ANALYSISOFMOBILEBANKINGFOR

FINANCIALINCLUSIONINTANZANIA:
CASEOFKIBAHADISTRICTCOUNCIL

PREPARED BY ANITHA RODGERS

ISHENGOMA

2011


TableofContents
ABSTRACT ....................................................................................................................... 4
CHAPTER ONE ................................................................................................................ 5
INTRODUCTION ............................................................................................................. 5
1:0
INTRODUCTION ................................................................................................. 5
1:1 BACKGROUND OF THE PROBLEM................................................................... 5
1:2 STATEMENT OF THE PROBLEM ....................................................................... 7
1:3 RATIONALE OF THE STUDY ............................................................................. 8
1.4 general Objective of the Study ................................................................................. 9
1.4.1 SPECIFIC OBJECTIVES ................................................................................. 9
1:5 RESEARCH QUESTIONS ..................................................................................... 9
1:6 CONCEPTUAL FRAMEWORK .......................................................................... 10
1.7 The significanCE of the Study ............................................................................... 12
1.8 LIMITATIONS OF THE STUDY ......................................................................... 13
CHAPTER TWO ............................................................................................................. 14
LITERATURE REVIEW ................................................................................................ 14
2:0 INTRODUCTION ..................................................................................................... 14
2:1 HISTORY OF M-BANKING ................................................................................ 14
2:2 SERVICES PROVIDED BY M-BANKING SYSTEMS...................................... 15
2:3 THE TECHNOLOGY ACCEPTANCE MODEL (TAM) .................................... 16
2.4 UNDERSTANDING OF DIFFERENT MODELS IN M-BANKING .................. 18
2:5 THE BANK-LED MODEL IN M-BANKING FOR A GROWING ECONOMY
LIKE TANZANIA ....................................................................................................... 20
2.6 M-BANKING IN DEVELOPING COUNTRIES LIKE TANZANIA.................. 20
2:7 FINANCIAL SERVICES ACCESSIBILITY IN TANZANIA ............................. 22
2.8 M-BANKING IN TANZANIA ......................................................................... 23
2.9 M-BANKING FUTURE IN TANZANIA ............................................................. 28
2.10 THE M-BANKING AND FINANCIAL INCLUSION ....................................... 31
2.11 M-BANKING AND THE POOR ........................................................................ 33
2.12 IMPORTANCE OF M-BANKING IN TANZANIA .......................................... 36
2.13 M-BANKING AND THE CENTRAL BANKS .................................................. 38
2.15 CHALLENGES FOR A MOBILE BANKING SOLUTION .............................. 41
2.16 OTHER APROACHES TO ADDRESS CHALLENGES IN M-BANKING
42
CHAPTER THREE.......................................................................................................... 44
RESEARCH METHODOLOGY ..................................................................................... 44
3.0 INTRODUCTION ..................................................................................................... 44
3.1 RESEARCH TYPE AND APPROACH ................................................................ 44
3.1.1 QUANTITATIVE RESEARCH ......................................................................... 45
3.1.2 QUALITATIVE RESEARCH ............................................................................ 45

3.2 RESEARCH DESIGN ........................................................................................... 45

3.3 YPES AND SOURCES OF DATA REQUIRed ............................................... 46
3.3.1 Primary data collection ................................................................................... 46
3.3.2 SECONDARY DATA COLLECTION .......................................................... 47
3.4 Sampling Design ............................................................................................... 48
3.4.1 POPULATION................................................................................................ 48
3.4.2 SAMPLING TECHNIQUE ................................................................................ 48
3.4.3 THE PROBABILITY AND NON-PROBABILITY SAMPLING ................. 49
3.4.4 CHARACTERISTIC OF THE SAMPLE ....................................................... 49
3.5 DATA ANALYSIS METHOD .............................................................................. 50
3.6 REALIBILITY AND VALIDITY ..................................................................... 51
3.7 response rates ......................................................................................................... 51
3.8 data measurement ................................................................................................... 51
CHAPTER FOUR ............................................................................................................ 52
DATA PRESENTATION AND ANALYSIS ................................................................. 52
4.0 Introduction ................................................................................................................ 52
4:1 THE GENERAL OBJECTIVE .............................................................................. 52
4.1.1 SPECIFIC OBJECTIVES ............................................................................... 52
4.2 RESULTS AND DISCUSSION ............................................................................ 53
4.2.1 To examine the awareness of the operation of mobile banking systems and
understanding of the technology usage to mobile subscribers. ................................ 54
CHAPTER FIVE............................................................................................................ 70
SUMMARY, CONCLUSSION AND RECCOMENDATION ....................................... 70
5.0
INTRODUCTION ............................................................................................... 70
5.1 SUMMARY ........................................................................................................... 70
5.2 CONCLUSION ...................................................................................................... 72
5.3 RECOMMENDATION ......................................................................................... 73
REFERENCES................................................................................................................. 75

ABSTRACT
The study analyzed the Mobile Banking (M-Banking) system coverage for financial
inclusion in Tanzania, the case study of Coast region at Kibaha district council.
Objectives of the study were to analyze coverage of M-Banking for financial inclusion,
the usage behavior of mobile subscribers to M-Banking services, understand the extent
in which mobile banking systems had impeded financial development and the
assessment of service effectiveness and service cost charges.

The main aim was supported by specific objectives which were determined by using the
Technology Acceptance Model (TAM, 2009). In this model, I could analyze the MBanking system usage behavior of the population understudy.

The instruments used were questionnaires and interview which were administered to
mobile subscribers and retail agents of the mobile banking systems. The findings were
collected, organized, analyzed and interpreted using SPSS Tables.

The outcome indicates that 79% of the population understudies were using the MBanking system technology of which almost 100% has helped in accessing financial
services in an easy way. It further shows that, the illiterate populations are facing the
difficulty in using technology compared to literate one. Also, the service cost charges are
still not clear to the study hence recommending further study into this.

However, those who were not registered with any of M-Banking facility they could
show their interest to use it due to perceived importance of technology in financial
accessibility at an easy of which the same group of those not registered with the facility
showed their awareness of the service that is believed to be convenient in obtaining
services at an easy way.

CHAPTER ONE
INTRODUCTION

1:0

INTRODUCTION

Financial inclusion is the delivery of financial services at affordable costs to sections of

disadvantaged and low-income segments of society. Mobile Banking refers to activities
performing balance checks, account transactions, payments and credit applications via a
mobile device or Personal Digital Assistant (PDA). Financial inclusion has important
role in stimulating development by providing banking related financial transactions in an
easy way.

1:1 BACKGROUND OF THE PROBLEM

The UNCDF report of January 2009 illustrate that, the financial inclusion has been of an
importance in third world countries since the early 2000s after the research findings
about financial exclusion and its direct correlation to poverty in third world countries. It
has shown that, the banking services are still inadequate to include people from full
participation in accessing financial services such as saving, insurance, payments, short
and long-term credit, pensions or local money transfers.
The financial inclusion is now a common objective for many central banks among the
developing nations as it addresses the constraints of financial exclusion. Ways of
overcoming financial exclusion have been cited through which the introduction of
financial inclusion facilities to an easy way (Kempson and Dominy, 2003).

During the second quarter of 2010, Tanzania had a total of 19,592,795 mobile
subscribers. By September 2010 there were about 20,771,487 subscribers who were
receiving services from seven telecommunications companies (Vodacom, Airtel, Tigo,
Zantel, TTCL, SaSatel and Benson Informatics (BOL)). Vodacom is the market leader
with 8,426,097 subscribers followed by Airtel with 5,901,634 subscribers, Tigo with
4,575,534 subscribers, Zantel with 1,586,516,Tanzania Telecommunication Company
Limited with 256,064,Sasatel with 23,071 and BOL with 2571 subscribers (Tanzania
Communications Regulatory Authority report, 17th January 2011).

In Tanzania, the early 2007 Vodacom-Tanzania mobile company introduced a Vodafone

M-PESA as a new mobile money transfer service in partnership with Vodafone Group.
With M-PESA, Vodacom customers could convert cash into electronic money at an
authorized M-PESA agent. So far the population under which Vodacom-Tanzania has
registered its subscriber occupies 17.9% of the total population (Vodacom-Tanzania
report, August 2008).

However, the mobile money transfer in Tanzania has been a common objective for
almost all the mobile companies in Tanzania. This could be seen through the
introduction of M-banking system by the four Telecommunications companies namely
M-Pesa, Zap, Tigo Pesa and Z-Pesa.

1:2 STATEMENT OF THE PROBLEM

The July 2010 estimates of Tanzania total population was estimated to be 41,892,895,
thus the population under which Tanzania has registered mobile subscribers occupies
49.58% of the total population. The number of mobile subscribers under the above
Telecommunication company with M-Banking system occupies 48.9% of the total
population i.e 20,489,781 of which 16,391,824.8 i.e. 39% of total population are rural
people living under poverty (TCRA, 2011).

Taking the consideration of the above figure, the mobile industry in Tanzania by 2010
earned the revenue that was doubled amount of what the mining industry got i.e.
$2.684billion (TSh3.6trillion) per year, this makes telecommunications be the countrys
leading industry (UDSM,2011).

According to provisional data as of 30 June 2010, 9.2 million of registered subscribers

are for mobile payment services from four mobile operators (Vodacom, Airtel, Tigo and
Zantel) who are currently offering the mobile payment services. The service provision
however requires that the phone companies partner with commercial banks (TCRA,
2011).

Since almost half of Tanzanians own a mobile phone through which they can save
money and handle financial transactions without needing a bank account, to what extent
has the M-Banking system covered the financial inclusion in Tanzania? Are these
mobile subscribers use the money transfer system in accessing financial services?
7

However, the official statistics from TCRA, Tanzanian mobile subscribers spend the
second most on mobile phone use in the region. Despite this rank, there is still a large
weak consumer purchasing power in the country where half of the population still lives
on less than a dollar a day.

1:3 RATIONALE OF THE STUDY

The study intends to discover the coverage of financial inclusion through mobile
banking system in Tanzania by examining the Vodacom-Tanzania M-PESA, Tigo Pesa,
Zap and Z-Pesa banking systems.

The findings will indicate whether the mobile banking system is as far-reaching,
accessible and contributes to the potential understanding on how to make formal
financial procedures through mobile banking to mobile subscribers.

The study is built on the rationale that the mobile banking systems in Tanzania could
bring several positive effects that include financial services accessibility such as money
transfers. This could be seen through the increased demand in money transfer between
2008 and 2009 through Vodafones M-Pesa in Tanzania that could possibly improve the
banking system.

Also the study will help policy makers in considering the opportunity available for MBanking in the development and growth of the economy.

1.4 general Objective of the Study

The general objective of the study is to understand the mobile banking system in
financial Inclusion coverage in Tanzania.

1.4.1 SPECIFIC OBJECTIVES

To examine the awareness of the operation of mobile banking systems and

understanding of the technology usage to mobile subscribers.

To assess the usage behavior of the service by the mobile subscribers

To assess the service effectiveness and cost charges of the mobile banking systems.

To identify the extent in which mobile banking systems had impeded financial
development.

1:5 RESEARCH QUESTIONS

Are the mobile subscribers using the M-Banking systems in accessing financial
services?

Are the mobile subscribers happy and satisfied with the technology? Do they
understand the use of it?

Is the service cost effective?

To what extent does mobile banking system in Tanzania has covered the financial
inclusion?

1:6 CONCEPTUAL FRAMEWORK

In this study, many models have been proposed to explain and predict the use of a
system but for the case of environment that the researcher chose to conduct her study,
the Technology Acceptance Model was taken into account since it has been the only one
which has captured the most attention of the Information Systems community
(Venkatesh&Davis,2000).

The Technology Acceptance Model (TAM) is an information system theory that models
how users come to accept and use a technology. It is essential for anyone willing to
study user acceptance of technology to have an understanding of the Technology
Acceptance Model (Mohammad Chuttur, 2009).

10

Figure 1: The Technology Acceptance Model

Perceived
value

Trust

Intention to
use

Perceived ease
of adoption

Taking into
use

Usage
behavior

Perceived ease
of use

The model suggests that when users are presented with new technology, a number of
factors influence their decision about how and when they will use it (Venkatesh & Bala,
2008).

Hence, from above model the usage behavior of mobile subscribers (customers) in using
a technology (M-Banking) are predicted to be much dependable on the perceived value
of the technology and the perceived ease use of it that will bring forward the intention to
use the perceived technology. The following are defined factors influences users with
the usage behaviors of the new technology:

Perceived usefulness (PU)

This was defined as a degree to which a person believes that using a particular system
will enhance his or her job performance (Fred Davis, 1989).

11

Perceived ease of use (PEOU)

It was defined a degree to which a person believes that using a particular system would
be free from effort

Since technologies and elements of uncertainty exists in the minds of decision makers
with respect to the successful adoption of them, people tends to form attitudes and
intention towards trying to learn to use the new technology prior to initiating efforts
directed at using(Bagozzi&Warshaw,1992).

Therefore, the study findings are made under the assumptions made in the TAM model
since it has behavioral element on intention to use/act and be free to act without
limitation.

1.7 The significanCE of the Study

Kothari 2000 asserts that, Research inculcates scientific and inductive thinking and it
promotes the development of logical habits and organization. The conduct of this
research expects to contribute differently to the expectations of different groups of
people who will be interested in its findings as follows:

To the researcher, the study is for partial fulfillment of the requirements for the
award of the degree of Master in Business Administration (Finance and Banking) at
Tumaini University, Iringa College. It has also been an opportunity for the
researcher to explore and get much insight to the problem under study.

12

To policy makers, the study aims at understanding of opportunities available for

financial accessibility development.

To the academicians and other researchers, the findings of this study will serve as a
basis for further investigations in this area.

1.8 LIMITATIONS OF THE STUDY

It was argued that no research is free from limitations (Katega and Mdendeni, 2004)
the main constraints to this research were as follows:

Inadequate research materials and facilities since there are inadequate secondary
information of the problem under study.

Also the researcher faced the respondents very busy that could not answer her
questionnaire therefore forced her to do interview while they are at work.

Financial constraints where by the researcher fall short of fund in conducting the
research.

13

CHAPTER TWO
LITERATURE REVIEW

2:0 INTRODUCTION
Mobile Banking as activities performing balance checks, account transactions, payments
and credit applications via a mobile device or Personal Digital Assistant (PDA). It
includes provision of banking and financial services with the help of mobile
telecommunication devices. The scope of offered services may include facilities to
conduct bank and stock market transactions to administer accounts and the access of
customized information.

Furthermore, the Mobile banking system is also referring to SMS Banking as a

technology that enables services offered by banks to its customers by permitting them to
operate over their mobile phones using SMS messaging (Davis, 2010)

2:1 HISTORY OF M-BANKING

The earliest mobile banking services were offered via SMS with the introduction of the
first primitive smart phones with WAP support enabling the use of the mobile web. In
1999, European banks started to offer mobile banking on this platform to their
customers. Mobile banking until 2010 often been performed via SMS or the Mobile
Web.

14

The M-Banking system operates in such a way that a specific sequence of SMS
messages will enable the system to verify if the client has sufficient funds in his or her
wallet and authorize a deposit or withdrawal transaction at the agent.

Also, when depositing money, the merchant receives cash and the system credits the
client's bank account or mobile wallet. In the same way the client can also withdraw
money at the merchant: through exchanging SMS to provide authorization, the merchant
hands the client cash and debits the merchant's account.

2:2 SERVICES PROVIDED BY M-BANKING SYSTEMS

Mobile banking can offer services such as account information, mini statements,
checking of account history, alerts on account activity(passing of set thresholds)
monitoring of term deposits, access to loan statements, access to card statements, mutual
funds (equity statements, stop payment on cheque, ordering cheque books, balance
checking in the account.

Also, it can do payments, Deposits, Withdrawals, and Transfers such as domestic and
international fund transfers, micro-payment handling, mobile recharging, commercial
payment processing, bill payment processing, peer to Peer payments, withdrawal at
banking agent, deposit at banking agent.

15

2:3 THE TECHNOLOGY ACCEPTANCE MODEL (TAM)

The Technology Acceptance Model (TAM) is an information system theory that models
how users come to accept and use a technology. It is essential for anyone willing to
study user acceptance of technology to have an understanding of the Technology
Acceptance Model (Mohammad Chuttur, 2009).

TAM is an adoption of the theory of reasoned action (TRA) to the field of IS. It posits
that perceived usefulness and perceived ease of use determine an individuals intention
to use a system with intention to use a system with intention to use serving as a mediator
of accrual system use.

The model suggests that when users are presented with new technology, a number of
factors influence their decision about how and when they will use it (Venkatesh & Bala,
2008)

Figure 2: The Technology Acceptance Model

Perceived
value

Trust

Intention to
use

Perceived ease
of adoption

Taking into
use

Usage
behavior

Perceived ease
of use

16

Hence, from above model the usage behavior of mobile subscribers (customers) in using
a technology (M-Banking) are predicted to be much dependable on the perceived value
of the technology and the perceived ease use of it that will bring forward the intention to
use the perceived technology.

The following are defined factors influences users with the usage behaviors of the new
technology:

Perceived usefulness (PU)

This was defined as a degree to which a person believes that using a particular system
will enhance his or her job performance (Fred Davis, 1989).

Perceived ease of use (PEOU)

It was defined a degree to which a person believes that using a particular system would
be free from effort (Fred Davis, 1989).

However, since technologies and elements of uncertainty exists in the minds of decision
makers with respect to the successful adoption of them, people tends to form attitudes
and intention towards trying to learn to use the new technology prior to initiating efforts
directed at using(Bagozzi&Warshaw,1992).

17

2.4 UNDERSTANDING OF DIFFERENT MODELS IN M-BANKING

A mobile banking conceptual model
In this model, the Mobile Banking can be said to consist of three inter-related concepts
known as Mobile Accounting, Mobile Brokerage and Mobile Financial Information
Services.
The accounting and brokerage services are offered invariably in combination with
information services. The information financial services are offered as an independent
module.
Mobile banking business models
In this model, a wide spectrum of Mobile/branchless banking models is evolving, if
mobile banking is being used to attract low-income populations in often rural locations,
the business model will depend on banking agents i.e. retail or postal outlets that process
financial transactions on behalf telecoms or banks.
The banking agent is an important part of the mobile banking business model since
customer care, service quality and cash management will depend on them. Many
telecoms will work through their local airtime resellers.
Bank-focused model
The bank-focused model emerges when a traditional bank uses non-traditional low-cost
delivery channels to provide banking services to its existing customers. Examples range
from use of automatic teller machines (ATMs) to internet banking or mobile phone
banking to provide certain limited banking services to banks customers.

18

This model is additive in nature and may be seen as a modest extension of conventional
branch-based banking.

Bank-led model
The bank-led model offers a distinct alternative to conventional branch-based banking in
that customer conducts financial transactions at a whole range of retail agents (or
through mobile phone) instead of at bank branches or through bank employees.

This model promises the potential to substantially increase the financial services
outreach by using a different delivery channel (retailers/ mobile phones).

The bank-led model may be implemented by either using correspondent arrangements or

by creating a JV between Bank and Telco/non-bank. In this model customer account
relationship rests with the bank.

Non-bank-led model
The non-bank-led model is where a bank has a limited role in the day-to-day
account management. Typically its role in this model is limited to safe-keeping of
funds. Account management functions are conducted by a non-bank (e.g. Telco)
who has direct contact with individual Mobile Banking Services

19

2:5 THE BANK-LED MODEL IN M-BANKING FOR A GROWING

ECONOMY LIKE TANZANIA
The bank-led model is an alternative to conventional branch-based banking where
customers conduct financial transactions at of retail agents through mobile phone instead
of at bank branches or through bank employees.

The model promises the potential to substantially increase in the financial services
outreach by using a different delivery channel including retailers or mobile phones. In
this model customer account relationship rests with the bank.

Thus, the Central banks objectives in financial inclusion to provide a greater role in
modernizing the national economy by promoting the M-Banking system in the country
could possibly help in financial inclusion .The bank-led model helps in realizing the
significance of M-Banking system in Tanzania since it may be cheaper than bank based
alternatives.

2.6 M-BANKING IN DEVELOPING COUNTRIES LIKE TANZANIA

The research Analyst with Audience Scapes project suggests that, For a developing
country like Kenya a standard of success and reach by which deployments in other
countries are often measured. From a development perspective, a study provided
encouragement by indicating that M-PESA is reaching down Kenyas socio-economic
spectrum, thus providing efficient and affordable financial services to those at the

20

bottom of the pyramid (BOP).The study further analyzed about the neighboring
Tanzania, a relatively poorer country where mobile money is notably slower to take off.

National surveys in Kenya in mid-2009 and Tanzania in mid-2010 which included

questions about use and knowledge of mobile money. Researchers have highlighted the
significant differences between Kenya and Tanzania in geography, population density,
economic development and access to financial services, which put Tanzanian m-money
service providers at a relative disadvantage. Indeed, at the two-year point, the surveys
showed that only 11.5% of Tanzanian adults had used an m-money service, versus 56%
of Kenyans.

Furthermore, mobile money in Tanzania remains primarily a tool for the banked and the
well to do. Only 3.9% of respondents among Tanzania are financially excluded or
unbaked. Similarly, only 7% of Tanzanian respondents with a household income of less
than $2 a day reported having used m-money, compared to 41% in Kenya of which 51%
of Tanzanian respondents said their household income is less than $2 a day versus 38%
in Kenya.

There is further room for optimism for development groups pushing m-money as a tool
of financial empowerment for BOP individuals, if only because more lower-income
Tanzanians are now owning mobile phones in larger and larger numbers.

21

In the Tanzanian survey, a strong connection between m-money use and mobile phone
ownership. The survey defined recent adopters of the mobile phone as those who first
acquired a mobile phone in the past year, and revealed that this group includes many
more lower-income individuals than those who adopted mobile phones earlier (between
two and five years ago).

Thus, as mobile phone usage reaches further down the income scale, there is a greater
chance that BOP individuals will use m-money services. The AudienceScapes data
indicate that mobile phone ownership remains a key determinant of m-money usage. Just
over 92% of those who have used m-money also said that they are mobile phone owners.
This connection was also found in the 2009 Kenya survey, with some 86 percent of mmoney users in the survey owning their own mobile phone.

2:7 FINANCIAL SERVICES ACCESSIBILITY IN TANZANIA

The research findings carried out in Kenya and Tanzania by ODI (Overseas
Development Institute, 2009) on financial inclusion household investment and growth
through Fin Scope Survey shows that there is higher usage of informal mechanisms than
formal financial services.

Rural inhabitants save and borrow more for an agricultural investment while in urban
money is used for starting business. In Tanzania, men are more likely to save or borrow
to invest than women.

22

However, most people have never been able to go into a bank because of the minimum
deposits to be so high. It can be the first step into the formal financial system for lowincome Africans with mobile phone operators to connect their payment customers to
Opportunity Bank operated out of trucks and storage containers across 21 countries in
Africa at a cost of 3% or 4% transaction (Abbie Laugtug, 2010).
Microfinance Focus (2010) says that, Microfinance and cash agents will continue to
play a major role in the successful implementation of the pilot and indeed the mobile
branchless banking value chain, Securing the mobile branchless banking value chain
against fraud is a major challenge for the region.
Fraud reduction is high on the agenda across Central Banks in Africa. New security
requirements for mobile financial management insist both the financial institutions and
their distribution networks take a high level of responsibility in protecting the end user,
the report said.

2.8

M-BANKING IN TANZANIA

During the second quarter of 2010, Tanzania had a total of 19,592,795 mobile
subscribers. By September 2010 there were about 20,771,487 subscribers who were
receiving services from seven telecommunications companies (Vodacom, Airtel, Tigo,
Zantel, TTCL, SaSatel and Benson Informatics (BOL)).

23

In Tanzania, the early 2007 Vodacom-Tanzania mobile company introduced a Vodafone

M-PESA as a new mobile money transfer service in partnership with Vodafone Group.
With M-PESA, Vodacom customers could convert cash into electronic money at an
authorized M-PESA agent. So far the population under which Vodacom-Tanzania has
registered its subscriber occupies 17.9% of the total population (Vodacom-Tanzania
report, August 2008).

Vodacom is the market leader with 8,426,097 subscribers followed by Airtel with
5,901,634 subscribers, Tigo with 4,575,534 subscribers, Zantel with 1,586,516,Tanzania
Telecommunication Company Limited with 256,064,Sasatel with 23,071 and BOL with
2571 subscribers (Tanzania Communications Regulatory Authority report, 17th January
2011).

In Tanzania phones are said to be relatively inexpensive to purchase, the first technology
in history to have more low-income users than wealthy ones. A policy advocate for
CARE, an international humanitarian aid organization, Mobile banking has become
a hot topic.

In a lot of Africa, there are large geographic distances between population centers so its
really cost-prohibitive for microfinance institutions or banks to set up branches (Abbie
Laugtug, 2010).

24

Services like M-Pesa are driving efficiencies and economic growth by allowing small
business owners to focus on selling rather than on collecting payments from hard-toreach customers. Mobile money is also helping to reduce corruption and graft (although
in our meeting last week Tamara Cook relayed how corrupt officials in Kenya now
sometimes demand bribes through M-Pesa).

Furthermore, developing countries governments are experimenting with using m-money

on cell phones to pay public servants like police officers and teachers, with some
surprising results. In Afghanistan last year, when the government started paying police
officers through M-Paisa, the Afghan version of the service, it discovered that 10% of
the workforce was phantom employees, their paychecks being pocketed by corrupt
managers.

In Pakistan, the EasyPesa mobile banking platform there played a role in helping to
distribute money to the unbanked rural poor in the aftermath of last summers
horrendous floods as a direct and efficient way to reach those most in need while
minimizing the likelihood of leakage.

Table1:
The following figure shows Number of subscribers over time in Tanzania from the
TCRA records from 1995 to mid 2007:

25

The majority of Tanzanias 41 million inhabitants live on less than $2 a day and only 12
percent have a formal bank account. But almost half of Tanzanians own a mobile phone,
through which they can save money and handle financial transactions without needing a
bank account (Abbie Laugtug, 2010).

The mobile phone providers are setting up networks of agents such as shops, petrol
stations and post offices who will transfer funds to and from a customers mobile money
account, increasing and decreasing the electronic value stored in the phone.

However, Tanzania covers 364,900 square miles and has fewer than 500 retail bank
branches and people rely on informal networks to transfer money such as sending cash
to family members through a taxi driver who will be traveling near their home village.
26

The July 2010 estimates of Tanzania total population was estimated to be 41,892,895,
thus the population under which Tanzania has registered mobile subscribers occupies
49.58% of the total population. The number of mobile subscribers under the above
Telecommunication company with M-Banking system occupies 48.9% of the total
population i.e 20,489,781 of which 16,391,824.8 i.e. 39% of total population are rural
people living under poverty (TCRA, 2011).

Table 2:

27

Market Share by Subscribers as provided by Tanzania Communication Regulatory

Authority, 2008

2.9 M-BANKING FUTURE IN TANZANIA

The Bank of Tanzania (BoT) and Tanzania Communication Regulatory Authority
(TCRA) have signed a MoU to regulate mobile money transfer services due to strong
growth of mobile payment services in the country.

The Daily News reported that BoT attributed the sharp increase in the number of
subscribers to limited access to formal banking services, especially in rural areas. The
service provision however requires that the phone companies partner with commercial
banks. The MoU provides a mechanism for regulatory and supervisory coordination

28

between the two regulators. While the central bank regulates the financial transactions,
the TCRA focuses on the communication infrastructure.

The Tanzanian survey suggests that marketers and promoters of m-money services may
be underutilizing word-of-mouth, SMS-text messaging and other information channels
beyond mass media that have the potential to reach many more potential users.
Combining these channels with mass media campaigns can enhance the effectiveness of
raising awareness and use of m-money services.

Mobile operators in Tanzania have welcomed the new entrant in mobile phone money
transfer service, Tigo pesa, saying competition would make the product more popular in
the market.Speaking in separate interviews with The Citizen, Zain and Vodacom
Tanzania managing directors said the market segment was yet to be exploited fully and
that new players would hot up competition (Alvar Mwakyusa, 2010).

The coming of Tigo pesa brings the number of mobile money transfer providers to four.
Zain operates Zap while Vodacom and Zantel operate M-Pesa and Z-pesa respectively.
Competition in mobile money transfer is good provided that it is well structured, secure
and reliable.

Moreover, for the mobile phone money transfer service to work efficiently there is need
for wider coverage, agents network as well as active subscribers. It takes time to adopt

29

new technology, the concept of sending, receiving and settling bills through mobile
phones will be adopted in the near future and become part of life for majority
Tanzanians (The Citizen, 2011).
From the survey, Tanzanias m- money market faces many challenges and has not
replicated the success of m-money like neighboring Kenya, there are signs that Tanzania
is finally turning a corner. Based on trends in the first half of 2010, take-up rates of mmoney services are gaining momentum as agent networks expand and service providers
devote more resources to direct marketing.

Hence, it is important to monitor not only the number of people who are signing up for
these services, but also on whether there is greater penetration at the bottom of the
pyramid.

However, there may be a few additional insights to be gained from looking at M-Pesa.
This service has recently added an interest-bearing savings account, M-Kesho, which
further strengthens peoples understanding of saving.

M-Pesa provides an excellent example of a mobile money transfer service that has
created best practices in the industry for addressing banking inequities and fostering
entrepreneurship. Some of M-Pesas key services that have allowed it to gain rapid
adoption include:

Strong branding and simple messaging for an easy-to-use service

Scalable agent distribution structure for liquidity management

30

Easy and quick customer registration, with rewards for agents

Simple, affordable, and transparent retail pricing

Free deposits, with no minimum balance requirements

Ability to send money to non-customers

2.10 THE M-BANKING AND FINANCIAL INCLUSION

The survey conducted by Tele World across Africa, Latin America and Asia, the number
of people who do not have a bank account but do have a mobile phone is set to grow
from 1 billion today to 1.7 billion by 2012. These unbanked mobile individuals
represent a compelling market opportunity for operators (The Guardian, 18th October
2009).
Tanzania and Malawi were the African countries mentioned where mobile telephones
are taking a first step into the formal financial system. Almost 1 million active customers
in Tanzania use mobile-phone payments to transfer funds to relatives, buy supplies, pay
doctors and save money for future emergencies.
Recent research in Senegal suggests that high entrepreneurship rates in developing
economies are a significant point of leverage for building a middle class in the
developing world. Increased access to finance has been shown by the World Bank to
have a significant correlation to a reduction in GINI coefficient (less income inequality).

31

However, lack of access to finance and banking services has been consistently reported
to be the biggest factor blocking firms and entrepreneurs in developing countries from
growing or launching new business ventures.

Banking rates are notoriously low in developing economies, but mobile penetration rates
are high and climbing steadily. Mobile banking provides a platform from which to offer
more opportunity and stability to lower and middle-class citizens in these developing
nations, helping to reach development goals in an equitable manner.

Mobile banking in the developing world is emerging not as an addition to regular

banking as it is in the developed world (allowing customers to use their phones to check
balances or pay a bill). Instead it is an alternative to limited or non-existent bricks and
mortar banks, which frankly dont want very poor people as customers anyway. Poor
people are supremely innovative, especially when it comes to scarce resources like
money. It didnt take long for them to figure out that they can use airtime loaded on their
cell phones through scratch cards as a form of currency in Senegal.
In emerging markets around the world, the un-banked began trading minutes or using
them to make payments for goods and services and send remittances home from their
urban jobs to rural family members.

32

Mobile phone companies recognized the opportunity (after all, there are more than 3
billion people in the world without access to banking services) and a new market was
born. For example, M-Pesa, launched by Safaricom in Kenya in 2007, has had
tremendous growth as a cash transfer system quick, simple, and safe. Therefore, M-Pesa
conducts millions of m-money transactions a day in Kenya, and there are five times as
many M-Pesa agents (23,000) as there are banks and ATM machines combined in the
country. Lack of literacy is not an obstacle, as M-Pesa clients quickly learn to text what
they need on their phones.

2.11 M-BANKING AND THE POOR

Despite the low rate of use among the poor, they still make up nearly a third of those
who said they have used m-money, and their presence among m-money users seems to
be increasing.36% of those m-money users who began using the service in the 6 months
prior to the survey also said they live on less than $2 a day. This is a significant
demographic shift away from the higher income profile of users who have been using
the service longer than six months. Only 23 percent of these earlier adopters have a daily
income of $2 or less (David Montez, 2009).
Indeed, mobile money service providers have taken steps to make these services more
accessible and convenient. For example, Tanzanias M-PESA (operated by Vodacom)
partnered with the GSMA to tackle the problem of agent liquidity; Bharti Airtel
(formerly Zains Zap service) continues its work towards creating a cash-free ecosystem.

33

The Tanzania AudienceScapes survey pointed to a recent, sharp increase in the number
of registered users: 63 percent of those who said they had used m-money also said that
they first began using a service in the past 6 months. This corroborates recent supplyside statistics and points to a m-money market poised for further expansion.

The Tanzania survey queried respondents in the research Analyst with InterMedias
AudienceScapes project as to why they have not started using m-money. The main
reason cited for not using m-money was a lack of knowledge about how to use it. At the
same time, respondents expressed interest in learning more about it.

Since many agents are already airtime sellers and kiosk operators, agents are in a
position to inform existing and prospective customers about m-money. Understandably,
lacking access to an agent is a substantial problem in rural areas of which 93% of
respondents who said they do not have access to a network agent are rural residents.
Tanzania, in particular, faces this problem as nearly three-quarters of its population
reside in rural areas. These regions are often the last to see an agent network roll out due
to a lack of prospective storefronts that can support an agent.

Christine Bower (2007) further illustrates that, mobile payment options are old hat
in places like Japan where mobile phones linked to credit/debit cards. The mobile
banking or m-banking gives millions of poor people in developing countries access
to financial services that could change the world.

34

The World Bank estimates that in many countries, over half the population (the
unbanked) has never had a bank account. The poor tend to be terrified of banks, since
they're often humiliated or ignored when they try to enter them. That means they can't
leave their savings anywhere safe, pay a bill without walking the cash to the office, or
prove that they're credit-worthy. Meanwhile, mobile phone penetration is through the
roof, especially in Africa.

People with no previous access to bank accounts were able to watch the World Cup via
satellite services that they paid for electronically with a few taps on a mobile phone. The
service is a clear sign that mobile banking is taking off in Africa, giving some of the
world's poorest people a way to access financial services.

In developed countries, there were a lot of mobile banking services and they failed,"
says an economist who works for the Bill and Melinda Gates Foundation. The reason, he
believes, is that for people who already have access to banks, as most people in the
developed world do, it's difficult for such services to compete.

At the moment, enthusiasm for m-banking has outrun its implementation. For one thing,
regulators break out in a cold sweat at the thought of all the overlapping issues involved.
But there are success stories. SafariCom, partly owned by Vodafone, is set to expand its
M-Pesa pilot to all of Kenya.

35

However, these telecom companies aren't offering m-banking out of the kindness of their
hearts. They like m-banking because it's a way for them to attract new customers by
doing what they already do well processing millions of tiny transactions. Banks aren't as
interested, because they don't expect to profit from poor clients who won't be taking out
a mortgage anytime soon. But the telecoms could start siphoning away bank customers
who don't need all the bells and whistles.

2.12 IMPORTANCE OF M-BANKING IN TANZANIA

The research conducted by the University of Dar es Salaam, indicates that there is 10%
increase in penetration rate of telecommunications services in Tanzania that had pushed
a country's gross domestic product (GDP) up by 1.2% (Humphrey Moshi, , 2011).
Furthermore, Economists in Tanzania say spending on telecommunications may help
nurture the growth of a country's economy even though the growth depends on a number
of factors such as ownership of the telecommunication firms, investment guidelines and
the level of transparency in operations of the companies. The convenience of mobile
payments spares members the trip to the nearest town to pay for supplies is a way to
protect the capital and savings (Laugtug, 2010).

The new system of mobile payments has made it possible for individuals to save as little
as $1 or $2 at a time, amounts too small for deposits to formal banks given the 30%cost
of a deposit, said Dennis Ripley (A senior vice president at Opportunity International,
2010).

36

In Tanzania, the cost of transportation can be a barrier to receiving health care but a
hospital in Dar es Salaam that wanted to figure out a reliable way to cover patients costs
has been done using a mobile phone system called Vodafone M-PESA .This simplified
payment mechanisms.
However, the rise of banking transactions through mobile phones is giving a whole new
meaning to pocket money in parts of the developing world that lack banks or cash
machines. Mobile money applications are emerging as potent financial tools in rural and
remote areas of the globe, allowing people with no bank accounts to get paid, send
remittances or settle their bills.
The Mobile World Congress in Barcelona says that, there is a very big opportunity in MBanking system. Mobile banking began to emerge six years ago in the Philippines and
South Africa, where 8.5 million and 4.5 million people, respectively, use such services.
Today, 40 million people worldwide use mobile money, and the industry is growing,
according to the GSMA. There are 18,000 new mobile banking users per day in Uganda,
15,000 in Tanzania and 11,000 in Kenya, according to the report.

Mobile phones can offer a wide range of banking solutions, from sending transfers to a
relative to buying goods in a store or putting money aside for a rainy day, all by dialing a
few numbers on ones phone. Mobile banking can also make life easier for people in
parts of Africa where paying a simple bill can be time-consuming, said Reg Swart,

37

regional executive of Fundamo, a company that makes banking applications.

2.13 M-BANKING AND THE CENTRAL BANKS

The negative and positive experience on credit programs for the poor has been
accumulated in low income countries and many of the lessons learned are relevant for
any country wishing to pursue the deliberate policy. The evolution of public policy has
not been different in other developing nations where poverty is so conspicuous.

Moreover, leaving behind the basic needs paradigm of the 1970s for most of the
developing world in the 1980s were a decade of structural adjustment dominated by
stabilization efforts designed to bring national expenditure in line with national income
(or output) as well as by attempts to increase national income, through policy reforms
that have promoted a more efficient use of resources (Grootaert and Kanbur, 2002).

Furthermore, the Government should come in and come up with fiscal policies that will
lessen the hurdles that applicants in financial service face. The tax regime should be
favorable to all players in the market whose objective is to serve the poor people. In this
case, in addition to encouraging formal financial service providers, the country will
promote informal players as well.
According to the open letter from Presidio Graduate Schools Sustainable MBA program
in San Francisco, the appropriate policy and regulations provide an environment in

38

which mobile banking systems and firms can thrive. Best practices for mobile banking
policies include:

Electronic banking and signatures should be legally recognized.

Customers must be protected against fraud by implementing disclosure and dispute

resolution requirements for vendors. Formation and enforcement of cyber fraud laws
will also provide vendor and customer protection.

Integration of mobile banking platforms should be encouraged to ensure consumer

choice, payment system access for agents, and protect against harmful monopolies.

Remote account customers should not be discriminated against and account opening
procedures should be risk-based.

Non-bank agents (such as stores) should be allowed to provide remote cash

withdraw services for greater access and utility for users and agents.

However, it is the deliberate policy of most central banks to relax some of these legal
requirements so as to maximize the numbers of the players in the market, especially
those whose operational objectives is to serve the unbaked to come up with other
programs explicitly designed to assist the poor.

In this regard there is a need to take stock of all antipoverty policies that have worked
and which have not. We need complimentary policies that will support on the promotion
of financial inclusion.

2.14 M-BANKING AND THE REST OF THE WORLD

39

The main reason that mobile phones are being pressed into so many important services
is that they provide a cheap and effective work-around to weak or non-existent
alternatives. Take mobile banking, which is spreading across Africa, South Asia, and
Latin America.Mobile banking, also referred to as mobile finance, or even mobile
money (m-money for short), with Tamara Cook, program officer for the Financial
Services for the Poor initiative at the Bill and Melinda Gates Foundation, and Mary
Ellen Iskenderian, president of Womens World Banking.

This part of the mobile commerce is also very popular in countries where most of their
population is unbaked. In most of these places banks can only be found in big cities and
customers

have

to

travel

hundreds

of

miles

to

the

nearest

bank.

Countries like Sudan, Ghana and South Africa received this new commerce very well.

In Latin America countries like Uruguay, Paraguay, Argentina, Brazil, Venezuela,

Colombia, Guatemala and recently Mexico started with a huge success. In Colombia
was released with Redesign. In Iran banks like Parsian, Tejarat, Mellat, Saderat, Sepah,
edbi and bankmelli offer this service. Guatemala have the support of Banco industrial
(Unbanked Report of 2011).

Mexico released the mobile commerce with Omnilife, Bancomer and a private company
(MPower Ventures). Kenya's Safaricom (Part of the Vodafone Group) has had the very
popular M-Pesa Service mainly used to transfer limited amounts of money, but has been

40

increasingly used to pay utility bills. Zain in 2009 launched their own mobile money
transfer business known as ZAP in Kenya and other African countries.

2.15 CHALLENGES FOR A MOBILE BANKING SOLUTION

On January 2009, Mobile Marketing Association (MMA) in their Banking SubCommittee that was chaired by CellTrust and VeriSign Inc published the Mobile
Banking Overview for financial institutions in which it discussed the advantages and
disadvantages of Mobile Channel Platforms (Short Message Services (SMS), Mobile
Web, Mobile Client Applications, SMS with Mobile Web and Secure SMS). The
following were published:
Handset operability
There are a large number of different mobile phone devices and it is a big challenge for
banks to offer mobile banking solution on any type of device. Some of these devices
support Java ME and others support SIM Application Toolkit, a WAP browser, or only
SMS.
Security
Security of financial transactions, being executed from some remote location and
transmission of financial information over the air, are the most complicated challenges
that need to be addressed jointly by mobile application developers, wireless network
service providers and the banks' IT departments.

41

The mobile banking infrastructure to handle exponential growth of the customer base.
With mobile banking, the customer may be sitting in any part of the world (true anytime,
anywhere banking) and hence banks need to ensure that the systems are up and running
as a result customers will find mobile banking more and more useful, their expectations
from the solution will increase. Banks unable to meet the performance and reliability
expectations may lose customer confidence.

2.16

OTHER APROACHES TO ADDRESS CHALLENGES IN MBANKING

Around the globe, various initiatives use the mobile phone to provide financial services
to those without access to traditional banks. Yet relatively little scholarly research
explores the use of these m-banking/m-payments systems.
Presenting illustrative data from exploratory work with small enterprises in urban India,
it argues that contextual research is a critical input to effective adoption or impact
research. Further, it suggests that the challenges of linking studies of use to those of
adoption and impact reflect established dynamics within the Information and
Communication Technologies and Development (ICTD) research community.
There are systems such as Mobile Transaction Platform which allow quick and secure
mobile that enables various banking services. Recently in India there has been a
phenomenal growth in the use of Mobile Banking applications, with leading banks
adopting Mobile Transaction Platform and the Central Bank publishing guidelines for
mobile banking operations.
Application distribution

42

Due to the nature of the connectivity between bank and its customers, it would be
impractical to expect customers to regularly visit banks or connect to a web site for
regular upgrade of their mobile banking application. It will be expected that the mobile
application itself check the upgrades and updates and download necessary patches via
phones (Indian News, 2011).
However, there could be many issues to implement this approach such as upgrade /
synchronization of other dependent components. Mobile banking has come in handy in
many parts of the world with little or no Infrastructure development, especially in
remote and rural areas.

43

CHAPTER THREE
RESEARCH METHODOLOGY

3.0 INTRODUCTION
Kothari (2000) defines research methodology as a way to systematically solve the
research problems. According to Burns and Burch (1995), methodology describes in as
much details as necessary, how the research was, what methods were used to achieve the
research objectives.

This chapter is therefore aimed at transmitting the details procedures that is showing the
steps to be taken by the researcher in collecting data, the methodological foundations
and the reasons behind the researchers choice of the research methods used.

3.1 RESEARCH TYPE AND APPROACH

Kothari (2000) put it clear that there are mainly two basic approaches to research,
namely quantitative approach and qualitative approach. This research will consider both
qualitative and quantitative approaches.

44

3.1.1 QUANTITATIVE RESEARCH

The quantitative research is a measure of phenomena using numbers in mathematic and
statistics procedures to process data and summaries data. It involves numerical data
(Kothari, 2000).
The researcher used this type of research so a to enable her analysis of the collected data
in a statistical procedure and process data in numerical forms to summarize the results.

3.1.2 QUALITATIVE RESEARCH

This type of research, the research is conducted in a natural setting environment
concerned, it involves collecting textuals, verbals or graphical data. It refers to data that
can not be counted (Kothari, 2000).

3.2 RESEARCH DESIGN

Research design refers to the plan on how the researcher systematically collected and
analyzed data needed to answer research questions. It is a framework or roadmap
through which a research process is conducted to explain the social phenomena under
investigation (Kothari, 2000)
The study takes into account both the quantitative study. The study is about the
understanding of the financial inclusion with the M-Banking systems in Tanzania. In
investigating the answers, study design have been used where by the Coast Region was
selected to undertake the study.

The researcher intended to analyze the coverage of M-Banking for financial inclusion in
Tanzania as to whether the system is being used by mobile subscribers. The intention of

45

the researcher is also to identify the cost effectiveness as well as the service charges of
these M-Banking systems in Tanzania.
Moreover, the study involved mobile subscribers registered under four mobile
companies (TiGo, Vodacom,Airtel and Zantel) of which the M-Pesa, TiGo Pesa,Zap as
well as Z Pesa Agents with both retail and wholesale activities were involved.

3.3

YPES AND SOURCES OF DATA REQUIRed

Data refers to all the information a researcher gathers for his or her study (Mugenda and
Mugenda, 1999). There are mainly two types of data, namely primary data and
secondary data. Primary data refers the information a researcher obtains from the field
i.e. from the subjects in the sample while secondary data refers to the information a
researcher obtains from research articles, books, reports and journals. In this study the
researcher make use of both primary and secondary data.

3.3.1 Primary data collection

The primary data collection refers to the data collected direct from the field; it involves
observation, questionnaires and interviews. The primary data enable to get the first
handed data (Kothari, 2000).
The researcher relied on this type of data because it needs to get views directly from
those concerned with the problem under study. The data collection methods used for this
study are questionnaires and interviews.

46

3.3.1.1QUESTIONNAIRES
Kothari (2000) argued that the person who answers the questionnaire might feel in
telling the truth. This is the main reason why the researcher decides to make use of this
data collection method. Also the researcher thought that the use of this data collection
method together with other would be suitable due to the resource restriction that
hindered the exclusive use of other methods.

In this study one set of questionnaires was developed and distributed to respondents
who were the mobile subscribers from the four mobile companies with the M-Banking
systems as well as the Retail and wholesale agents of their operating systems.

3.3.1.2INTERVIEW
Interview refers to conversation between two people where questions are asked by the
interviewer to obtain information from the interviewee (Kothari, 2000). The personal
interviews were conducted in getting data through a set of predetermined questions.
The researcher chose to use this method due to the academic nature of the study and thus
to her the interview method enabled her to overcome the resistance of some respondents
who seemed to be too busy with their work to get time to fill in questionnaires and hence
more detailed information to be obtained. Also interview was conducted to those who
could not understand the English language in the questionnaire.

3.3.2 SECONDARY DATA COLLECTION

Secondary data are the facts and figures that have already been recorded before the
project at hand. On the other hand secondary data are those which have already been
47

collected by someone else and which have already been passed through the statistical
process (Kothari, 2000).
As stated before the researcher made use of secondary data that were collected through
an intensive review of the reports, journals, books, and magazine and internet materials.

3.4

Sampling Design

Kothari, 2000 defined sampling design as the key consideration of which people,
settings, behaviors or events to be included in the study. It deals with a selection of the
population that would involve a great amount of time and resources to provide valid
ideas of the study. This is the reason why a small number of cases were selected for
study purpose to represent the whole population i.e. a sample.

3.4.1 POPULATION
A population consists of all the cases of individuals or things or elements that fit a
certain specification. Thus the populations for this study consist of mobile subscribers
and the mobile banking system agents of which around 20.4 million people in Tanzania
are subscribed with mobile companies.

3.4.2 SAMPLING TECHNIQUE

Sampling techniques is defined as procedure used to select some elements of a
population in such a way that they represent the actual characteristics of the total
population (Cohen, 2000).

48

3.4.3 THE PROBABILITY AND NON-PROBABILITY SAMPLING

There are mainly two types of samplings techniques: probability and non probability
sampling techniques. Probability sampling involves the use of statistical theory in design
of empirical study and the selection of sample.

Thus, it is suitable for a homogeneous population and when the researcher wants each
element to have equal chance of being selected. So for non probability sampling, this
technique is purposive and subjective in nature and involves selection of a sample based
on judgment and knowledge.
In this research, probability sampling techniques was used because the sample selected
has equal chance of being selected. Considering the academic nature of the problem
under study, probability technique allowed the researcher to use cases that had the
required information for the study objectives.

Other reason as why the researcher used this kind of convenient sampling techniques is
because the most target group i.e. mobile subscribers and mobile banking systems agents
are so scattered that non-probability sampling would have been unrealistic.

3.4.4 CHARACTERISTIC OF THE SAMPLE

According to Trochin (2000) Before gathering your sample its important to find out as
much as possible about your population you should at least know some of the overall
demographics, age and sex about your population.

49

The population under this study is 20.4million people having 26 Regions that cover
Tanzania, each Region is estimated to have 788,068 people. Since the study covered
only one region. Since the sampling design is selected randomly the required sample
size for the total population in one Region is 384 with the margin error of 5% (Research
Advisors, 2006)

Furthermore, the researcher conducted the study covering one Region that consists of 6
districts. From the case study environment, the researcher covered one district (Kibaha
Mjini) of which is characterized by both low and medium income earners.

Therefore, the population sample size to be considered was 64. The demographic sample
of this study includes mobile subscribers and their retail agents including those with
mobile payment services.

3.5 DATA ANALYSIS METHOD

The questionnaires administered to the respective respondents for primary data
collection. Data collected were analyzed both qualitatively and quantitatively through
Statistical Package for Social Science.
The ideas collected from Interview were also analyzed by using SPSS and the
researchers knowledge obtained from literature review.

50

3.6 REALIBILITY AND VALIDITY

The validity and reliability of instruments is critical in research (Ngulube, 2005).
Validity and reliability refers to the quality that a procedure or instruments (tool) of a
research is accurate, correct, true, meaningfully and right, and so this is the aim of the
instruments used in this study.

The study validity depends much on the current state of the economy with the struggle to
develop the ease access of financial services. However, the study is conducted for
knowledge expansion and it is owned by the Researcher herself.

3.7 response rates

Williams, (2003) argues that response rate of twenty percent for self administered
questionnaire based survey is sufficient to report the results. According to (Babbie and
Mouton, p.261); a questioner return rate of fifty percent is adequate for data analysis and
reporting. A return of seventy percent regarded as very good. In this research the
researcher came back with rate of 78% since 53 questionnaires were answered out of 64
population sample.

3.8 data measurement

Data measurement means the process of assigning numbers to object or observations, the
level of measurement being the function of rules under which the number are assigned.
For this type of data nominal was used as the measurement.

51

CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS

4.0 Introduction
This chapter presents detail research results and discussions in response to the research
objectives that were set before in questionnaires and interview. The following were the
objectives of my study:

4:1 THE GENERAL OBJECTIVE

The general objective of the study was to analyze the mobile banking system in financial
Inclusion coverage in Tanzania.

4.1.1 SPECIFIC OBJECTIVES

To examine the awareness of the operation of mobile banking systems and

understanding of the technology usage to mobile subscribers.

To assess the usage behavior of the service by the mobile subscribers

To assess the service effectiveness and cost charges of the mobile banking systems.

52

To identify the extent in which mobile banking systems had impeded financial
development.

In fulfilling the study objectives, the researcher formulated questions which were asked
in questionnaires for response from the respondent. The following section presents the
understanding of the researched topic to the key areas of M-Banking system and the
usage behavior of the technology from the mobile subscribers and retail agents.

4.2 RESULTS AND DISCUSSION

The following were the results from respondents and discussions according to the
research objectives:

Mobile Company

Frequency

Percentage

Airtel

4%

Tigo

17%

Tigo,Airtel

10%

Tigo,Voda

15

28%

Tigo,Voda,Airtel

17%

Tigo,Voda,Airtel,zantel

8%

Tigo,Zantel

1%

53

Voda

8%

Voda,Airtel

7%

Total

53

100%

4.2.1 To examine the awareness of the operation of mobile banking

systems and understanding of the technology usage to mobile
subscribers.

Table 3:
Responses on type of mobile company subscribed
The TCRA Report of January 2011 has shown that Vodacom is the market leader with
8,426,097 subscribers followed by Airtel with 5,901,634 subscribers, Tigo with
4,575,534 subscribers, Zantel with 1,586,516,Tanzania Telecommunication Company
Limited with 256,064,Sasatel with 23,071 and BOL with 2571 subscribers.

When analyzing the 53 respondents views on which mobile company he/she has
subscribed, 4% were Airtel subscribers, 17% Tigo subscribers, 8% were Vodacom
subscribers,7% were Vodacom as well as Airtel subscribers, 10% were Tigo as well as
Airtel subscribers, 28% were Tigo as well as Vodacom subscribers, 17% were Tigo as
well as Vodacom and Airtel subscribers, 8% Tigo as well as Voda,Airtel and zantel
subscribers.

Since the study was undertaken in district council the Tigo subscribers were seem to be
market leader but in actual sense Vodacom has penetrated internal parts of the country
compared to Tigo that is not yet established to some villages
54

Table 4:
Responses on M-Banking Sytem Registration
Frequency

Percent

No

17

32%

Yes

36

68%

Total

53

100.0%

55

When analyzing responses on those who were registered with M-Banking services, 32%
of respondents were not registered while 68% were registered and has been using the
services.
The research analyst with Intermedias audiencescapes projects,2010 asserts that in
Tanzania, there is a strong connection between m-money use and mobile phone
ownership. The survey defined recent adopters of the mobile phone as those who first
acquired a mobile phone in the past year and revealed that this group includes many
more lower-income individuals than those who adopted mobile phones earlier (between
two and five years ago).

Table 5:
Respondents reasons with no M-Banking services
Frequency

Percent

i don't have a phone

16%

i don't like the service

14%

i'll register sometimes later

16

29%

not aware of the service

14%

56

use friend's phone

16%

use friend's phone,i'll register sometimes later 7

12%

Total

100.0%

53

Bagozzi&Warshaw(1992) illustrates that, technologies and elements of uncertainty

exists in the minds of decision makers with respect to the successful adoption of them,
people tends to form attitudes and intention towards trying to learn to use the new
technology prior to initiating efforts directed at using.
Therefore from the field findings, 32% of respondents who were not registered with MBanking services, 16% did not have phone, 14% did not like the service (they dont even
think of registering themselves), 29% had intention of registering themselves for the
service, 14% were not aware of services, 16% were using friends mobile facilities and
12% were using friends phones but had an intention of registering themselves to obtain
SMS Banking.
Table 6:
Response on type of M-Banking system registered
Frequency

Percent

m-pesa

16

30%

m-pesa,zap

8%

Tigopesa

17

32%

tigopesa,m-pesa

14%

57

tigopesa,m-pesa,zap

8%

tigopesa,m-pesa,zap,z-pesa

8%

Total

53

100

Among those who were registered with M-Banking system, 30% were registered with
M-Pesa,8% with M-Pesa and Zap,32% were for Tigo Pesa, 14% were registered with
Tigopesa as well as M-pesa,8% were registered with TigoPesa, Mpesa, Zap and 8% with
tigopesa,m-pesa,zap,z-pesa.
The citizen magazine (2011) has asserted that, the coming of Tigo pesa has brought the
number of mobile money transfer providers to four i.e Zain operates Zap while
Vodacom and Zantel operate M-Pesa and Z-pesa respectively. Competition in mobile
money transfer is good provided that it is well structured, secure and reliable.
Table 7:
Respondents views on the use of the Technology
Frequency

Percent

easy to use

12

22.6

Simple

11.3

simple,easy to use

15.1

simple,easy to use,need for training usage

15.1

simple,need for usage training

1.9

58

Respondents views on the use of the Technology

Frequency

Percent

easy to use

12

22.6

Simple

11.3

simple,easy to use

15.1

simple,easy to use,need for training usage

15.1

simple,need for usage training

1.9

Total

53

100.0

Among those who were registered with M-Banking services,30% could find the
technology just easy to use,17% it was simple, 22% it was simple and easy to use, on the
other hand another 22% were simple, easy to use although needed for training usage
while 9% was just simple but still need for usage training.
Furthermore, research Analyst with Inter Medias Audience Scapes project as to why
they have not started using m-money. The main reason cited for not using m-money was
a lack of knowledge about how to use it. At the same time, respondents expressed
interest in learning more about it.

4:2:2 To assess the usage behavior of the service by the mobile subscribers

59

Table 8:
Responses on Age groups
Age Group

Frequency

Percentage

9-17

4%

18-26

22

42%

27-35

14

26%

36-44

9%

45-53

9%

54-62

9%

Total

53

100%

From the field in analyzing the gathered data, the researcher found that out of 53
respondents 22% of respondents were between the age of 18-26, 14% were between the
age of 27-35, 5% were from the age between 36-44, 45-53, 54-62, 2% were between the
age of 9-17.Therefore from this analysis the youth ranging to age 18-26 are more likely
to use phone than any other age group range.

Table 9:
60

Gender Respondents
Frequency

Percent

Male

28

53

Female

25

47

Total

53

100

In analyzing the gender structure, the researcher found that 53% female respondents
while male were respondents 47%.

The research findings carried out in Kenya and Tanzania by ODI (2009) shows that rural
inhabitants save and borrow more for an agricultural investment while in urban money is
used for starting business where by in Tanzania, men are more likely to save or borrow
to invest than women.

Table 10:

61

Responses on the level of education

Frequency

Percent

diploma

13%

have not gone to school

17%

primary school

24

45%

secondary school

11

21%

university level

4%

Total

53

100.0%

To analyze the level of education from the population sample chosen, 13% were the
respondents obtained diploma, 45% obtained primary school, 17% have not gone to
school, 21% obtained secondary school and 4% obtained tertiary (university) level.
The TAM Model illustrates that the perceived easy use of technology brings an intention
to use the technology, other research findings shows that level of education matters in
easy understanding of the technology. Therefore, there is a strong relationship between
the factor of level of education and use of technology.

Table 11:

62

Respondents views on how often using the service

Frequency

Percent

every after 3 days

13

everyday

14

24

every month

22

41

every week

10

22

Total

53

100.0

From the field, 13% of respondents were using the service in every after 3 days,24%
almost every day they were using their phone to acquire financial services via their
mobile phone,41% were using the service every month, 22% every week.

The citizen, 2011 asserts that, mobile money service providers have taken steps to make
these services more accessible and convenient where customers could now use to access
financial services.

4:1:3 To assess the service effectiveness and cost charges of the mobile banking
systems.

63

Table 12:
Respondents views on the awareness of service cost charges
Frequency

Percent

no

11

21

yes

42

79

Total

53

100.0

From the field, 21% of respondents were not aware of the service cost charges even
though they obtained M-Banking services while 79% were aware of the service cost
charges that are analyzed in the following pie chart below.
The Tanzanian survey from research intermedias suggests that marketers and promoters
of m-money services may be underutilizing word-of-mouth, SMS-text messaging and
other information channels beyond mass media that have the potential to reach many
more potential users. Combining these channels with mass media campaigns can
enhance the effectiveness of raising awareness and use of m-money services.

Table 13:

64

Responses on the service cost charges

Frequency

Percent

affordable

18

33

costly

10

19

normal

19

35

not affordable

13

Total

53

100.0

From the 79% of respondents who were aware of the service cost charges,33%
respondents seems to afford the cost,19% the service was costly for them, 35% could
find the service cost just normal while 13% could not afford the service cost charges.

Abbie Laugtug, 2010 says that, most people have never been able to go into a bank
because of the minimum deposits to be so high. It can be the first step into the formal
financial system for low-income Africans with mobile phone operators to connect their
payment customers to Opportunity.

4:1:4 To identify the extent in which mobile banking systems had impeded financial
development.

65

Table 14:
Respondents views on accessible services from M-Banking
Frequency Percent
all of the above

17%

deposit,money transfer

4%

deposit,money transfer,saving

4%

deposit,saving,purchasing airtime

6%

deposit,withdrawal

8%

deposit,withdrawal,money transfer,payment,purchasing airtime

4%

deposit,withdrawal,money transfer,saving,purchasing airtime

4%

deposit,withdrawal,money transfer,payment,purchasing airtime

4%

deposit,withdrawal,money transfer,purchasing airtime

8%

deposit,withdrawal,saving,purchasing airtime

6%

money transfer

8%

money transfer,purchasing airtime

4%

money transfer,saving

4%

Moneytransfer

4%

withdrawal,moneytransfer

9%

withdrawal,moneytransfer,purchasing airtime

4%

withdrwal,money transfer

4%

Total

53

100.0%

From the field,17% of respondents could access all of financial service categories under
M-Banking system,4% could deposit and money transfer,4% could access savings,
deposit and money transfer,6% could deposit, access saving, purchasing airtime,8%

66

could access deposit and withdrawal,4% could access deposit, withdrawal, money
transfer, payment as well as purchasing airtime,4% could access deposit, withdrawal,
money

transfer,

saving

and

purchasing

airtime,4%

could

access

deposit,withdrawal,moneytransfer,payment,purchasingairtime,8% could access deposit,

withdrawal, money transfer, purchasingairtime,6% could access deposit, withdrawal
,saving, purchasing airtime,12% money transfer, purchasing airtime,4% money transfer,
saving, 9% withdrawal,moneytransfer,4% withdrawal, money transfer, purchasing
airtime,4% withdrawal, money transfer.
In Tanzania, the cost of transportation can be a barrier to receiving health care but a
hospital in Dar es Salaam that wanted to figure out a reliable way to cover patients costs
has been done using a mobile phone system called Vodafone M-PESA that has
simplified payment mechanisms (Prof. Humphrey Moshi,2010).

Also, the poor has been accumulated in low income countries and many of the lessons
learned are relevant for any country wishing to pursue the deliberate policy. The
evolution of public policy has not been different in other developing nations where
poverty is so conspicuous. The convenience of mobile payments spares members the trip
to the nearest town to pay for supplies is a way to protect the capital and savings
(Laugtug, 2010).

67

Further more, the researcher could interview respondents on matters regarding the
reasons as to why they think the service is affordable or not, she could also ask for their
comment regarding the services provided by the M-Banking systems as follows:

TiGo subscribers for those who were accessing money transfer could further enjoyed
their service as it tends to enable them to access financial services at exactly time
and reaches the intended person just in time, majority of them were between the age
of 18-45 years old. Most of the registered M-Banking system had no Bank Accounts
but most use the technology for saving.

Those registered with M-Pesa and Zap said that M-Pesa technology is more
understandable in using than Zap even though most of its agents are faced with
inadequate Money to run their services, most times they cant provide Tsh 500,000
Tsh 1,000,000.

M-Pesa subscribers could find their network system ineffective since it can even take
2 days for a network to be stable to access the intended financial service. Also they
could further complain on the service cost charges that M-pesa is expensive to run
than TiGo Pesa.

Those who could respond normal to the service cost charges explained that costs are
not higher for them not to afford even those others could say that the cost charged
are affordable since the rates are normal. Others could say affordable since it

68

consider time instead of queing at the bank for 2 hours it takes few minutes access
the intended service and leave.

Moreover, other respondents clarified that the withdrawal charges are expensive and
should be reduced and at rural centers.

Agents are in needing especially TigoPesa. Also, those who were registered with Mpesa and Tigo Pesa could find the technology categories differently hence
recommended that, there was a need for each mobile company to train their
subscribers on how to use the service even though TiGo Pesa is easy to use.

Other respondents could further state the benefit of using M-Banking that, the
system has no service charges like bank service charges.

Transactions are made easy with M-Banking systems unlike the Banking
transactions. The system is also helpful to low income earners as they can access
financial services at an easy way.

Those who were not registered with any of M-Banking system were having an
intention o use as they could believe that the technology is helpful in accessing
financial services at affordable charges.

69

CHAPTER FIVE
SUMMARY, CONCLUSSION AND RECCOMENDATION

5.0

INTRODUCTION

This chapter is divided into three parts which provide summary of the study findings,
conclusion and recommendation on the basic service and technological usage behavior.

5.1 SUMMARY
The study undertaken, technology usage behavior of M-Banking system in the Region is
more likely to be dependable on the perceived value of the M-Banking services as most f
respondents registered with the service could find the technology saving them from bank
charges (affordable charges with M-Banking), time saving.

The perceived ease use of M-Banking was not the same to every respondents, those who
could read and write (the literate population) seem to find the technology simple and
under stand able to use compared to those who did not go school (illiterate population).

70

From the respondents views, the intention to use M-Banking service was brought
forward by the perceived value of the M-Banking services, most were registered because
of the belief in M-Banking that enabled them to access financial services in an easy way
Also, the level of education, age and sex were determinants of usage behavior of the MBanking system. Female population was likely to be the most user of M-Banking facility
compared to Male population. This is supported by the evidence that in Coast Region
women tends to be engaged in production and savings than Men.

The study could find out that, the service cost charges are not affordable to low income
earners like farmers in the rural area, on the other hand they could be affordable to those
with formal education with formal employment.

Furthermore, the views given by respondents that the rates given by the retail agents to
withdrawal charges were affordable to TiGo subscribers compared to Vodacom M-Pesa
while the depository charges for both services are convenient.

Moreover, the sudy findings shows that the TiGo Pesa now has gained popularity to MPesa even though most of its customers are more likely covered to towns rather than in
entirial centers of the country compared to M-pesa,this was evidenced by respondents
who could explain that their relatives at entirial can not access TigoPesa rather than MPesa while TiGoPesa is more affordable to M-Pesa.

71

However, the study has shown that the M-Banking system has now been the desire for
almost everyone in accessing financial services in an easy way hence paves a way in
promoting development in financial services accessibilities.

5.2 CONCLUSION
In analyzing the coverage of financial inclusion with the use of M-Banking systems in
Tanzania the following are concluded based on study objectives:

Most of the people registered with M-Banking system did not have bank accounts
hence the M-Banking system are now seemed to cover the financial services more
widely even to those areas with no financial services accessibilities.

There is a close relationship between the problem of lack of knowledge and the
problem of not having access to an m-money agent where network agents are on the
ground of representatives for service providers.

When analyzing M-Banking services, the poor are now saved with bank charges that
were seemed to be high and not affordable to low income earners as it appears that
the service cost charges of M-Banking systems are not as high as those of Bank
service charges.

Also, financial services accessibilities are now made simpler and available even to
rural areas as it is now easy to access financial services to rural areas with M-Pesa.

When analyzing the technology understandability and usage behavior, the TiGo
subscribers find the technology usage categories much easier and understandable

72

compared to M-pesa even though they both need to simplify the technology usage
categories.

5.3 RECOMMENDATION
The 79% of Tanzanias population live in rural places that are denied with financial
services, the use of M-Banking system could now be use as alternative way to promote
the poor in accessing financial services, hence the policy makers should now see this
opportunity for the country and come up with supportive policy to ensure growth of the
economy in the financial sector as well as for rural financial development.

In todays world, technology has become a key factor in development in all aspects e.g.
production, communication and services including Mobile Banking systems. Therefore,
the mobile companies should also understand their customers and make sure that their
services are convenient, affordable (reflecting cost of living) and should also consider
the easiness in usage of the technologies introduced.

Mobile companies should now also consider the security of the M-Banking system
looked by customers as it reflects their trust in the technology usage behavior.

However, the study covered Coast Region under Kibaha district council but the
researcher wished to expand the coverage of the study by extending to other Regions but
Time and Funds constraints could not allow her to do that, therefore, I recommend other
researchers to do a further study of the problem to remote areas such as Mpanda (Rukwa

73

Region) and Uvinza (Kigoma Region) where the researcher could not afford to cover for
the sake of the study.

Also the researcher, recommend further study on analyzing the coverage of M-Pesa and
Tigo Pesa to remote areas as to whether they occupy the entire centers of the country or
just in districts and towns.

74

REFERENCES
Bagozzi, R.P. (2007): "The legacy of the technology acceptance model and a proposal
for a paradigm shift.: Journal of the Association for Information Systems

Benbasat, I.; Barki, H, (2007): Journal of the Association of Information Systems

Chuttur, M.Y. (2009), Overview of the Technology Acceptance Model: Origins,

Developments and Future Directions: Indiana University, USA,

Davis, F. D. (1989): "Perceived usefulness, perceived ease of use, and user acceptance
of information technology": MIS Quarterly

Lindlof & Taylor (2002): Qualitative Communication Research Methods (2nd Edition):
Oaks

Patton (1991): Qualitative Research & Evaluation Methods (3rd Edition): Thousand
Oaks.

Retrived from http://sprouts.aisnet.org/9-37 on 17th July 2011

Retrived from http:// www. uncdf.org on 24th March 2011-09-07

75

Retrived from http:// www.vodacom/introduction.com from 15th May 2011

Scherer, M. J. (2004), Connecting to Learn: Educational and Assistive Technology for

People with Disabilities, Washington, DC: American Psychological Association (APA)
Books

Stephan (2007): The Mobile Commerce Prospects: A Strategic Analysis of Opportunities

in the Banking Sector, Hamburg University Press

Venkatesh, V. (2000), "Determinants of perceived ease of use: Integrating control,

intrinsic motivation, and emotion into the technology acceptance model", Information
systems research.

76

Date:

CHECKLIST/QUESTIONNAIRE
My name is Anitha Ishengoma. I am a student at Tumaini University, Iringa College
undertaking Masters of Business Administration. I am kindly asking you to answer my
questionnaire which aims at partial fulfillment of Masters Thesis on Analysis of mobile
banking for financial inclusion in Tanzania. The information which you have provided
in this questionnaire will not be given out to any person. In case of any problem please
do not hesitate to call 0659 900 373

General Information:
Country:.. Region: District:.. Town:..

Personal Information:
1. What is your Age?
a) 9-17
b) 18-26
c) 27-35
d) 36-44
e) 45-53
f) 54-62

(1)
(2)
(3)
(4)
(5)
(6)

2. What is your gender?

a) Male
b) Female

(1)
(2)

3. What is your level of Education?

a) Primary School Level
b) Secondary School level
c) Diploma
d) Tertiary level
e) Have not gone to school

(1)
(2)
(3)
(4)
(5)

4. Which mobile company has you subscribe yourself?

a) TiGo
b) Vodacom
c) Airtel

(1)
(2)
(3)
77

d) Zantel

(4)

5. Are you registered with any of Mobile banking system?

a) Yes
b) No

(1)
(2)

6. If No,
Why?...............................................................................................................
a) I dont have a phone
b) Use friends phone
c) Not aware of the service
d) I dont like the service
e) Ill register sometimes later

(1)
(2)
(3)
(4)
(5)

7. Which of the following mobile banking system have you registered yourself?
a) TiGo Pesa
(1)
b) M-Pesa
(2)
c) Zap
(3)
d) Z Pesa
(4)
8. What services do you access from the system?
a) Deposit
b) Withdrawal
c) Money transfer
d) Payment
e) Saving
f) Purchasing Airtime
g) All of the above

(1)
(2)
(3)
(4)
(5)
(6)
(7)

9. How often use the phone to access financial service?

a) Everyday
b) Every after 3 days
c) Every week
d) Every after 2 weeks
e) Every Month

(1)
(2)
(3)
(4)
(5)

10. How do you find the technology?

a) Simple
b) Easy to use (Understandable)
c) Difficult to use
d) Need for usage training

(1)
(2)
(3)
(4)

11. Are you aware of the service cost charges?

a) Yes

(1)
78

b) No

(2)

12. If Yes, How do you find the service cost charges?

a) Affordable
b) Not Affordable
c) Costly
d) Normal

(1)
(2)
(3)
(4)

Comments on the service and technology usage characteristics

79