperability within the country. The informal sector in Tanzania is much larger than the

formal economy, which is why it is important for the small businesses to adopt mobile

banking if adoption of mobile banking is to continue.

In addition the study raises interesting questions about the role that MFIs could play in

the adoption of mobile money. Although the research suggests that MFIs are going to adopt

mobile banking, further research should focus on the impact this will have on overall adoption

of mobile money within Tanzania. Research should look to evaluate whether the MFIs have

been able to extend their borrowing capacity because of the increased efficiencies of mobile

banking.

As the need for retailers to adopt e-money was documented, further research should be

conducted around the need for and potential viability of offering incentives to the various

market participants. This would involve government participation as well as various market

participants’ views. An analysis should be conducted to determine whether mobile money has

led to increased numbers of users for MNOs and banking. In addition, an analysis should be

run to determine whether network loyalty has occurred since the introduction of mobile

money.

The views of the MNOs, banks, MFIs and industry experts were one side although

objectivity was brought from the industry experts. It would be interesting to investigate views

of the poor people. To evaluate whether they feel that mobile banking is adding value to their

lives.

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Finally, research could also examine whether mobile money encourages individuals to

save money. This is significant as Tanzania and many other developing countries have low

savings rates and perhaps mobile banking could change this. Research could be used to

determine what innovative mobile banking products are being demanded by the people to

evaluate whether the current products are representative of the needs of the population.

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9 APPENDICES

9.1 Appendix A – Interviewee Profile Organisation Representative Department/Title Vodacom Mark Taylor ME: Strategic Products

Vodacom John Machunda M-PESA Partnership Manager

Airtel Kelvin Twissa M-Commerce Director

Tigo Andrew Hodgson Chief of Business Development

Tigo Joseph James Regional Manager Arusha

Tigo Gabriel Cosp Head of mobile financial services

NMB Neema Kassim Project Manager

CCBRT Tom Vannaste Deputy Director

D-Tree international Steve Oils Country Director D-Tree International

BRAC Guendu Roy Country Representative

BRAC Walid Ahmed Manager

Stanbic Bank Douglas Kamwendo Director Personal and Business Banking

Infotech Ali Mufuruki CEO

Tai Solutions Chris Stratham Co-founder and CEO

World Wide Worx Arthur Goldstruck CEO

UCT Irwin Brown Professor of Computer Science

Fundamo Hannes van Rensburg CEO

Wizzit Charles Rowlinson CEO