The usage of national payment system agents in deepening financial services in Tanzania: challenges and opportunities

Financial institutions in Tanzania find it difficult to open branches in remote and rural areas where majority of low income customers live because cost is prohibitive. Use of branches banking can provide a cheaper means for such customers to safety access financial services. The problem is, what should be done to achieve that goal? Inductive research approach and exploratory research design were used by this study to address the problem. Ten countries, where notable progress in branchless banking has been made, were used as a sample. Sampling was based on geographical stratum. The study found that: the use of mobile phones as branchless banking delivery channel and branchless banking agents have accelerated in the last 2 years. However, they cannot solely continue spearheading growth without certain policy issues to be addressed. Such policies include: financial inclusion set up by central government and supported by relevant regulatory bodies, anti-money laundering and combating terrorism financing and those that govern taxation, competition and consumer protection. The study recommends adoption of a “hybrid model” of branchless banking, where both financial institutions and mobile network operators share transaction processing infrastructure. The model could enable majority to access financial services through a shared and cost effective infrastructure using nation-wide payment system agents.