Causes of financial exclusion in Tanzania

Financial exclusion is currently a widespread issue of concern by the government, the financial services industry, stakeholders and various consumer groups. Without understanding the causes of financial exclusion we risk continuingly excluding some of those who are mostly in need of the services and products of financial sector. Therefore the study is motivated to analyse factors that causes financial exclusion in Tanzania with savings and loan being special financial products targeted as they are typical in the Tanzania’s financial market. The study used both qualitative (descriptive statistics) and quantitative (multinomial probit) techniques in analysing the Fin Scope data for 2009.Empirical results from qualitative analysis reveal that public awareness on financial products and institutions is very minimal while majority claimed enough income to be the major hindrance to financial inclusion. Furthermore, results from marginal effects of multinomial probit show that increase in level of education, income and age lowers the probability of exclusion from saving and borrowing. Financial illiterate, male and urban residents have higher probability of being excluded from saving and borrowing than their counterparts.Therefore, education and awareness on financial services should be provided to increase financial literacy. Government should liaise with commercial banks, private companies and CBO’s to establish microfinance that will take care of the excluded/informal served groups as well as product diversification to cater for the needs of all.