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Tanzania: Cash Rules in Spite of Mobile Money’s Growth

Categories : Cash and Crises, Cash ensures competition among payment instruments, Cash is available to all users, Cash is the first step of financial inclusion, Cash protects privacy and anonymity, Costs of cash versus costs of electronic payment instruments
June 23, 2022
Tags : Mobile Money, Tanzanie; cash, taxation
Cash in circulation is growing in Tanzania, alongside significant progress in terms of financial inclusion and the development of mobile money.
Guillaume Lepecq

Chair, CashEssentials

This post is also available in: Spanish

According to the Bank of Tanzania, cash in circulation grew at an annual rate of 9.2% to reach 5.2 trillion Tanzanian shillings (TZS) at the end of June 2021. That growth rate follows a 5.2% increase the previous year.

Cash Demand Grows alongside Financial Inclusion

This growth took place in the context of increasing financial inclusion. The Second National Financial Inclusion Framework aims to ensure broader access to and usage of financial services and aims to increase the share of adults using formal financial assistance to 75% by 2022 from 65% in 2017,  says the central bank. Tanzania will achieve this target by implementing policies, regulations, and solutions to support innovation and by providing financial services that are responsive to the needs of the enterprises, individuals and households. During 2020/21, the central bank, in collaboration with other stakeholders, implemented various initiatives to advance and accelerate financial inclusion in the country, focusing on women, youth and small and medium enterprises.

Like other sub-Saharan countries, Tanzania has been at the forefront of the mobile money market for years. The Global System for Mobile Communications Association (GSMA), defines a mobile money service as accessible to people who do not have formal bank accounts. As such, it does not include any mobile banking or payment services linked to traditional bank accounts or credit cards in its accounting. According to the GSMA, 159 of the world’s 300 million active mobile money users are in sub-Saharan Africa.

“As of June 2021, Tanzania had 33.2 million mobile money accounts relying on a network of agents managing transactions across rural and urban areas,” says the GSMA. According to World Bank data, the total population of Tanzania is 60 million, and there are 84 mobile cellular subscriptions for 100 people. 27% of the population live below the poverty ratio of USD1.90 (2011 PPP). According to Quartz Africa, in 2019, a total of TZS 9.5 trillion (or USD4 billion) was transacted through the system.

Booming Mobile Money Tempts the Taxman

As the Covid-19 pandemic took its toll on the Tanzanian economy, the government introduced the tax to increase revenue collections to finance the budget. In July 2021, the government introduced a levy on mobile money which increased the cost to send, withdraw, and transfer money. The policy sparked outrage from the general public, a sharp reduction in transactions, and a shift to cash.

“The change in consumer behaviour leads to increased use of cash. Between June and September 2021, the total number of P2P transactions reduced drastically from 30 to 18 million (-38%) per month, while the total number of cash-out transactions reduced from 33 to 25 million (-25%) per month,” says the GSMA, in an analysis of the impact of the new tax, which unsurprisingly recommends eliminating or significantly reducing the tax.

Other African countries have raised taxes on mobile money, including Cote D’Ivoire,  Democratic Republic of Congo,  Malawi and Uganda.

Taxing Transactions to Fund Economic Recovery

In June 2022, the government announced it would lower the tax by 43%, to reduce the impact of the cost-of-living crisis. For Quartz Africa, “Tanzanians were going back to using cash, and the government started thinking on how to get them back to mobile money platforms.”

In March 2020, mathematician Ivar Ekeland, former President of Paris-Dauphine University, and economist Jean-Charles Rochet, professor at the University of Geneva and the Massachusetts Institute of Technology (MIT),  wrote, “It is necessary to tax financial speculation”. In that essay, Ekeland and Rochet proposed the introduction of a 0.3% tax on all electronic transactions (i.e. money transfers between bank accounts of individuals and businesses) to finance with reason and justice a (large) part of the needs for post-pandemic economic reconstruction.

For Rochet and Ekeland, this tax would be able to “realign individual interests in the direction of the common good.” It would have a minor impact on average-income households and hardly tax productive activities or consumption. It would be able to garner the consent of a large majority of citizens. “In these difficult times when the State needs new resources and must reinvent a sustainable economy, we hope that it will be the subject of public debate.” state the authors.


This post is also available in: Spanish