In Tanzania, the fintech sector is still nascent with less than 50 companies, among which 68% in their early stages and 20% still at the pre-startup stage and not fully launched yet, a research found.

An assessment of the Tanzanian fintech landscape by the United Nations Capital Development Fund (UNCDF), in partnership with Tanzania’s Information, Communication and Technology (ICT) Commission and local innovation hub Sahara Ventures, identified just 34 active fintech startups in the country as of November 2020.

These fintech startups focus on six market segments – payments and remittances, lending and financing, insurance, savings, investments, and personal finance – and mainly offer business-to-consumer (B2C) solutions (91%), showcasing that the industry is still in the early stages of development with many gaps to fill.

Salum Awadh, a corporate advisor, investment manager and an entrepreneur, told the Fintech Times in November 2020 that Tanzania was

“still playing catch-up in the fintech space, despite seeing a few interesting businesses taking shape and beginning commercializing their business models.”

Mobile money and digital payments is the biggest vertical in Tanzania’s fintech sector, he said, with perhaps the most notable startup in this space being Nala. Nala is a young fintech startup specializing in mobile payments. It provides a solution that allows users to make transfers and payments faster and without data connectivity.

Nala won the pan-African Ecobank Fintech Challenge in 2018 and is backed by the likes of Y Combinator, DFS Lab and VentureSouq. Active in Tanzania and Uganda, Nala has now plans to expand to Kenya.

ClickPesa is another payment startup from Tanzania but which focuses on business payments. ClickPesa offers a platform that unifies payments services for businesses. The platform connects with existing mobile wallets and bank accounts to facilitate payments.

ClickPesa recently expanded to Europe, opening an office in London in January 2020.

In business services, Tanzania is home to players such as E-Seven, Vision and StraightBook, three online accounting software and business administration services providers serving small and medium-sized enterprises (SMEs).

In insurtech, Jamii is a notable player in Tanzania. The company provides a mobile-based, micro-health insurance product for the low income and informal sector.

Jamii has built a mobile policy management platform that performs all the administration activities of an insurer, and allows users to access cheap insurance via a basic mobile phone starting at just US$1 per month.

The startup is backed by Techstars and Barclays.

Challenges to overcome

But before the local fintech industry can reach its full potential, several challenges must be addressed.

The UNCDF assessment identified several growth inhibitors including a fragmented funding ecosystem that requires startups to invest a lot of time and effort to attract limited funding, a lack of affordable and skilled local talent, and low levels of financial and digital literacy among Tanzanian adults, particularly those in rural areas.

The regulatory landscape is another big problem in Tanzania, Awadh said, stating that investors typically shy away from businesses located in jurisdictions with either unfavorable or unclear regulations.

“The capital gain tax discourages inventors from investing in Tanzania, that’s why investors end up opting for South Africa, Kenya or Nigeria where there are safe regulations that ensure them a return on investment,” he said during a workshop in December 2020.

Despite this, Tanzania’s large pool of unbanked (67%), youthful population, and strong economic growth makes it a fertile ground for fintech, especially in the areas of personal finance and Islamic finance.

“I see a lot of potential in the space of personal finance, as many countries are graduating into middle-income economies including Tanzania, there will be a huge demand for more financial and investment solutions,” Awadh told the Fintech Times.

“And with a Muslim community accounting for almost half of country’s population, we predict to see more demand of sharia-compliant financial services.”

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