The digital revolution paved the way for Digital payment.
The advent of digital technology has fundamentally altered our lives, reshaping various sectors of the economy, including finance. This digital revolution has given birth to digital payments – electronic transactions made without exchanging physical cash. In Tanzania, a country with a diverse economic structure and a strong drive towards financial inclusion, digital payments fuel economic growth. This article aims to provide an in-depth understanding of how digital payments contribute to Tanzania’s burgeoning economy, supported by relevant data and insightful analysis.
Tanzania’s economy has grown steadily over the past decade, with its GDP growing at an average rate of 6% annually between 2010 and 2020. This growth, however, was not evenly spread across the populace, creating a financial disparity, especially among the rural population. Digital payments have emerged as a solution, integral in bridging this financial divide and fostering economic inclusion.
Mobile money services such as M-Pesa, Tigo Pesa, and Airtel Money have revolutionised digital payments in Tanzania. As per the Finscope Tanzania 2017 survey, 65% of Tanzanian adults were using mobile money services, making Tanzania one of the global leaders in mobile money usage. Such services allow users to complete transactions, pay bills, and even access credit facilities, fostering financial inclusion, especially among the unbanked population.
How Digital Payments Drive Economic Inclusion in Tanzania
Digital payments are boosting individual financial inclusion and positively influencing Tanzania’s macroeconomic landscape. The World Bank states that digital payments can reduce transaction costs, increase transaction speed, and improve the convenience and security of payments. These benefits subsequently lead to increased economic activity.
One of the key drivers of Tanzania’s economy is the Small and Medium-sized Enterprises (SMEs) sector, which contributes approximately 40% to the GDP. Digital payments, by simplifying transactions, reducing costs, and enhancing customer reach, have facilitated the growth of SMEs, thus providing an impetus to the economy. Moreover, digital transactions’ traceability aids in improving tax compliance, thereby augmenting government revenues.
The digital payment system has also been pivotal in developing Tanzania’s e-commerce industry, contributing significantly to the GDP. As per the Tanzania Communications Regulatory Authority, the number of internet users in Tanzania reached 28.69 million in 2021, fueling online transactions and bolstering economic activities.
Nevertheless, it is critical to recognise the challenges to fully adopting digital payments in Tanzania. Internet accessibility, digital literacy, cyber security concerns, and regulatory issues pose significant hurdles. Therefore, strategies to tackle these challenges are crucial for leveraging digital payments to their maximum potential for economic growth.
In conclusion, digital payments are increasingly vital in Tanzania’s economic landscape, facilitating financial inclusion, fostering the growth of SMEs and the e-commerce industry, and enhancing government revenues. To fully capitalise on these benefits, continued efforts must be made to improve digital infrastructure, increase digital literacy, and strengthen regulatory frameworks. Undeniably, digital payments can boost Tanzania’s economy further, marking a transformative stride towards a digitally driven economic future.
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