THE POTENTIAL INNOVATIVE STRATEGIES OF USING MOBILE MONEY SYSTEMS FOR ENHANCING FINANCIAL INCLUSION IN TANZANIA

Abstract

In many developing countries in Africa, financial exclusion among the poor is a major constraint to poverty reduction ever since independence. Mobile money is a financial innovation that provides transfers, payments, and other financial services at a low or zero cost to individuals in developing countries where banking and capital markets are deficient and financial inclusion is low. In Tanzania, mobile money systems have been increasingly used as a means to overcome this constraint. However, there still existing mobile money service divide, highly skewed against the rural poor population. This paper was therefore seeking to explore the potential innovative strategies of using mobile money systems for enhancing financial inclusion in Tanzania. In this paper secondary data was used whereby, review and analysis of several documentary sources were done. The findings of the study revealed that although mobile phones have become common in Tanzania covering rural areas where there is acute poverty and lack of access to formal banking institutions is rampant, they are hardly used for financial transfers and payments due to a number of existing obstacles such as poor network coverage; lack of knowledge of m-banking users; high mobile money transaction fees; and lack of enough float, ATM breakdown and theft. As a result, the country has been losing opportunities to use mobile money systems to extend financial facilities to the poor who do not have access to formal finance. Innovative strategies are highly needed to fight the obstacles and promote financial inclusion to both rural and urban sectors. Some of the key determinants recommended that make the strategies work and therefore result into  successful financial inclusion are such outreach, penetration, availability, accessibility, technology, financial literacy, trust, and income adequacy