Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized THE WORLD BANK GROUP AFRICA REGION MACROECONOMICS AND FISCAL MANAGEMENT GLOBAL PRACTICE APRIL 2017 ISSUE 9 Extending Financial Inclusion in Tanzania Money Within Reach TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION PAGE ii The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Table of Contents Foreword................................................................................................................... v Abbreviations and Acronyms. ....................................................................... vii Acknowledgments...............................................................................................ix Executive Summary.............................................................................................. x Part One : The State of the Economy.............................................................. 1 1.1 Recent Economic Developments............................................................................. 3 1.2 .................................................................................................... 18 Outlook and Risks. 1.3 The Growth-Financial Sector Nexus.....................................................................23 Part Two: Financial Inclusion......................................................................... 27 2.1 Mobile Money: A (Payment Services) Revolution.............................................. 31 2.2 From Payments to Deposits: Mobile Money is the Most Popular Saving ...................................................................................................................... 37 Channel. 2.3 The Backbone of Financial Intermediation: Bank Credit as a Constraint to Growth........................................................................................................................40 2.4 Enhancing Financial Sector Development: Three Directions...........................45 2.5 Suggested Actions Towards Broader and Deeper Financial Inclusion...........60 Annexes................................................................................................................. 67 .....................................................................................68 Annex 1: Key Macroeconomic Indicators. ..................................................................................................69 Annex 2: Real GDP Growth Rates. Annex 3: Shares of Economic Activities in GDP..........................................................................70 Annex 4: Fiscal Framework . ...........................................................................................................71 Annex 5: Balance of Payments ......................................................................................................71 Annex 6: Monthly Imports of Goods and Services.....................................................................72 PAGE i TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Annex 7: Monthly Exports of Goods and Services.................................................................................................. 73 Annex 8: Inflation............................................................................................................................................................ 74 Annex 9: Food Crop Prices............................................................................................................................................ 76 Annex 10: Average Food Wholesale Prices................................................................................................................ 77 Annex 11: Interest Rates Structure.............................................................................................................................. 78 Annex 12: Monetary Aggregates................................................................................................................................. 79 Annex 13: National Debt Developments.................................................................................................................... 80 Annex 14: Poverty by Geographic Regions................................................................................................................ 81 Annex 15: Business sentiment survey........................................................................................................................ 90 Annex 16: The CPMI – World Bank Payment Aspects of Financial Inclusion (PAFI).......................................... 91 List of Boxes Box 1: An Overview of Tanzania’s Financial Sector......................................................................................... 25 Box 2: .......................................................................................... 35 The Mobile Money Revolution in Tanzania. Box 3: Examples of Advanced Mobile Money Products Offered in Tanzania............................................ 39 Box 4: Are MFS Crowding out NBFI in Tanzania?............................................................................................ 41 Box 5: Using Mobile Phones to Boost Productivity of Tanzania’s Farmers - A Partnership . between Olam International, the Connected Farmer Alliance (CFA) and Vodafone.................... 45 Box 6: The Tanzania National Financial Inclusion Framework...................................................................... 46 Box 7: The Importance of a Stronger Banking System: “The Tail Cannot Wag the Dog”....................... 59 Box 8: Transfers Through the Productive Social Safety Net Program (PSSN) Implemented . by the Tanzania Social Action Fund (TASAF)....................................................................................... 61 Box 9: National ID System in India...................................................................................................................... 63 Box 10: Interoperability of Payment Instruments.............................................................................................. 64 List of Figures Figure 1: Global Prices of Fuel and Gold are Rebounding.....................................................................................4 .................................................................................5 Figure 2: Growth Continues to Outpace EAC Comparators. Figure 3: Sector Growth Rates....................................................................................................................................7 Figure 4: Inflation has Remained Low.......................................................................................................................8 Figure 5: The Shilling Stabilized After Significant Fluctuation in 2015................................................................9 Figure 6: Nominal and Real Effective Exchange Rates Remained Stable. ...........................................................9 Figure 7: Shifts in the Composition of Trade Flows (January 2017, Year-on-Year Changes)........................10 Figure 8: Current Account Deficit has been Narrowing.......................................................................................10 Figure 9: Fiscal Deficit Remains Below 4 percent of GDP....................................................................................11 Figure 10: Declining Aid Flows have Been Offset by Increasing Non-Concessional Borrowing.....................12 Figure 11: Decrease in Grants and Concessional Borrowing................................................................................12 PAGE ii The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Figure 12: Arrears to Pension Funds Remain High (as % of GDP) . ....................................................................12 Figure 13: Financing Shortfalls are Constraining Budget Execution.................................................................. 22 ........................................................................... 24 Figure 14: Public Debt in Selected SSA Countries (% of GDP). Figure 15: Low Monetary Growth Heralds a Slowdown in Credit to both . Government and Private Sector.............................................................................................................. 26 ..................... 27 Figure 16: Monetary Growth Slowed Sharply in 2016 While Interest Rates Remained Stable. ........................................ 29 Figure 17: Road Density and Electricity Production in Tanzania and Comparators. ................................................................ 29 Figure 18: Average Growth Rates of Public and Private Investments. Figure 19: Tanzania Trails East Africa Peers in Ease of Doing Business............................................................. 30 Figure 20: Tanzania Lags Well Behind SSA in Terms of Traditional Financial Access Points, 2015.............. 31 Figure 21: Traditional Financial Access Points vs. Mobile Money Agent Locations. (Yellow and Red Dots; Red=Areas of High Concentration) in Tanzania.......................................... 32 Figure 22: Account Penetration, 2008-2015............................................................................................................ 33 Figure 23: Cross-country Comparison in Financial Access. .................................................................................. 33 Figure 24: Trends in Electronic Money Payments 2011-2015 – Cross-country . Comparison (% of GDP).......................................................................................................................... 34 Figure 25: Trends in Electronic Payments 2011-2015 (TZS billion). .................................................................... 34 Figure 26: Mobile Money Service Providers in Tanzania and Kenya, by Market Share................................... 34 Figure 27: Trends in Saving Behavior – Cross-country Comparison (% of adults). ......................................... 37 Figure 28: Saving Channel (% of Adults)................................................................................................................. 38 Figure 29: Mobile Money Advanced Uses – 2013 and 2015 (% of Adults and . % of Each Group)..................................................................................................................................... 38 Figure 30: Trends in Borrowing Behavior – Cross-country Comparison (% of Adults)................................... 40 Figure 31: Borrowing Channels (% of Borrowers).................................................................................................. 41 Figure 32: NBFI usage in Tanzania and Cross-Country Comparison (% Adults), 2015.................................. 41 Figure 33: Bank Deposits and Mobile Trust Account Balances . (TZS Billion and % GDP).......................................................................................................................... 42 Figure 34: Credit to GDP Ratio – Cross-country Comparison, 2015................................................................... 43 Figure 35: Access to Finance as Key Business Constraint and % of Formal Firms . with a Bank Loan....................................................................................................................................... 43 Figure 36: Banks’ Interest Rates on Domestic Currency....................................................................................... 44 Figure 37: Demographic Trends for Active Mobile Money Account Use (% of Adults)................................. 47 Figure 38: Main Reasons for Not Signing Up for a Mobile Money Account (% of Adults. who Access Mobile Money but are not Registered)........................................................................... 48 Figure 39: Type of Identification Reported by Adults in Tanzania....................................................................... 50 Figure 40: Mobile Money Account Uses – 2015 (% of Active Mobile Money Users). ..................................... 53 Figure 41: Firms’ Reasons for Using / not using Mobile Money......................................................................... 53 Figure 42: Cost Savings from Enhanced Use of Digital Technologies. ............................................................... 55 Figure 43: T-Bills and Banks’ (Nominal) Interest Rates on Domestic Currency............................................... 57 PAGE iii TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION List of Tables Table 1: Number of Borrowers and Loans in the Tanzanian Banking System.......................33 Table 2: Market Shares (as a % of Total Balance Sheet)...........................................................34 PAGE iv The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Foreword This Ninth Edition of the Tanzania macroeconomic policy management. Economic Update series provides the This is the basis of stability and growth. The World Bank’s regular review of the economy, improvements in revenue mobilization and while the special focus of this edition is tighter anti-corruption controls will assist the important issue of financial inclusion. with the implementation of effective fiscal The broad story of Tanzania’s growth and policy. Measures to utilize natural gas for poverty reduction over the past decade is power generation will reduce the import now well known. With strong and consistent bill and improve the external balance over growth rates of 6-7 percent, Tanzania has the medium to long term future. And the performed very well by regional standards. continued implementation of a prudent Similarly, over the same period, the poverty monetary policy should provide the level in Tanzania has declined significantly, necessary support to maintain a growth- from 60 percent to 47 percent based on supporting low rate of inflation. the US$ 1.90 per day global poverty line. However, today 12 million Tanzanians live Secondly, manage the expansion in on less than TZS 1,300 per day, with many public investment projects effectively others living just above the poverty line – so to ensure maximum impact on growth an economic shock could have a significant and reduction of poverty. To achieve its impact on the number of poor households. ambitions, Tanzania needs to scale up Likewise, a jump in growth could bring a investment in infrastructure and human substantial number of the poor clustered capital. The Government has reoriented just below the poverty line out of poverty. resources through higher commitments to Another key feature of Tanzania’s economy the development budget, but outturns in is the estimated 800,000 young women this fiscal year have not been as anticipated. and men who enter the job market annually, Speeding up public investment is critical with only limited opportunities to find a even just to maintain current growth rates. productive job. Higher levels of growth are Achieving higher growth may require an badly needed to create a greater number of adaptation of the current approach. Public productive jobs and to significantly reduce investment projects need to be prioritized poverty. for growth and poverty reduction impact, and they need to be fully funded. The Maintaining and accelerating growth Government must sustain efforts to mobilize demands the right policies. The impressive domestic revenue and control recurrent growth path of Tanzania to date has been expenditures, and make additional efforts driven by the decisions of the past. Future to secure external financing of the budget, growth will be driven by the decisions of especially through maximizing the use of today’s leaders. The Government is clear concessional resources and grants. Private that its focus is industrialization, but for sector resources must also be leveraged into this to occur in a way that creates jobs and key infrastructure investments, especially reduces poverty, Part One of this economic in energy and transport. Lessons need to update points to three key areas that be learned from past experiences, and the require attention for building on the growth private sector engaged in transparent, win- momentum. Firstly, continue with prudent win public private partnerships. PAGE v TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Thirdly, Tanzania needs to unlock the complete roll out of the National ID system growth potential of the private sector. and the shift towards electronic payments There is no alternative to private sector-led for government-related transactions, growth to reach the levels of investment, including for social transfers such as TASAF, employment and poverty reduction that will could greatly facilitate the expansion and fulfil the aspirations of the Tanzanian people. deepening of financial inclusion, particularly But reforms are needed in the following areas: for women and youth. predictability of policy making is central – without that, private sector actors will not Secondly, deepening inclusion by have the confidence to invest and create broadening the use of more advanced jobs; streamlining taxes and regulations will financial products and services will help unleash the ability of businesses, especially Tanzania move towards a more formalized, small businesses, to grow; expanding transparent, and dynamic economy. This access to reliable infrastructure (such as a can be achieved through measures that reliable and affordable power supply and include facilitating the full-scale sharing of an efficient port, road and railway network); infrastructures amongst banks and other strengthening the education and training retail payment service providers, as well as system to produce skilled workers; and enhancing the overall consumer protection access to affordable finance, which emerges framework and extending a deposit consistently in the top three constraints to insurance mechanism to Mobile Financial business growth in Tanzania and is a special Services. theme of this economic update. Thirdly, Tanzanians need expanded In less than eight years, Tanzania has made access to affordable long-term credit by significant progress towards creating an lowering the cost of risk through better efficient, low-cost mobile money transfer selection of borrowers and by reducing system, which has increased financial the disincentives on lending to the private inclusion for the benefit of many. However, sector. In this area, measures to reduce the much larger formal financial system, the pressure of public borrowing, improve which is critical for the growth of the information sharing by credit bureaus, business sector, is still lagging behind. The and redefine collateral requirements analysis in the report shows that Tanzania should be high on the agenda. High needs to make further steps in order to collateral requirements impact SMEs and improve its ability to mobilize savings and entrepreneurs with insufficient fixed assets, to provide access to affordable credit to and this is particularly constraining for the real economy. Interest rates remain women. One of the key messages of the high and access to credit very restricted, report points to paying greater attention hence resulting in a lower ratio of credit to towards bridging the gender gap in access the private sector relative to its GDP. This is to finance in rural areas where women true when we compare Tanzania with other involved in agricultural activities suffer countries in the region. significant limitations. As we know, this also limits the positive effects of increased Part Two presents three areas of particular access to finance on the overall economy, attention to deepen Financial Inclusion. hence posing serious constraints to poverty Firstly, efforts should be made to expand reduction and increased shared prosperity. access to those still not participating in financial services, including women and youth. Similarly, the range of services Bella Bird available to those who are already active in Country Director for Tanzania, Malawi, the financial sector should be expanded. A Burundi and Somalia PAGE vi The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Abbreviations and Acronyms ATM Automated Teller Machine BoT Bank of Tanzania CICO Cash-in, cash-out CFA Connected Farmer Alliance CGAP Consultative Group to Assist the Poor CMC Community Management Committee CDD Customer Due Diligence DAWASCO Dar es Salaam Water and Sewerage Corporation DB Doing Business EAC East African Community EU European Union FDI Foreign Direct Investment FL Financial Literacy FSDT Financial Sector Deepening Trust FYDP Five-Year Development Plan GDP Gross Domestic Product GPFI Global Partnership for Financial Inclusion ID Improved Identification ICT Information and Communication Technology KYC Know-Your-Customer LGA Local Government Authority LGD Losses Given Default MFI Microfinance Institutions MNO Mobile Network Operators MFS Mobile Financial Services MSME Micro, Small and Medium Enterprises NEC National Election Commission NBFI Non-Bank Financial Institution NPL Non-Performing Loans OPEC Organization of the Petroleum Exporting Countries PAFI Payment Aspects of Financial Inclusion P2G Person-to-Government P2P Person-to-Person PPP Public-Private Partnership PSSN Productive Social Safety Net ROA Return on Assets ROE Return on Equity PAGE vii TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION SACCOs Savings and Credit Cooperatives SOE State Owned Enterprise TANESCO Tanzania Electric Supply Company Limited TIB Tanzanian Investment Bank TASAF Tanzania Social Action Fund TDV Tanzania Development Vision TZS Tanzanian Shilling USAID United States Agency for International Development UK United Kingdom UIDAI Unique Identification Authority of India UFA Universal Financial Access USD United States Dollar WBES World Business Environment Survey WBG World Bank Group PAGE viii The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Acknowledgments The ninth edition of the Tanzania The team would like to thank Bella Economic Update was prepared by a joint Bird (World Bank Country Director World Bank team of the Macroeconomics for Tanzania, Burundi, Malawi, and & Fiscal Management (MFM) and Somalia), Preeti Arora (Country Program Finance & Markets (FM) Global Practices. Coordinator), Abebe Adugna (Practice Wendeline Kibwe prepared Part One and Manager for MFM, Africa) and James Andrea Dall’Olio, Barbara Calvi, and Marco Seward (Practice Manger for FM, Africa) Nicoli prepared Part Two. William Battaile for their guidance and leadership provided overall supervision. The authors throughout the preparation of the report. acknowledge the contributions of Fiseha Gebregziabher, Valeriya Goffe, Jonathan Irfan Kortschak provided editing Markswell, Fernando Montes-Negret, assistance, while Grace Mayala, Serena Emmanuel Mungunasi, Harish Natarajan, Cavicchi, Joseph Rubambe, Abdulaziz John Wearing, Yutaka Yoshino, and Peter Muhile and Loy Nabeta managed the Zoetterli. The report also benefitted design and printing of the report. from the insights of Margaret Miller and Jacques Morisset, as well as comments from the IMF Tanzania team led by Mauricio Villafuerte. PAGE ix TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Executive Summary In 2016, the global economic to fulfill its aspirations of becoming a environment remained subdued, with middle-income country. In addition to growth performance in Sub-Saharan describing key aspects of macroeconomic Africa the weakest in over 20 years. performance and fiscal management, the Economic conditions across most advanced report presents a timely analysis of the economies remained challenging, while impact of financial sector deepening on emerging and developing economies as economic activity and on the livelihoods of a whole are set to maintain their growth Tanzanians. momentum. However, there is a lot of Part I. State of the Economy variation between developing countries. Growth in Sub-Saharan Africa slowed down In the context of a fragile global economy, significantly, dropping from an average Tanzania has maintained a relatively high real GDP growth rate of 4.5 percent in the level of stability. Tanzania is one of the few 2010-15 period to an estimated 1.5 percent resource-intensive African economies that in 2016, the lowest rate in more than two have remained resilient in the face of volatile decades. The decline in the region’s average global conditions. The decline in average growth rate is the result of a number global oil prices has been favorable for of factors, most notably the ongoing Tanzania’s fuel import bill, which declined adjustments to sluggish commodity prices, by about 3 percent in the period from 2015 the slowdown in export demand, and the to 2016. In contrast to the price of oil, the tightening of global financial conditions. price of gold, which is one of Tanzania’s most significant exports, has declined by In the context of these developments, the much less, cushioning the country from a ninth addition of the Tanzania Economic significant terms of trade shock. Indeed, Update describes the current state of the Tanzania’s terms of trade index improved economy, with the special topic focusing in the period from 2013 to 2015, with this on financial inclusion. The report aims improvement standing in sharp contrast to to stimulate policy analysis and debate the decline experienced by net oil exporters around the key economic and development such as Angola and Nigeria. challenges that Tanzania faces as it strives PAGE x The World Bank Group Macroeconomics and fiscal management Global Practice, Africa region The Tanzanian economy has continued to tighter fiscal controls and improving record a strong performance, maintaining accountability of public institutions. The high growth and low inflation rates. Over new administration has embarked upon the year, Tanzania recorded a real GDP a strong policy direction of improving growth rate of nearly 7 percent, among the public administration and clamping highest in the region, despite a slight decline down on corruption. While these public in the third quarter of 2016. The inflation rate administration reforms are instrumental in has remained low and near the authorities’ strengthening accountability, they could also medium-term target of 5 percent, although impact the private sector via two channels. it has trended upward in recent months, First, the private sector relies significantly following a tightening of the food supply on Government demand for goods and and rising energy costs. The overall external services, and policies that limit this demand balance continued to improve, with foreign will decrease private sector activity. Second, reserves remaining stable at the equivalent policy adjustments, if they occur frequently, of four months of import cover. The value of could cause uncertainty for the private the shilling has also remained stable and the sector, and this uncertainty could dampen fiscal deficit has been contained, standing at private sector investment decisions, with 3.5 percent of GDP at end-June 2016. negative implications for future growth. These implications would mean that the However, the Government’s tight fiscal Government should pay more attention to, and monetary stance may have weighed and be more explicit about, the potential on economic performance. The 2015/16 unintended consequences of Government budget saw overall spending fall below policies on the private sector. target mainly because of under-execution of development projects. External borrowing To maintain the growth momentum, the also fell short of expectations due to delays Government will need to focus on three in securing funds from foreign lenders. A key growth enablers. The challenge is to decline in foreign financing of the budget increase growth rates to achieve higher has in turn slowed both money supply levels of poverty reduction and the creation growth and credit growth to both the public of a sufficient number of productive jobs to and private sector. In response, the Bank of absorb new entrants to the labor market. Tanzania has recently lowered the discount Toward this end, the Government forecasts rate in order to boost domestic credit growth rates to increase to 8.2 percent by growth, especially to the private sector. 2019. The good news is that, as shown by Tanzania’s recent resilience to the sluggish The medium term outlook remains global economic conditions, the economic favorable, though the economy continues outlook will be largely dependent on to adjust to Government policies including domestic policy and performance. The PAGE xi TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION three growth enablers that could lay the the Government to unlock external foundation for achieving the Government’s financing of the budget, in addition to vision of higher real economic growth tapping financing from private sector include: resources, including through PPPs. i). Continued prudent macroeconomic iii). Supportive policies to promote management to promote stability: private sector investment and The authorities have a strong growth: Reforms are required to track record of macroeconomic unlock Tanzania’s private sector policy management, which will growth potential. These reforms need to continue. The improved should foster the supportive business revenue mobilization and tighter environment that is needed to crowd anti-corruption controls will aid in private sector investment. Such fiscal policy implementation. The reforms include policy predictability, continued progress towards the use expanding access to affordable of natural gas for power generation finance, streamlining taxes and will reduce the import bill and current regulations, expanding access to account deficit. The continued reliable infrastructure (such as implementation of prudent monetary power supply and good road and policy should provide the necessary railway networks), and improving support for maintaining relatively the education and training system to low inflation, which is important for produce skilled workers to promote growth. industrialization. In addition, the private sector should be accorded ii). Effective implementation of enough space to play its part, public investments to address including partnering with the public key infrastructure gaps, including sector through PPPs. transport and energy: Tanzania plans to scale up investments in Part II. How does the financial sector infrastructure and human capital to contribute to Tanzania’s economic reduce large existing infrastructure development: the role of Financial and skills gaps. Addressing these Inclusion? gaps should constitute the basis for Tanzania has made great progress a higher growth trajectory into the towards increasing financial inclusion1, future. In particular, it would promote however access to finance remains industrialization, which would challenging. In less than eight years, create productive jobs. However, an efficient and low-cost mobile money this will require greater efforts by 1 Financial inclusion can be defined as the uptake and use of a range of appropriate formal financial products and services that are provided in a manner that is accessible and safe to the consumer and sustainable to the provider. PAGE xii The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region transfer system has significantly increased and addressed in order to maintain public the financial inclusion of Tanzanians. More confidence in the system, preserve the than 60 percent of the population now has gains achieved through greater inclusion, a financial account, compared to 11 percent and provide finance for growth. in 2006, with most of these accounts being held with mobile money services. However, Tanzania lags behind most comparator the much larger formal financial system, countries in terms of availability of critical for the business sector, is lagging credit, particularly long-term credit. A behind in terms of its ability to mobilize lack of credit to invest in real capital assets savings and to provide access to affordable limits productivity increases and therefore credit to the real economy. Interest rates growth. Small and medium enterprises are remain very high and access to credit very particularly under-served, limiting their restricted, as evidenced by the low ratio capacity to fuel much needed job creation. of credit to the private sector over GDP. High collateral requirements negatively This ratio stands at less than 15 percent, a impact entrepreneurs with insufficient very low level compared to other emerging fixed assets, particularly women. In economies and less than half the level of addition to access constraints, businesses Kenya (36 percent). face high loan costs and short tenures which are not suitable for investment As a result, Tanzania’s financial system purposes. Consequently, only 13 percent is increasingly bifurcated. On the of small formal enterprises have a bank one hand, a rising and dynamic mobile loan. financial sector is opening the door to the Tanzania should take three steps provision of a broader range of financial towards improving financial inclusion: services to the larger public. On the other hand, despite the large number i). Reaching last mile customers, of players, the formal banking sector particularly women and youth, to services a very small group of individuals achieve universal access through: and companies, operating with high lending rates and service fees, as well as „„ The use of electronic payment systems wide interest spreads. To compound the by the Government for transfers to problem, the competitive landscape for citizens for purposes such as social mobile and traditional financial services protection and conditional cash does not facilitate the gradual upgrading transfers. This would reduce costs of customers from transactional services and risks, while increasing volumes to savings and credit services, which to the point where it could be cost- remains the domain of the banking sector. effective to extend coverage to under- Furthermore, the recent deterioration of served areas. credit quality needs to be closely monitored PAGE xiii TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION „„ The acceleration of the roll-out of based approach to compliance, creating the national ID system. This could a level playing field between providers. be facilitated through the use of iii). Expanding access to credit by developments in biometric and mobile lowering costs and risk, and by technology to provide a platform for reducing disincentives to lend to the the provision of financial accounts at private sector by: low costs. „„ Reduced pressure of Government „„ Women and youth in particular would borrowing on the domestic market. benefit from increased financial Measures should be implemented to literacy to the underserved. This limit the crowding out of private credit could be achieved by implementing due to Government borrowing. One the National Financial Education measure to consider in this area would Framework in partnership with be the opening of the Government financial institutions and MNOs, securities market to international leveraging their networks and investors. In parallel, improvements technical experts to reach the poorest. to the cash and debt management ii). Deepening inclusion by consolidating process could have a significant positive progress and leveling the playing field impact. by: „„ Increased and improved information to „„ Implementing a deposit insurance credit bureaus. The quality of the data scheme. This should cover mobile provided to the credit bureaus should be money deposits and provide an improved, also thanks to the complete adequate consumer protection roll out of the single national ID (see framework for financial services. recommendation 1.A). In addition, Mobile Network Operators (MNOs) and „„ Facilitating the convergence of retail Non-Bank Financial Institutions (NBFIs) payment services. The Government, should be included in the reporting in consultation with the private system. sector, should foster the full scale interoperability of retail payments also „„ Women in particular would benefit when appropriate through shared from redefined collateral requirements. infrastructure. Measures should be implemented to expand the range of assets that can be „„ A uniform risk-based approach to used as collateral and to improve the compliance. In-line with international efficiency and efficacy of the judicial standards, the AML/CFT law and system for contract enforcement and regulations should be amended so that credit recovery. all financial institutions can adopt a risk- PAGE xiv The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region 1 The State of the Economy PAGE 1 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Part 1: The State of the Economy Key messages „„ Tanzania’s economic growth rate remains higher than that of most neighboring countries, while the inflation rate remains relatively low. The current account deficit has significantly improved, with gross reserves sufficient to cover four months of imports. The shilling has also remained stable in 2016, following significant depreciation and volatility in 2015. „„ The new administration continues to implement tight fiscal and monetary policies. The Government is increasing its domestic revenue mobilization, but shortfalls in external borrowing are constraining the full implementation of the development budget. Government has also reduced the discount rate in order to boost domestic credit growth, especially to the private sector, which has experienced significant deceleration. The financial sector remains stable, though the ratio of non-performing loans to total loans has increased. „„ The short to medium term macroeconomic outlook remains stable. However, the full implementation of the public investment program is challenged by shortfalls in external financing and implementation of reforms that will support private sector development. The most significant external risks relate to a possible rebound in oil prices and tight global financial conditions. „„ To maintain and increase the growth momentum, Government will need to focus on three key growth enablers: continued macroeconomic stability; the effective implementation of public investments; and supportive policies to promote private sector investment and growth. „„ The private sector should be encouraged to play a more significant role in investment and job creation, including through industrialization. This could be facilitated through measures to improve access to affordable credit and reliable infrastructure such as power and transport. Government efforts to streamline the regulatory environment are also critically important. PAGE 2 The World Bank Group Macroeconomics and fiscal management Global Practice, Africa region 1.1 Recent Economic Developments Africa. Globally, commodity-exporting emerging market and developing economies Global conditions remain sluggish are experiencing a protracted slowdown, with growth estimated at 0.3 percent in The global economic environment remains 2016. By contrast, commodity importers are challenging for many developing countries. estimated to record growth rates of about 6 Economic conditions across most advanced percent.3 economies remain subdued, while emerging and developing economies as In the context of a fragile global economy, a whole are set to maintain their growth Tanzania has continued to enjoy relative momentum. There is, however, significant stability. Tanzania is one of the few heterogeneity among developing countries. resource-intensive African economies that Growth in Sub-Saharan Africa slowed has shown strong signs of resilience in the down significantly, with average growth face of volatile global conditions. The above rates dropping from 4.5 percent in 2010- mentioned risks, which have been described 15 to an estimated 1.5 percent in 2016, the in previous Tanzania Economic Updates, lowest level in more than two decades.2 The remain important. In particular, China is the decline in the region’s growth rate is due to third largest market for Tanzanian exports, several factors, most notably the ongoing absorbing 13 percent of total exports in adjustments to weak commodity prices, the recent years, with most of these exports slowdown in export demand, the tightening consisting of minerals and precious metals of global financial conditions and, to a lesser exports. In addition, China is a significant extent, Brexit. source of development finance. Therefore, a sharper-than-expected downturn in export Commodity-intensive African economies in demand could have adverse effects on the particular have borne the brunt of sluggish Tanzanian economy. global growth. The decline in commodity prices since 2014 has taken a particularly Lower oil prices continued to suppress heavy toll on oil exporters in the region. the energy import bill in 2016. Fuel prices The downturn has been compounded by remain relatively depressed and are a tightening of financial conditions and projected to remain so in the foreseeable adverse weather shocks in some countries. future, with muted demand, resilient supply, Although many commodity exporters and high inventories (see Figure 1). The remain under severe economic strains, the price of Brent crude oil averaged at US$ hardest-hit include the region’s three largest 44 per barrel in 2016, US$ 8 lower than in economies, Angola, Nigeria, and South 2015. This has been favorable to Tanzania’s __________ 2 World Bank, Global Economic Prospects, ‘Weak Investment in Uncertain Times’, January 2017. 3 Ibid. PAGE 3 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION fuel import bill, which declined by about 3 the European Union (EU) turned out to percent in the period from 2015 to 2016. be short-lived and largely localized to the On the other hand, the relative stability of UK. However, the medium- to long-term gold prices has cushioned the country from repercussions are difficult to determine, the terms of trade shock experienced by with these repercussions partly depending oil exporters. However, uncertainty in the on how trade relations and financial flows global commodities markets around issues unfold between the UK and the EU in the such as the impact of OPEC supply cuts4 and years to come. For example, two UK-based increases in shale oil production presents banks, Standard Chartered and Barclays, risks of either a significant drop in gold prices collectively hold roughly 15 percent of and/or a sharp rebound in oil prices, which banking assets in Tanzania. Brexit could could be a drag on Tanzania’s economic reduce investment and financial flows from growth. As a signal of this uncertainty, oil the UK and European firms. In recent years, prices ended on a rising trend in 2016, with the UK and Switzerland accounted for more Brent crude expected to average US$ 55 per than 50 percent of the total FDI inflows to barrel in 2017.5 Tanzania. Under the unlikely scenario of a Figure 1: Global Prices of Fuel and Gold are Rebounding Source: World Bank Commodity Prices. Brexit is expected to have only a modest sharp Brexit-induced turbulence in the UK impact on the Tanzanian economy. The and other European economies, the impact initial impact of the UK’s vote to leave 6 on the FDI channel may be significant. ___________ 4 On November 30, 2016 OPEC members agreed to reduce production by approximately 1.2 million barrels per day (b/d) from the October baseline to lower OPEC’s production ceiling to 32.5 million b/d beginning January 1, 2017. Non-OPEC countries met following OPEC’s agreement and agreed to cut production by 558,000 b/d, with Russia making the largest cuts of approximately 300,000 b/d. 5 US Energy Information Administration, Short Term Energy Outlook brief, March 7, 2017. 6 In the immediate aftermath of the Brexit, a substantial number of emerging economies experienced a decline in stock markets and exchange rate depreciation. The Brexit has particularly affected countries with stronger trade links with the EU and the UK. PAGE 4 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Tourist visits from Europe may also decline, 2016 is estimated at 6.9 percent, slightly hurting the country’s booming tourism below the Government’s forecast of 7.2 sector which employs more than half a percent. million people and generates well over US$ 1.5 billion in foreign currency. The economy continues to adjust to Government policies including tighter fiscal Tanzania’s economic performance controls and improving accountability remains strong of public institutions. Since taking office in October 2015, President Magufuli has Tanzania’s economic growth remains high spearheaded a strong policy direction relative to other developing countries, of improving public administration and despite some softening in the third quarter clamping down on corruption. Improved of 2016. Tanzania’s economic performance tax administration has led to a substantial continues to rank among the highest in increase in the domestic revenues collected the region. The real GDP growth rate has in 2016. In the past year, the central consistently outpaced its EAC peers (see Government has put in place legislation to Figure 2). During the third quarter of 2016, regulate compensation and wages for the the real GDP growth rate declined to 6.2 broader public sector. This has strengthened percent, down from 7.9 percent recorded the capacity of the core administration in the previous quarter and 7.3 percent in to regulate the broader public sector. The the same quarter in 2015. High frequency Figure 2: Growth Continues to Outpace EAC Comparators Source: World Bank. data suggest a difficult environment for President has banned unnecessary travel, Q4 growth, including weakening business especially foreign travel, and reduced the sentiment, slowing credit growth and a slow use of allowances and honorarium as a pace of budget implementation, particularly mechanism of supplementing pay. There for development expenditures. Growth in has also been a nationwide drive to weed PAGE 5 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION out ghost workers in the public sector, and affected crop production in most parts of the more than 15,000 have been identified. country. Industry (both manufacturing and Government meetings in tourist resorts have non-manufacturing) grew by 8.6 percent been banned - an example of how public in the Q1-3 2016 period, compared to 8.1 administration reforms could also impact percent in the same period the previous the private sector, which relies significantly year, with higher growth in manufacturing on Government demand for goods and more than offsetting slower growth in non- services. manufacturing industry. The softening of the non-manufacturing industry sub-sector While these public administration reforms stems from the substantial deceleration of are critical in strengthening accountability, construction and a slump in the generation they could also impact the private sector via of electricity. The mining and quarrying two channels. First, the private sector relies sub-sector recorded strong growth, with a significantly on Government demand for rate of 15.6 percent in Q1-3 2016 compared goods and services, and policies that limit to about 6.6 percent in Q1-3 2015. This this demand will decrease private sector increase can be attributed to the increased activity. Second, policy adjustments, if they production of almost all types of minerals occur frequently, could cause uncertainty and natural gas. The increased production for the private sector, and this uncertainty benefitted from the continued low fuel costs could dampen private sector investment and the modest recovery of commodity decisions, with negative implications for prices. future growth. These implications would mean that the Government should be more The service sector expanded by 7.6 percent explicit about, and pay more attention to, in the Q1-Q3 2016 period, roughly a the potential unintended consequences of percentage point higher than recorded Government policies on the private sector. in the same period in 2015. The service sector has been buoyed by a number of Growth in agricultural production increased factors: growth in transport and storage in the first three quarters of 2016 compared due to increased gas production activities; to the same period in 2015, while non- a boost to public administration supported manufacturing industry growth decelerated by increased public spending in legal and (see Figure 3, panel a and b). Over the legislative activities; burgeoning financial first three quarters of the year, agriculture services due to increased use of financial registered a growth rate of about 2 percent, and mobile services; and significant growth 1.5 percentage points higher than recorded in education that reflects a change in in the corresponding period in 2015. Growth policy to the provision of fee-free public in Q1 and Q2 was helped by favorable education. rainfall, while rain shortfalls in Q3 negatively PAGE 6 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Figure 3: Sector Growth Rates Source: National Bureau of Statistics. The poverty rate has fallen from 60 percent capable of producing sustainable growth and in 2007 to an estimated 47 percent in shared benefits. Toward this end, investments 2016, based on the US$ 1.90 per day in infrastructure and the social sectors and the global poverty line. Despite this remarkable modernization of agriculture could be critical progress, about 12 million Tanzanians still live for the achievement of significant poverty in extreme poverty, earning less than US$ reduction. It is also important to ensure that 0.60 per day. Many others live on the edge these investments are prioritized and fully of poverty and are thus at risk of slipping funded so that they can be completed on below the poverty line in the case of economic time. Additionally, it is important to ensure shocks. In fact, in terms of absolute numbers the full funding of critical non-salary recurrent of poor citizens, Tanzania ranks in the top ten spending on items such as TASAF and countries in the world, and in the top four in capitation grants and medical supplies to SSA. Tanzania’s persistently high poverty rate, ensure good quality education and health despite its high economic growth, reflects services that directly benefit the poor. the fact that marginally productive economic activities and expansions in non-labor The Government continues to provide intensive sectors have underpinned much of support for social safety nets for poor and the economic growth during the last decade. vulnerable households. About 1.1 million The current growth momentum is expected extremely poor households have enrolled to lead to only a slight drop in poverty. A in the Productive Social Safety Net (PSSN)7 higher growth rate could contribute to the program, with TZS 42.6 billion having been eradication of extreme poverty, in line with disbursed to beneficiaries in April–June 2016. the TDV 2025 objective of becoming a middle Of the beneficiaries, four-fifths belong to income country with a competitive economy the poorest 40 percent of the population __________ 7 PSSN aims to reduce and break the intergenerational transmission of poverty in Tanzania. PAGE 7 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION and almost two-thirds are among the Headline inflation has remained low poorest 20 percent. The Tanzania Poverty and around the authorities’ medium- Assessment 2015 shows that cash transfers term target limit of 5 percent. At the end to poor households can make a significant of February 2017, the rate stood at 5.5 contribution to poverty reduction, including percent, up from the figure of 4.5 percent to improvements to human capital as a result recorded in October and remained almost of improved school attendance and access unchanged from the rate recorded in to better healthcare. The Government has February 2016 (see Figure 4). The recent also taken steps to review and clean up the gradual increase in headline inflation has database of beneficiaries to ensure ineligible been driven by upward trending food and households are removed. Coupled with the energy prices. The rate of food inflation close collaboration between TASAF and notched up from 5.1 percent in February LGAs to identify unqualified households, the 2016 to 8.7 percent in February 2017, due exercise will strengthen program supervision mainly to increases in prices of cereals, and accountability mechanisms. The such as maize grains and flour, rice Government should also consider making and beans. Moreover, energy and fuel all payments to TASAF beneficiaries through inflation edged up from 4.4 percent at electronic channels to reduce the costs and the beginning of 2016 to about 9 percent risks of cash payments processing, and as a in May 2016 and to nearly 12 percent in tool to further strengthen financial inclusion February 2017 on account of rebounding (see Part Two). global oil prices. Figure 4: Inflation has Remained Low Source: National Bureau of Statistics. PAGE 8 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region In 2016, the value of the shilling stabilized, billion for the year ending January 2017, following significant volatility and down from US$ 3.8 billion recorded for the depreciation in 2015. Figures 5 and 6 show year ending January 2016. The total value that the value of the shilling remained stable of exports of goods and services increased in 2016, especially against the US dollar, by 5.1 percent, led by strong performance Indian rupee and Kenyan shilling. There has in the export of minerals, traditional crops been notable appreciation against the euro and tourism receipts (see Figure 7). In and Chinese renminbi towards December. particular, the value of gold exports recorded From January, the shilling depreciated considerable growth of 29.8 percent due to against these four currencies, except the increases in both export volume and prices. Figure 5: The Shilling Stabilized After Figure 6: Nominal and Real Effective Significant Fluctuation in 2015 Exchange Rates Remained Stable Source: World Bank. Kenyan shilling. The stability of the shilling Moreover, during the same period receipts can be largely attributed to the Government’s from tourism and transportation increased implementation of a conservative monetary by 5.2 percent due to an increased number policy, supported by improved export of tourist arrivals and volume of transit earnings and reduced demand for foreign goods to neighboring countries. The total currencies to finance imports. The real value of imported goods and services effective exchange rate stabilized in 2016 8 declined by 15.3 percent between the year after a significant adjustment in 2015. It is ending January 2017 and the corresponding now close to its equilibrium level. period in 2016. All major import categories showed declines, especially in capital and The current account has narrowed transport goods, except for industrial raw significantly, as exports grew modestly materials. The slow execution of budgeted and imports fell significantly, especially development spending partly explains the for capital and transport goods. The decline in capital imports. current account deficit stood at US$ 1.8 __________ Real effective exchange rate is calculated as a weighted average of bilateral real exchange rates with 5 major 8 trading partners of Tanzania. PAGE 9 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Figure 7: Shifts in the Composition of Trade Flows (January 2017, year-on-year changes) Notes: “Other Consumer goods” exports include edible vegetables, oil seeds, cocoa, raw hides, cereals, raw hides and skins, and wood. Source: Bank of Tanzania and Tanzania Revenue Authority. Capital inflows have fallen, though account deficit especially in the context of remain adequate to finance the the high cost of non-concessional external shrinking current account deficit. loans. Gross international reserves stood During the year ending November 2016 at US$ 4.3 billion by end of January 2017, capital inflows, especially official transfers, a level sufficient to finance the equivalent decreased markedly by 68.7 percent. By of approximately four months of projected contrast, direct investment flows picked imports of goods services. This was a up modestly. However, official aid, at 1.4 significant increase compared to the level of percent of GDP in 2015/16, remained an about three months at the same point over important source of financing of the current the preceding three years. Figure 8: Current Account Deficit has been Narrowing Source: Bank of Tanzania. PAGE 10 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region 10 and Figure 11). The shortfalls were Growing Challenges in Fiscal due to delays in concluding negotiations and Monetary Policies with international lenders, in addition to Fiscal policy the Government’s cautious approach to external non-concessional borrowing that The fiscal deficit in 2015/16 was lower incurs high service costs. than budgeted and largely financed by domestic borrowing (see Figure 9). The The 2015/16 Budget saw significant overall fiscal deficit in 2015/16 stood at 3.5 overruns in recurrent spending and percent of GDP, slightly higher than the significant shortfalls in development figure of 3.3 percent recorded in 2014/15 spending. Despite Government efforts to but significantly lower than the budget control expenditures, recurrent expenditure target of 4.2 percent. The Government was higher than budgeted, driven largely by achieved this fiscal deficit through increased spending on goods and services increased domestic revenue collection, as well as salary and wages. Election year postponing some development spending spending pressures explain a large share Figure 9: Fiscal Deficit Remains Below 4 percent of GDP Source: Ministry of Finance and Planning. and controlling recurrent expenditure and of this overrun. Recurrent spending in corruption, especially during the second 2015/16 stood at 14.2 percent of GDP, half of the fiscal year. The fiscal deficit was 1.3 percent higher than in 2014/15 and largely financed by increased domestic amounting to 77 percent of total public borrowing which partially compensated for spending. On the other hand, development shortfalls in external borrowing (see Figure spending was lower than budgeted, due PAGE 11 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION in part to shortfalls in external borrowing, high execution rates (such as 141 percent with these shortfalls not fully compensated for roads, 157 percent for energy and 111 for by increased domestic borrowing. percent for education), though these high Development spending in 2015/16 stood rates are partly attributable to arrears at 4.4 percent of GDP, the same level as clearance. recorded in 2014/15 but significantly lower Strong measures to reduce tax than the budget target of 6.3 percent exemptions and to curb tax evasion of GDP. At about 23 percent, the share and corruption, especially during the of development spending to total public second semester of 2015/16, resulted spending declined slightly in 2015/16 in a significant increase in domestic compared to 2014/15 when the proportion revenue collection. Domestic revenue stood at 25 percent. This decline was driven stood at 14.4 percent of GDP in 2015/16, by under-execution of the budget. However, slightly lower than the budget target of by the end of 2015/16, about 69 percent 14.6 percent but higher by 1.6 percentage of development funds were released, points compared to the figure recorded an improvement compared to previous in 2014/15. The increased revenue years when not more than 60 percent of collection in 2015/16, especially during development funds were released. the second semester, was on account of significant effort by the Government to Figure 10: Declining Aid Flows have Been Offset by Increasing Non- Figure 11: Decrease in Grants and Concessional Borrowing Concessional Borrowing Source: Ministry of Finance and Planning. Source: Ministry of Finance and Planning. Moreover, in 2015/16 development funds reduce exemptions and to curb evasion were released earlier in the fiscal year, with and corruption. In 2015/16, domestic more than 50 percent released during the revenue was sufficient to cover 104 percent first semester. Some sectors experienced of the recurrent budget, slightly higher PAGE 12 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region than the figure of 101 percent recorded in lower than the figure recorded in June 2014/15. The contribution of aid (grants 2015. The stagnant level of total arrears and concessional loans) to the financing conceals a significant reduction in arrears to of the budget in 2015/16 continued to contractors and other suppliers, which was fall, amounting to only 1.4 percent of GDP, mostly offset by the increase in arrears of compared to the figures of 2 percent and 3.8 SOEs, especially TANESCO, to its suppliers. percent recorded in 2014/15 and 2013/14, Arrears to pension funds remained at 3.3 respectively. As a result, grants and percent of GDP, pending the Government’s concessional loans financed only 7 percent issuance of non-cash bonds to clear of the budget in 2015/16, compared to 12 the verified arrears. The accumulation percent in 2014/15. of domestic arrears is a symptom of dysfunctional budget implementation, with Arrears remain high and pose a serious sustained arrears undermining the trust credibility challenge. Although there of private sector suppliers, pensioners and has been a significant increase in revenue potential investors considering partnering collection since November 2015, progress with Government. The Government needs toward clearing arrears has been slow to clear these arrears as a matter of urgency (see Figure 12). Arrears to constructors in order to restore budget credibility and and other suppliers, pension funds, and the confidence of suppliers and potential SOEs amounted to 6.3 percent of GDP new investors, especially in infrastructure (equivalent to TZS 6.5 trillion) at end- investments. June 2016, which is 0.2 percent of GDP Figure 12: Arrears to Pension Funds Remain High (As Percent of GDP) Source: Tanzania Authorities and World Bank estimates. PAGE 13 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION The 2016/17 budget called for a fiscal for the clearance of verified arrears, as deficit increase to accommodate higher well as budget lines previously defined as levels of public investment and the recurrent spending. clearance of verified arrears. The deficit target of 4.5 percent of GDP was one Development budget underspending is percentage point higher than in 2015/16, largely explained by external financing reflecting plans to control recurrent shortfalls. Half-way through the fiscal expenditures, increase revenue and borrow year, the Government has managed to more to invest in development projects. raise only 12 percent of planned external Recurrent spending is slated to decline by financing from both concessional and about 2 percent of GDP. Domestic revenue non-concessional sources. Of the major collection is budgeted to increase to 16.9 financing sources, concessional borrowing percent of GDP from the 14.8 percent realized in the first half of 2016/17 was 21 outturn in 2015/16. The target for overall percent of the target for the whole fiscal public expenditure is 22.7 percent of year. This low disbursement of concessional GDP, 3.4 percentage points higher than in loans is largely explained by delays in 2015/16. Moreover, the budget reprioritized project preparation and implementation. resources toward increased development Non-concessional external loans disbursed spending, with a target of 46 percent of by December 2016 was only 2 percent of overall spending compared to the figure of the target for the whole fiscal year, partly 23 percent recorded in 2015/16. explained by a cautionary approach by the Government to borrow from external Development spending is budgeted markets due to high costs. Domestic to more than double this fiscal year, borrowing, by contrast, has been negative on if realized. Full implementation of the net terms for the first half of the fiscal year. 2016/17 development budget would Mobilizing concessional external financing result in an equivalent of roughly 10 going forward remains critical to execution percent of GDP in development spending, of the budget and realizing investment which is 6 percentage points higher than plans. However, this requires accelerated realized in 2015/16. The planned increase preparation and implementation of planned in development spending is set to be projects and programs, including policy and directed to projects identified under the institutional reforms. FYDP II, including the construction of the Central Corridor Standard-Gauge Railway While public debt remains at manageable and the expansion of the Dar es Salaam levels, it should be monitored closely due port. However, the overall budget figure for to significant increases in recent years. The development spending somewhat overstates public debt to GDP ratio, which stood at 37.7 the shift, as it includes some funds allocated percent in June 2016, increased by 2.5 percent PAGE 14 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Figure 13: Financing Shortfalls are Constraining Budget Execution (a) Budget versus Actual for H1 2015/16 (b) Budget versus Actual for H1 2016/17 (in billion TZS) (in billion TZS) Source: Ministry of Finance and Planning. of GDP compared to the ratio recorded in its debt, especially the external debt which is June 2015 (see Figure 14). This large increase vulnerable to exchange rate movements and is attributable to increased commercial a failure to achieve fiscal consolidation. borrowing, both from domestic and foreign markets, to finance the Government’s Domestic debt has increased in the past ambitious public infrastructure program and few years, as have shorter-term and to compensate for the decline in foreign aid. more expensive instruments. Domestic By June 2016, commercial debt constituted public debt only accounts for 8 percent of 23.3 percent of total debt, with external total debt, with this mainly composed of Figure 14: Public Debt in Selected SSA Countries (percent of GDP) Source: International Monetary Fund. non-concessional loans amounting to 64.4 Treasury bonds, mostly held by commercial percent of total commercial debt. Despite banks and more recently by pension funds. the increase in the level of debt, Tanzania However, in the year ending in November remains at low risk of debt distress. However, 2016, domestic debt increased 21 percent Tanzania will need to monitor and manage to a new record level of over TZS 10 billion, PAGE 15 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION compared to an increase of 5 percent for is almost the same level as in 2015/16. external debt. Budget financing requirement More than two-thirds of the total interest is the main driver of the increase in domestic payments are for non-concessional debt debt during this period. The share of from both domestic and external markets, longer-term instruments (Treasury bonds) underscoring the importance of closely continued to decline, from 70 percent to monitoring any new non-concessional 62 percent year-on-year. Additionally, the obligations. In the year ending January share of debt held by commercial banks fell 2017, US$ 601.9 million was paid by from 51.8 percent to 39.8 percent between Government for external debt service while November 2015 and November 2016. During TZS 1056.4 billion was paid for domestic the same period, pension funds increased debt service, which in total is equivalent to their share of domestic public debt holding about 2.2 percent of GDP. from 16 percent to 26 percent while and Monetary Policy other institutions increasing their share from 3.7 percent to 6.9 percent. The increased Monetary policy has remained tight. holding of Government securities by pension The year-on-year growth of extended broad funds, especially those which are financially money supply (M3) decelerated sharply stable, was aided by the Government making from 16.2 percent in January 2016 to 4.0 full payment of monthly employer’s pension percent in January 2017. Similarly, the year- contribution since 2015/16. on-year growth of reserve money contracted by about 1.0 percent in January 2017 from Public debt service has increased an increase of 16.3 percent in January 2016. significantly as a result of increased The contraction in M3 growth occurred on non-concessional borrowing. In 2016/17, the back of a decline in net foreign assets of total public debt service due is about 5.9 the banking system and, to a lesser extent, percent of GDP. A large share of this is a slowdown in domestic credit growth both principal repayments on domestic debt to the Government and private sector. (See that is expected to be rolled over. Actual Part Two on Financial Inclusion for related principal repayments is 1.8 percent of analyses.) GDP, which is largely for non-concessional external loans, while interest payment is The deceleration in domestic credit about 1.7 percent of GDP. At this levels, growth to both the Government and debt service is equivalent to about 38 private sector has prompted the Bank percent of domestic revenue in 2016/17, of Tanzania to reduce the discount rate up from about 36 percent in 2015/16. recently. Net credit to the Government Moreover, interest payments alone are contracted by 6.4 percent (year-on-year) in set to consume nearly 10 percent of total January 2017 compared with 12.4 percent public expenditures in 2016/17, which increase in the corresponding period in PAGE 16 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region 2016 (see Figure 15). Similarly, credit to the 2016 remaining stable at around 17.8 percent private sector declined from 25.3 percent and the ratio of liquid assets to demand to 5.1 percent between these two periods. liabilities at 42.4 percent. These levels are From March 2016 private sector credit well above the regulatory thresholds of 10 growth has stopped, which poses a risk percent and 20 percent, respectively. The for the growth prospects, in particular, the sector continues to grow, with return on decline in Government credit was largely equity (which measures how effectively due to a decline in the Bank of Tanzania’s the bank can use shareholders’ money to advances to the Government and lower net generate profit and expand banks’ operation) Government borrowing from commercial standing at 10.5 percent at end-December banks as a result of improved revenue 2016. However, the ratio of non-performing collection. In reaction to this, the Bank of loans (NPLs) to total loans edged up to 9.5 Tanzania has since March 2017 reduced percent at end-December 2016 from 6.4 the discount rate from 16 percent to 12 percent at end-December 2015, reflecting percent. a downward risk to banks’ profitability and future lending. Moreover, banks have been The financial sector remains stable, navigating the new environment created by though the deteriorating quality of Government’s decision to centralize public lending and the poor performance of institutions’ bank accounts at the Bank of some smaller banks is noteworthy. The Tanzania rather than at commercial banks, fundamentals of the sector remain sound, leading to a decline in deposits estimated with commercial banks’ capital ratio (total to be around TZS 600 billion. The directive capital to risk-weighted assets plus off- has affected banks’ liquidity at least in the balance sheet exposure) at end-December short term. Two major banks, CRDB and TIB, Figure 15: Low Monetary Growth Heralds a Slowdown in Credit to both Government and Private Sector Source: Bank of Tanzania. PAGE 17 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION have posted losses during Q2 of 2016 while driven by the second Five Year TWIGA Bancorp, a state owned commercial Development Plan (FYDP II). The bank, was put under the receivership of the Government’s vision is targeted toward Bank of Tanzania due to inadequate capital. industrialization and human development. This will require prioritization of sectors The real interest rate remains high but in which the country has a comparative stable, reinforced by steady inflation. advantage, including those which leverage The real cost of credit to the private sector its rich and diverse natural resources. The has remained fairly stable, staying within strategy can be built around diversification a narrow band of 10 to 11 percent since of resource-based industries, including January 2016 (see Figure 16). This reflects agribusiness, as well as upgrading stagnant nominal interest rates which have capabilities of value addition (e.g., food). remained stable at around 16 percent, and a The prospect of job creation through labor- Figure 16: Monetary Growth Slowed Sharply in 2016 While Interest Rates Remained Stable Source: Bank of Tanzania. low and stable inflation rate standing around intensive light manufacturing (e.g., textile 5 percent. Stability in real interest rates over and garment) critically hinges on successful the past three years contrasts with the improvements in human capital (skills). wide fluctuations experienced following the A special role is envisioned for the private global crisis, with the inflation rate reaching sector, with diversified domestic markets as high as 20 percent in late 2011. and consolidated State interventions. 1.2 Outlook and Risks According to Government forecasts, Maintaining the growth momentum is growth will accelerate to 8.2 percent a priority for the new administration, per annum by 2019 due largely to PAGE 18 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region an increase in public investment. The have a strong track record of macroeconomic Government’s growth outlook is based on stability, which will need to continue in full implementation of its fiscal policy, in order to manage future domestic and particular the reorientation of expenditure external imbalances. On the domestic side, toward public investment and dramatically improved revenue mobilization and tighter increasing the share of development anti-corruption controls will aid fiscal policy expenditure in the total budget to 40 implementation. On the external side, percent. Development spending is rising oil prices and tighter global financial budgeted in 2016/17 to more than double conditions may pose challenges. While to 11 percent of GDP, up from 4.4 percent the current account deficit is expected in 2015/16, with two flagships projects− to remain stable in the near term under the standard-gauge railway and Dar es the assumption that oil prices remain Salaam port expansion projects−accounting near current levels, rising oil prices will for spending worth about 1 percent of have a negative impact on the current GDP. Achieving the Government’s positive account and growth prospects. Moreover, growth outlook would also require favorable tighter borrowing conditions would have private sector and external conditions. With a significant impact on growth prospects, about 12 million Tanzanians living on less especially through shortfalls in financing the than US$ 0.60 per day and about 800,000 ambitious public investment program. The entering the labor force every year, higher current account deficit will continue to be and more inclusive growth is essential to partly financed by a combination of aid and creating much needed productive jobs and private capital inflows, although the former reducing poverty. is expected to play a less significant role over time. The overall level of gross international To maintain the growth momentum, reserves should remain stable in 2017. the Government will need to focus on three key growth enablers. There are Second, Government needs to effectively three areas that can lay the foundation implement and manage key public for achieving the Government’s vision of investments. In order to move to a higher higher real economic growth. These include: growth trajectory, Tanzania will need to scale i) macroeconomic stability; ii) effective up investments in infrastructure and human implementation of public investments; and capital, as planned under the FYDP II. This iii) supportive policies for promoting private is needed to help address the strikingly low sector investment and growth. level of power and transport infrastructure compared to other countries (see Figure First, continued prudent macroeconomic 17). Moreover, investment has been low, management is a necessary condition both from public and private sources, and for stability and growth. The authorities there are large gaps in skills necessary for PAGE 19 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION industrialization (see Figure 18). The and fully funded in order to be delivered on good news is that the FYDP-II has rightly time. Already a lack of funding is delaying emphasized the Government objective of implementation of key projects for additional scaling up infrastructure investments in power generation, even though these are both power and transport sectors as well critical to support industrialization in line as upgrading skills and quality of education. with the country’s ambition of becoming a The critical projects that have been identified semi-industrial nation by 2025. by the FYDP II will need to be prioritized Figure 17: Road Density and Electricity Production in Tanzania and Comparators Source: World Development Indicators and World Bank Africa Development Indicators. Figure 18: Average Growth Rates of Public and Private Investments Source: World Development Indicators. PAGE 20 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region And third, addressing constraints to the that Tanzania has the highest number of private sector is key to unlocking Tanzania’s non-tariff barriers among EAC members.9 growth potential. Tanzania’s ranking in the Besides, access to financing, tax rates and World Bank’s Ease of Doing Business (DB) inadequate supply of infrastructure are index jumped 12 positions from last year, other problematic factors.10 A deteriorating to 132nd out of 190 economies. Among quality of power services is limiting the areas where Tanzania performed better productivity growth of manufacturing firms than regional peers is the depth of credit and the poor performance of the power information, reflecting expansion of credit sector is perceived as a major constraint by bureau borrower coverage and credit data larger firms. Tanzania also lags behind its distribution from retailers. In spite of this EAC comparators (see Figure 19, panel b), in achievement, several constraints remain: terms of ease of doing business. • A survey of business managers of the top • The latest DB index released in October 100 mid-sized companies undertaken 2016 also shows that trading across borders in December 2016 signals a weakening remains difficult (see Figure 19, panel a), private sector sentiment (Annex 2).11 This due to the high cost of trade now at twice may partly reflect the recent and planned the SSA average, cumbersome import reforms by the Government, including procedures and lengthy documentation austerity measures and the drive for requirements at borders. increased domestic revenue collection, • Additionally, the recently launched EAC which have reduced the demand for goods Common Market Scorecard 2016 shows and services. Figure 19: Average Growth Rates of Public and Private Investments Source: World Bank, Doing Business report 2017. __________ 9 The EAC Scorecard is conducted jointly by the World Bank and EAC Secretariat. The previous scorecard in 2014 indicated that Tanzania managed to reduce the number of NTBs, but more have been introduced since then. 10 World Economic Forum, Executive Opinion Survey 2016. 11 The survey targets business managers of the top 100 mid-sized companies in Tanzania. There were 55 respondents to the three questions in the questionnaire. PAGE 21 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Taken together, these constraints imply purchasing low risk Government securities. that Tanzania will need to do more to The cost of lending is further exacerbated improve the investment climate and crowd by the uncertainty, slowness and non- in private sector investment. Such reforms transparent nature of the credit recovery should include ensuring policy predictability, process. Tanzanian banks complain about the expanding access to affordable finance, difficulties to recover collateral and resolve streamlining taxes and regulations, expanding NPLs, as a symptom of a dysfunctional access to reliable infrastructure, such as power insolvency and creditor rights system and a supply and a good road and railway network, slow, costly and unpredictable court system, and improving the education and training as well as multiple difficulties enforcing system to produce skilled workers to promote contracts and repossessing collateral.12 This industrialization. In addition, the private sector has an adverse impact on access to credit. should be given space to play its part, including Banks therefore try to protect themselves by partnering with the public sector through from substantial potential loss-given default PPPs. While the Government recognizes these (LGD) by creating a large buffer in the form of challenges and is currently working on reforms high effective interest rates (the Government such as streamlining of the business regulatory set floor rate plus spreads depending on the environment and adoption of an Electronic riskiness of the operation and the collateral Single Window to reduce time and costs at the offered by the borrower). port of Dar es Salaam, it could speed up as well as expand such reforms. The negative business From the supply side, the market is dominated sentiment indicators point to the need for the by the three largest banks, which account Government to promptly engage in public- for 45 percent of total bank lending and private dialogue on investment climate, and face limited competition from the vast pool over the medium term, help restore confidence of smaller banks in the market. Although the in the economy by hastening reforms and number of licensed banks is high in Tanzania policy adjustments that would sustain higher (58, compared to for example 43 in Kenya), private investment and growth. competition is surprisingly limited. Combined with the common practice of “layering” of Finally, reforms are also needed to ease the funding from large to small banks (reflected in systemic credit constraints to the private significant interbank deposits and wholesale sector, as discussed in the next chapter. deposits from pension funds and MNOs), In Tanzania, the commercial banks hold this raises the cost of funding for the latter the largest share of Government securities, group up to 6-6.5 percent, versus an average at around 40 percent. As such, they have of 2 percent for large banks. This gap is then little incentive to lend to the private sector reflected in higher lending rates charged by when they can obtain attractive returns medium/small banks. __________ 12 Judicial recovery procedures are considered very uncertain, lengthy and costly (lasting 4-5 years, on average), characterized by lack of transparency and, in many instances, by corruption and Court injunctions on behalf of delinquent borrowers. PAGE 22 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region 1.3 The Growth-Financial Sector Nexus increasing financial inclusion, due to a rapidly expanding financial sector and Financial development makes an important through the mobile money revolution, but contribution to the achievement of further improvements are required. About sustainable growth and poverty reduction. 62 percent of Tanzanians now have access Financial development has been shown to to basic financial services through the be an important factor for sustaining strong conventional banking system or mobile and stable economic growth for many money providers, up from a mere 11 percent Sub-Saharan Africa countries.13 However, a decade ago. As a result, in 2014 Tanzania for financial development to contribute to surpassed its own financial inclusion target economic growth it requires the expanded of 50 percent of the population by 2016, use of existing financial instruments, and the making it well-positioned to achieve the creation and adoption of new instruments Universal Financial Access Initiative by 2020. for intermediating funds and managing risk (Chami, Fullenkamp, and Sharma Notwithstanding these achievements, 2010). A well-developed financial sector the limited access of the private can potentially help to increase economic sector to credit remains a significant growth through several ways (Nzotta 2004). constraint, as evidenced by Tanzania’s First, it helps to mobilize savings and to low ratio of credit to GDP compared to allocate them to households, business and its peers. Tanzania trails Kenya and the Government for productive investments. Sub-Saharan Africa group in terms of the Second, it facilitates the management total value of credit relative to the size of liquidity in the system. Third, it helps of the economy. Kenya’s credit supply is to reduce the risks faced by firms and twice that of Tanzania’s while the average business in their production process and for Sub-Saharan Africa is three times that improves portfolio diversification. Fourth, it of Tanzania’s. Tanzania’s banking system provides a structure to link different sectors is small in terms of the total value of of the economy and inspire higher levels assets, mostly involved in collecting short- of specialization and economies of scale. term deposits and contracting short-term Fifth, it provides the necessary environment loans to relatively low risk borrowers (the for the implementation of Government larger enterprises) and the Government. In policies geared toward macroeconomic Tanzania, although working capital loans stabilization, including price and exchange are important their economic impact has rate stabilization. remained limited since banks obtain a very high return by lending to the Government, As emphasized in the next chapter, which is almost risk-free and which does Tanzania has made great strides towards not require the use of bank capital. __________ 13 See for example, the IMF Regional Outlook (April 2016). PAGE 23 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Improved credit availability can boost the gap between rich and poor expanded MSME growth, which in turn can support from 16 to 26 percentage points. Therefore, inclusiveness and help reduce poverty. The improving access to credit among MSMEs, 2013 WBES data show that access to credit including reducing the gender gap, can be a is perceived as the top constraint among conduit for further poverty reduction. MSMEs. At the same time the Poverty Assessment 2015 indicates that among the Part Two of this Economic Update presents major drivers for poverty reduction during a description and analysis of Tanzania’s the past decade was the participation of achievements in terms of financial inclusion non-agricultural businesses. Moreover, the and of the remaining constraints. It then Findex 2014 data reveal that gender and proposes policies that could promote income gaps may have widened recently greater financial inclusion and thereby despite the increased financial inclusion. support private investment to facilitate the Between 2011 and 2014 the gap between achievement of greater economic growth men and women account owners went from and increased poverty reduction into the a 7 to an 11 percentage point difference, and medium term. Box 1: An Overview of Tanzania’s Financial Sector Financial Depth and Structure Tanzania’s financial depth is very limited, as shown by its ratio of total financial assets to GDP, which stands at only 43 percent. The ratio for banking system assets to GDP stands at only 30 percent, while the ratio for credit to the private sector to GDP stands at only 17.1 percent (2015). Tanzania’s financial system is bank-centric, with the banking sector accounting for 71 percent of the total financial assets, split evenly between domestic and foreign banks. Pension funds and insurance companies account for 27 and 2 percent respectively, while collective investment schemes accounted for 0.1 percent. Banking System Of total banking assets, only about half go into lending, with lending fully funded by customer deposits, with a loan to deposit ratio of 85.8 percent in June 2016. This feature is not exclusive to Tanzania, as other African and lower income countries (LICs) are similarly characterized. However, even in relation to other LICs, Tanzania records a ratio of private sector lending to GDP well below the mean of 60-80 percent (see IMF 2016). Tanzania’s banking sector is small in terms of asset size and the percentage of individuals and businesses served (see table below). It is also crowded, with 58 banks in operation; concentrated, with a skewed distribution (with the two largest banks holding a market share of close to 40 percent of total bank assets). The banking sector is also very segmented in terms of characteristics and products (with a large number of specialized small lenders) and geographically (with 12 local community banks and 7 regional (quasi) monopolies for public sector deposits and captured, civil servant borrowers)14 and a branch network concentrated in the three largest cities in a largely rural country with poor communications. Paradoxically, it can be said that Tanzania simultaneously possibly has too many banks, but not enough competition, or competition only in segments of the market for more common, low-risk financial products. The large number of banks is partly the result of the low minimum capital requirements: TZS 15 billion (US$7 million) for commercial banks, TZS 5 billion (US$2.3 million) for deposit-taking __________ 14 Public sector deposits are “auctioned” in 7 regional “lots” – mainly to the larger banks with a nation-wide branch network, creating regional monopolies of this cheap source of funding. However, these regional allocations are not strictly observed. PAGE 24 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region microfinance institutions (MFIs), and only TZS 2 billion (US$900,000) for community banks. While BoT has already raised capital requirements in the recent past (2014), these levels are still very low compared to other countries (for example, Kenya’s minimum capital for commercial banks is equivalent to TZS 100 billion), and have not contributed to stimulating consolidation so far. Table 1: Number of Borrowers and Loans in the Tanzanian Banking System (as of April 30, 2016) Number of Clients in the Banking System Individual Company Number of Borrowers 1,242,451 34,007 Number of Loans 1,824,097 57,208 Source: CreditInfo. Paradoxically, Tanzania might have too many banking institutions (58), but not enough competition, as the skewed structure of its banking has resulted in a very concentrated banking system with a few large banks, and a proliferation of small banks which do not have the scale, nor the sources of funding to perform adequate intermediation functions. Considering that the 4 largest banks represent about half of total bank assets, loans, deposits and capital, and the following 6 largest bank have a market share of around 20 percent, there is less than a third of the market left to be shared among 48 very small banks, with market shares below 1-2 percent each. Even within the group of the 10 largest banks, the variance is very wide. For example, the total assets of the 10th largest bank represent only about 13 percent of the assets of the largest bank in the country. This very concentrated structure possibly implies there are high intermediation costs (due to the high fixed cost and lack of scale of the smaller banks), low efficiency, and small banks’ dependency on non-deposit funding, with negative consequences for the cost of borrowing in the Tanzanian banking system. Moreover, the liberal licensing policy followed by the BoT is putting a lot of pressure on its capacity to adequately supervise the banking system. Table 2: Market Shares (as a Percentage of Total Balance Sheet) Market Share Assets Loans Deposits Capital 2014 2015 2014 2015 2014 2015 2014 2015 4 Largest Banks 49.5 48.6 50.0 49.4 49.5 49.8 48.2 47.1 Next 6 Largest Banks 21.0 20.7 21.7 19.5 22.1 21.9 24.4 18.3 Rest of Banks 29.5 30.7 28.3 31.1 28.4 28.3 27.4 34.6 Source: BoT. Looking at the profitability of the system: while aggregate figures show overall positive and high return on assets (ROAs) and return on equity (ROE) in the range of 1.5-2 percent and 10-15 percent, respectively, 21 banks, out of 58, are actually making losses. The latter group includes mainly smaller foreign-owned, community and State-owned banks.15 On the other hand, large banks managed to obtain excellent ROAs of about 3 percent, and ROEs of up to 25 percent (except for one of them, Barclay’s, which made losses in 2015). In the second half of 2016 (from June to November) credit growth has stalled, in stark contrast to the double -digit credit growth experienced over the past years. The slow-down in credit origination is also connected to the build up of credit risk in the banking system: NPLs almost doubling in size and reaching 9 percent as of September 2016. The increase in NPLs was evident across sectors, but was particularly sharp in agriculture (25percent), real estate and manufacturing (10percent). However, the aggregate figures mask a very diversified situation across the 57 banking players active in Tanzania, with the smaller banks presenting signs of increased vulnerabilities (as shown in the case of the state-owned TWIGA Bank). A number of smaller banks now present level of __________ 15 More worrisome, some banks in the last two groups are reported to have exhausted their capital, with limited or slow BoT intervention to require owners to bring additional capital. PAGE 25 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION NPLs above 15 percent indicating a point of no-return for the individual institution. Of particular concern is the level of NPLs in the state-owned Tanzanian Investment Bank (TIB), whose level of NPLs reached 30 percent as of September 2016. The third structural characteristic of the banking system is the very short-term nature of the deposits collected by the banking system, with an average maturity as of December of 2015 of only 136 days, reflecting the high share of “sight” deposits in the system (i.e. deposits which could be withdrawn any time versus time deposits). This makes it very risky for banks to undertake what is called “term transformation,” in other words, financing longer-term loans with a short- term deposit base. This feature makes banks a vehicle for funding short-term consumption of individuals and short-term working capital of enterprises, but not able to fund longer-term investment projects. The fourth feature is the high cost and relative scarcity of bank credit. In Tanzania the key reference interest rate (the T- Bill rate) is determined in a less than perfect Government securities market, where few large banks – the only ones with a major branch network and a large deposit base - buy Treasury paper auctioned by the BoT at very high interest rates. The result is that the reference interest rate (for all floating rates) in the country stands at 14-15 percent. This high rate is the “risk- free” rate, which sets a very high “floor” for all interest rates in the economy. At the same time high T-Bill rates discourage banks from lending, for safety reasons and because banks do not need to put capital lending to the Government or the BoT (zero risk-weight). Finally, banks do not operate in a vacuum and complementary reforms to the judicial and court systems in the country are essential for banks to be able to collect efficiently on the loans granted and repossess quickly the collateral backing some of their credit exposures. Without an efficient and clean court system the losses given default would continue to be too high and banks will respond by increasing their interest spreads in a perverse system where honest borrowers are penalized by delinquent ones. Pension Funds With about 26.5 percent of financial sector assets, the Social Security Funds (Pensions) represent the second largest players after banks. The sector is increasingly under stress: benefit payments increase significantly more than the expected contributions, while the return on assets is limited. PSPF, one of the largest pension funds, has been recording negative cash flows since 2014, to a large extent connected to the payments of benefits for “pre-1999” members on behalf of the Government (for which PSPF is not being compensated). The quality of the asset portfolio continues to remain problematic and the portfolio allocation shows a share of Government loans larger than the regulatory threshold (of 10percent). This is a result of the (past due) loans extended to Government-related projects and institutions (for an amount estimated at TZS 1.9 trillion), whose recovery has not happened. This large exposure risks undermining the longer-term viability of the fund, with possible repercussions on the stability of the overall sector. Insurance The sector continued to grow rapidly (19percent increase in assets in 2015), but still it remains extremely small vis-à-vis the rest of the financial sector as insurance assets are less than 1 percent of the overall financial sector. Apparently, the sector remained well capitalized, with adequate solvency ratios. Capital Markets The capital market is still at a nascent stage, not playing a major role in resource mobilization and long-term financing. Financial instruments are limited both in the corporate and Government securities market. Market turnover and the level of capitalization are low and over 2015 the market experienced a slow-down, with market capitalization decreasing by 4 percent. Mobile Financial Services (MFS) and other NBFIs MFS accounts rose from 1 percent of adults in 2009 to 61 percent in 2015. Over 50 percent of electronic transfers in Tanzania go now through MFS, reaching a volume of transactions of 50 percent of the GDP. This high degree of access to payment services is thanks to the network of 240,000 MFS agents across the country. PAGE 26 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region 2 Financial Inclusion PAGE 27 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Part 2: Financial Inclusion Key messages „„ Over the past decade, Tanzania’s mobile money revolution has facilitated a dramatic increase in the share of population with access to financial services. Mobile money services are now the vehicle of choice for secure and low cost electronic payments. They also have the potential to offer an expanded range of services that would allow people to formally save and borrow. This would have a positive impact on poverty reduction, including on women and the youth, but it will also contribute to the formalization of the economy, hence spurring economic growth. „„ The rest of the Tanzanian financial sector, particularly banking, has continued to grow. However, the role of banks in intermediating savings into credit remains underdeveloped compared to other regional peers. In particular, limited access to finance, as well as its high cost and short tenure remain amongst the critical issues which constrain the development of a vibrant private sector. „„ As a result, the Tanzanian financial sector remains increasingly bifurcated, with a very dynamic mobile financial services sector competing against a very concentrated banking sector. The GoT should make efforts to unlock competition in the banking sector, as well as ensuring a seamless integration between mobile and traditional financial services. The full interoperability obtained through an improved payment system infrastructure would set the stage for a better integration. „„ Efforts should be made to expand access to those still not participating in financial services. Similarly, the range of services available to those who are already active in the financial sector should be expanded. A complete roll out of the National ID system and the shift towards electronic payments for Government-related transactions, including for social transfers such as TASAF, could greatly facilitate the expansion and deepening of financial inclusion. „„ Measures to extend access to credit and reducing its cost are also urgently required to ensure that the financial sector is able to support growth. This requires action on two parallel fronts. On the one hand, measures should be taken to reduce the crowding out of public borrowing on the domestic credit market, which contributes to increased lending rates. On the other hand, improving the credit reporting system and the collateral recovery process, would help reducing the credit risk faced by financial institutions thus stimulating lending to businesses and SMEs. „„ Greater attention should also be directed towards bridging the gender gap in access to finance in rural areas where women involved in agricultural activities suffer significant limitations. Although the proportion of women with access to an account has increased, a significant gender gap, particularly in the rural areas, still negatively impacts women’s access to financial services. This also limits the positive effects of increased access to finance on the overall economy, hence posing serious constraints to poverty reduction and increased shared prosperity. PAGE 28 The World Bank Group Macroeconomics and fiscal management Global Practice, Africa region Introduction market if she had handed in the cash to the agent? And how could she monitor her Hadiya is a vendor selling corn clubs on balances? The agent patiently explained to the streets of Dar es Salaam.16 Back in her the processes involved in registering for 2011, she was one of the more than 20 a mobile account, explaining how she could million Tanzanian adults who worked in deposit and collect cash from her account the informal sector without access to the using the network of active agents located formal financial system. This changed in around the country. 2014 when a mobile money agent offered services that enabled her to transform her Since that day, Hadiya has been an active business. Originally from Mbeya, Hadiya mobile money customer and has managed moved to Dar es Salaam at a young age to expand her micro business to better looking for a job as a vendor of corn cobs. sustain herself and her family. Hadiya now When she arrived in the capital city back saves money in her m-wallet. She has also in 2009, she sold her wares in the streets, convinced her family to register for a mobile keeping her monthly profits with her at all money account so that she can easily send times, under her kitenge, as she did not them money with a single click for fees as feel that leaving them in her small shared low as TZS 600 (US$ 0.30) for a transfer to room in Ubungo was safe. Then, at the end a value of up to TZS 100,000 (US$ 48). Over of the month, she would go to a transfer the past year, she has also taken out a series office in the city center, which operated with of monthly micro-loans through her mobile erratic opening hours, to send money to her account, which has enabled her to rent a parents, who lived in a village in Mbeya. On small kiosk in her neighborhood, so that she a few occasions, she gave the money to a no longer needs to sell on the street. She has bus driver heading to her village. However, also been able to diversify and stock larger when she used the bus driver’s services, she volumes of products. Since she opened her often worried about whether her parents account, Hadiya has accumulated more would actually receive the money and if savings, with a high degree of security. She so, when. However, the cost of the money has become an entrepreneur who borrows transfers often amounted to as much as 30 to invest in her business. Soon, she hopes to percent of the total value of the transfer. be able to obtain a larger loan from a bank to One day, in 2014, Hadiya was approached enable her to open her own shop. by a mobile money agent. She was initially reluctant to trust the agent: How could she By contrast, Mzuzi is the owner of a small, access her cash in case of an emergency? ten-employee food service company.17 How could she pay her suppliers at the He has been repeatedly denied access ___________ 16 Her imaginary name means “gift” in Swahili, as financial inclusion can be interpreted as a gift to previously excluded people, as it gives them an opportunity to improve their livelihoods sustainably and to invest in realizing their projects. 17 We have picked this name, which means “inventive” in Swahili, as small Tanzanian entrepreneurs often need to come up with their own, alternative solutions to raise working and investment capital, due to the barriers to accessing the formal financial system. PAGE 29 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION to a bank loan due to a lack of sufficient bank would require him to repay the loan collateral. Returning from the bank branch within 90 days, while Mzuzi would need six where he has yet again been turned down, months to complete the process, collect, Mzuzi is brainstorming to figure out how and repay the loan. Thus, Mzuzi is faced not he can raise some funds to enable him to only with an access barrier, but by serious accept contracts as a caterer for weddings affordability and loan maturity constraints. and other ceremonies taking place in his The only option left for Mzuzi is thus to turn neighborhood. Once again, the bank has to his uncle Jawaad, who owns a garment refused to grant him a loan. The reason for manufacturing business, to ask him for an the refusal is, because the kitchen he wants informal loan based on trust. for his business is small, he cannot pledge it as collateral. At the same time, however, The stories of Hadiya and Mzuzi exemplify he needs to find a quick way to scale up both the problems and opportunities operations, to procure some new equipment faced by small-scale entrepreneurs at and to hire a few more cooks and waiters various levels of development in terms to work at the weddings. Otherwise, larger of their access to the financial sector in businesses will outplay him and he will lose Tanzania. Both Hadiya and Mzuzi needed the opportunity to expand his business. access to funds for short-term working He has thought about taking out a mobile capital. However, while mobile money money micro-loan, but unfortunately these services were able to offer a solution to an are too small to meet his needs. In any case, entrepreneur such as Hadiya, who needed he would need to repay these loans within a short-term micro-loan, the formal banking a month – too short a time to service the sector was not able to meet the needs of debt through the additional profits he could the owner of a small SME such as Mzuzi, expect to generate. who needed access to a loan with a six- month tenure at a reasonable cost. The Even if Mzuzi were to find collateral, the requirement for collateral, the high cost of cost of bank credit for a new, small-scale loans, and their short tenures, has shut the borrower would be too high. Thus, his doors to too many entrepreneurs and SMEs, modest service business could not yield even those with good business prospects the required return to repay the loan and and with attractive expected cash flows. the interest. The floating rate on a loan that Mzuzi would be able to access would This section of the Tanzania Economic be in the order of 24-25 percent, without Update tells the story of Tanzania’s dual including the bank’s other charges for the financial system. While it documents and study of credit, signing fees, and so on. All praises the progress Tanzania has achieved of these would have significantly added to in terms of increased financial inclusion, it the effective cost of the loan. Finally, the also highlights a number of infrastructure PAGE 30 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region gaps which need to be addressed to expand (see Figure 20). This low level of coverage and deepen this inclusion. It also investigates is not surprising in a large, low income the constraints on the ability of the formal country with a low population density.18 In banking sector to finance growth. Finally, such a context, a traditional bank-centric, the Update proposes policy directions and branch-based, delivery mode of formal interventions that should be considered sector financial services can only serve a to address the identified constraints and small share of the population, mostly in the to sustain progress in the overall financial larger urban centers. Thus, more than half development in Tanzania into the future. of the people without a bank account report that excessive distance from a bank branch 2.1 Mobile Money: A (Payment is the main reason for their failure to hold an Services) Revolution account.19 The traditional delivery mode for financial However, over the past few years, the services faces significant constraints in a mobile money revolution has facilitated large country such as Tanzania, with its significantly increased access to basic mainly rural and dispersed low-income financial services, reaching where banks population having limited pledgeable Figure 20: Tanzania Lags Well Behind SSA in Terms of Traditional Financial Access Points, 2015 Source: IMF Financial Access Survey, 2015 and Bank of Tanzania, 2015. assets. With 2.5 bank branches and 6.4 and traditional financial sector players ATMs per 100,000 adults, Tanzania ranks in have not been able to. Since 2008, mobile the bottom quartile of countries in terms of network operators (MNOs) have introduced access to traditional financial access points innovative mobile financial services (MFS)20 ___________ 18 60 people per km2 compared to 81 in Kenya and 195 in Uganda; World Development Indicators, World Bank Group, 2015. 19 Followed by cost considerations and lack of the necessary supporting documentation (Global Findex 2014) 20 Mobile Financial Services (MFS) consist in providing access to, and allow customers to perform transactions within, a mobile money wallet or a bank account using a mobile phone. PAGE 31 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION delivered through mobile phones and rate of use of digital financial services. through agent networks. Mobile money has Back in 2006, only around 11 percent of helped bridge the vast distances between Tanzania’s adult population used formal a sparsely populated country, enabling financial services, with most of these much lower thresholds for profitable service users being well-off city dwellers and provision, enhancing convenience of service, formal enterprises (Finscope Survey, and reducing delivery times. By 2016, there 2006). Over just ten years, the proportion were more than 260,000 active mobile of the population with a financial account money access points throughout the country, has increased to 62 percent, with these or one for every 103 adults. These services accounts being held with banks or with have reached out to customers, taught them a mobile money provider (see Figure 22). how to use their m-wallets to transact money With this rate, Tanzania ranks ahead of transfers, offered them cash-in, cash-out most countries in SSA in terms of financial (CICO) and other services (see Figure 21). 21 access (see Figure 23). As a result of this Figure 21: Traditional Financial Access Points vs. Mobile Money Agent Locations (yellow and red dots; red=areas of high concentration) in Tanzania Source: Mas and Elliot 2014 (FSDT). As a result, more than 60 percent of adult progress, by the end of 2014, Tanzania had Tanzanians now have a financial account, a already reached its 50 percent Financial dramatic increase that has placed Tanzania Inclusion target, originally set for 2016.22 at the forefront in Africa in terms of the It is now well-positioned to achieve the ___________ 21 The actual number of mobile money agents (so called “wakala”) is estimated to be in the range of 130,000. However, given the absence of exclusivity arrangements, agents serve multiple providers: 260,000 is the aggregate number of agent accounts among all providers. 22 Target of 50 percent adults making regular (weekly) use of a financial access points. In February 2016, the Financial Inclusion Council endorsed a revised NFIF measurement framework that includes a new target for financial services usage of 70 percent by 2017. 23 The initiative aims to provide access to financial services to all working-age adults by 2020. PAGE 32 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region objectives of the Universal Financial Mobile money has contributed to Access (UFA) 2020 initiative. 23 Box 2 increasing the share of payments describes the key success factors behind conducted electronically, with mobile this mobile money revolution. money transactions accounting for Figure 22: Account Penetration, about half of the overall total of 2008-2015 (millions of accounts) electronic payments in Tanzania. Over time, mobile money operators have become the providers of choice for the majority of Tanzanians to carry out money transfers. Both the total value and number of transactions has grown at double digit rates annually, with the ratio of mobile money transactions to GDP reaching the Note: Figures include retail and wholesale accounts. level recorded by Kenya in 2015 (see Figure One individual/firm may have multiple accounts. Source: Bank of Tanzania. 24) and standing at around 47 percent, with a value of TZS 42.9 trillion (US$ 20.7 Figure 23: Cross-country Comparison in billion). The large majority of these mobile Financial Access (percent of adults with money transactions were previously carried access to an account) out in cash (see Figure 24). By 2015, close to half of the total electronic payments in the country were carried out through mobile money services. As a result, the expansion of Mobile Financial Services (MFS) contributed to a general increase (of 35 percent per annum) in electronic Note: Includes all adults that have an account payments (see Figure 25). personally registered at their name. Data for SSA and OECD from the Global Findex database 2014: “access to an account at a financial institution” is defined as the percentage of adults that have an account at a bank or another financial institution, and “access to mobile money account” is defined as the share of adults that have personally used a mobile money service in the past 12 months. Source: InterMedia FII data, 2015; Global Findex 2014. PAGE 33 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Figure 24: Trends in Electronic Money Figure 25: Trends in Electronic Payments Payments 201 1-2015 – Cross-country 2011-2015 (TZS billion) Comparison (percent of GDP) Source: Central Banks of Tanzania, Kenya and Ghana. Source: Bank of Tanzania 2016. Competition between MNOs has reduced also enhanced by the sharing of the agent the cost of money transfers, with these network between MNOs (52 percent reduced costs being a significant factor of the agents serve multiple providers in the annual double-digit growth in the compared to only 4 percent in Kenya). This market size. The mobile financial services has clear benefits for consumers in terms landscape in Tanzania is unique. On the of both the number of access points and one hand, the four major players actively service costs (US$ 0.17 for transferring an compete for customers (see Figure 26), amount of US$ 20, compared to US$ 0.37 while at the same time competition is in Kenya).24 Figure 26: Mobile Money Service Providers in Tanzania and Kenya, by Market Share TANZANIA KENYA By market share of active wallets By market share of active wallets Note: Figures are expressed as market shares of active m-wallets. Source: CGAP Infographic: Tanzania’s Mobile Money Revolution, 2015. ___________ 24 Data from CGAP Infographic: Tanzania’s Mobile Money Revolution, 2015. PAGE 34 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Box 2: The Mobile Money Revolution in Tanzania Mobile money services were first launched in Tanzania in 2007 by E-Fulusi (T) Ltd, a local company that introduced a product known as Mobipawa. The product did not perform well, and the company winded up its operations. However, in 2008, Vodacom Tanzania Ltd introduced the M-Pesa product, followed by which Millicom (T) Ltd introduced Tigo Pesa and Airtel (T) Limited introduced Airtel money in 2009. Zantel introduced Ezy Pesa in 2010. In 2014, two more players joined the market, with the Tanzanian Informal Sector Worker Union introducing Dau Pesa and Smart Banking Solutions Limited introducing B-Pesa, although their participation and customer base is still very limited. From 112,000 subscribers in 2008, the total number of registered mobile money user accounts had grown to reach 53,300,000 by the end of February 2016 (see Figure 8), with 17,600,000 active users who had conducted at least one transaction within a window of thirty days. To facilitate the mobile money business, the providers use a network of agents for cash-in, cash- out (CICO) operations. As of February 2016, there were more than 260,000 agents to support mobile money services throughout Tanzania. All service providers share the agents and their infrastructure to perform money transfers. However, customers still need to refer to their own provider’s agents for cash withdrawals. Service providers hold trust accounts in different commercial banks based on their network coverage. Service fees have progressively decreased, with charges currently starting from a minimum of TZS 10 per transaction for small customers. For an average size transaction of TZS 32,500 (US$ 16.25), the average fee for the transfer is TZS 325 (US$ 0.16), or 1 percent of the value of an average transaction. Several factors have facilitated the development of mobile money in Tanzania. First, the presence of a thriving and highly competitive mobile telecommunication sector, with five main players, none of whom control more than a third of the market, has been a significant factor. The leading players all have experience of developing mobile money platforms elsewhere in the region. In addition, there have also been new entrants within the last two years, which has driven down prices. Lower prices and service innovation have helped drive increased penetration, with more than 36 million subscribers by September 2016 (around 75 percent of the population). Coverage is high, even in rural areas, despite remaining gaps. The World Bank- financed RCIP (Regional Communications Infrastructure Program) expects to extend coverage to a further 2.5 million people in rural areas by the end of 2017, through targeted subsidies to base station operators. Second, the interoperability arrangements among the mobile money providers introduced in 2015 have allowed customers to transfer value throughout (most of) the networks. This has made P2P transactions more convenient and provided an additional incentive to people to sign up for mobile money accounts. Despite this important innovation, customers still need to refer to their own provider’s agents for CICO operations. Finally, the Bank of Tanzania has played a facilitating role, carefully balancing the need to ensure adequate supervision, while at the same time avoiding stifling market developments. The BoT initially adopted a test and learn approach to MFS (GSMA 2014) when the market was at its early stage. The 2007 amendment to the BoT Act (2006) gave BoT powers to oversee and regulate non-bank entities offering payment services and was operationalized through the Electronic Payment Schemes Guidelines of 2007, which allowed MNOs to offer payment services. Under this framework, MNOs were required to establish a trust account with a partner commercial bank, where they would deposit funds to cover mobile payments. The commercial bank would in turn seek a letter of no objection (which remained confidential) from the Central Bank that would allow the service provider to operate. Only after witnessing a boom in MFS did the BoT strengthen the regulatory framework through the development of the National Payment Systems (NPS) Act (2015) and the related Electronic Money (E-Money) Regulations (BoT 2015). The NPS Act improved transparency and the homogeneity of the system by issuing licenses to MFS providers, by establishing clear requirements and procedures applicable to all of them, and by imposing penalties for non-compliance. PAGE 35 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION MNOs have entered into bilateral inter- The increased use of electronic operability agreements to enable payments creates multiple benefits to customers to easily transfer funds between the economy and to the people. The accounts across different networks. Since increased use of electronic payments February 2016, the four main MNOs have can benefit the country in multiple ways. become inter-operable, enabling users to It enhances the safety and efficiency of perform person-to-person (P2P) payments transactions; it increases the liquidity in between accounts operated by different the financial sector; and, by increasing service providers.25 However, this inter- the transparency of transactions, it also operability still has some limitations. For contributes to reducing the informal example, customers can only perform CICO economy.26 operations through mobile money agents that are directly hired by their own provider For individuals and small businesses, (also, see Box 9). the use of mobile money has reduced direct and indirect costs27 and increased MNOs are also bilaterally connected safety. It also facilitates the creation of a to banks and aggregators. This enables digital footprint that could progressively users to transfer funds between their bank support users’ access to the broader accounts and their mobile wallets in both financial sector and enable their entry directions (push and pull); to pay utility bills; into the formal economy. MNOs have a and to pay some taxes and other levees. wealth of data pertaining to the financial Some of these use cases have proven very transactions of users and increasingly successful and have strongly driven the use this information to assess client uptake of mobile money in Tanzania (e.g., creditworthiness. Such information, if for the payment of electricity bills). Payment shared with other financial actors, could service providers referred to as aggregators also contribute to extending bank credit (e.g., Selcom, Maxcom) play an important to a larger number of individuals, and to role in this space by filling infrastructure gaps; micro and small informal businesses. Over by enabling mobile phones as an access time, this process will support a path channel for some banking services; and by towards formalization for these mostly adding value to the offer of banks and MNOs. informal businesses. ___________ 25 Some limitations remain in the process of achieving full interoperability in Zanzibar: while Zantel’s Ezy Pesa mobile money service – the main provider on the island – is interoperable with Tigo Pesa as a result of the recent acquisition process in June 2015 of Tigo’s holding company of an 85 percent stake in Zantel), interoperability arrangements between Zantel and other MNOs are not yet in place. 26 See BIS-WBG 2016, WBG 2012a and WBG 2012b. 27 Direct costs include the ones associated with remittance transfers or indirect ones, as the opportunity costs of physically moving to bring money to settle payments for small traders. PAGE 36 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region 2.2 From Payments to Deposits: Mobile money is now the most popular Mobile Money is the Most Popular instrument used by Tanzanians to Saving Channel save. Interestingly, the increase in savings has occurred despite the decline in the Accounts allow individuals to save proportion of people who saved using in a safer manner. In fact, Tanzania’s services provided by a bank or other increased financial inclusion has been financial institutions from 11.9 to 9 percent, accompanied by an increase in the number indicating that some individuals may have of Tanzanians who save. Savings benefit moved away from banks towards mobile individuals by providing them with security money. In fact, mobile money accounts Figure 27: Trends in Saving Behavior – Cross-country Comparison (percent of adults) Note: Savings at a financial institution do not include mobile money. Source: Global Findex, 2014. of funds to plan future purchases and allow account holders to store up to TZS to smooth consumption, thus enabling 3 million (US$ 1,400) in their m-wallets, them to respond to economic shocks that with these savings receiving interest at cause unexpected expenses. In turn, this rates ranging from 2 percent to 5 percent, could help them to develop an investment- comparable to the average rate provided oriented mindset (CGAP 2016). 28 In the by banks (3.4 percent in December 2015). period from 2011 to 2014, the proportion At the end of 2015, mobile money services of Tanzanians who saved increased by 20 were the most popular saving instrument, percent, with the current proportion in line with 22 percent of Tanzanians using these with the rest of SSA (see Figure 27). services (see Figure 28). ___________ 28 For example, smallholder farmers who are constrained by their low-income flows and by the seasonality of crops, find it important to save for future purchases such as seeds or tools (94 percent), for health care (94 percent), for unexpected expenses - such as family subsistence in case of a bad yield (85 percent)- and to pay for children’s school fees (81 percent). Ninety-three percent (93 percent) of them also confirm that increased savings have a positive impact on their willingness to invest in their farms. PAGE 37 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Figure 28: Saving Channel (percent of adults) 22% 21% 8% 2% 1% 1% Source: InterMedia Tanzania FII Tracker Survey Wave 3 (September-October 2015). Saving accounts are just one of a range include person-to-business (P2B) of financial products offered by MNOs, payment services for purposes such as with these products expanding to utility bills and merchant payments; and include a full range of transactional, person-to-Government (P2G) payment saving, insurance and credit products services for purposes such as schools (see Box 3). By leveraging the mobile money and hospital fees; infrastructure and by partnering with other • Savings and insurance products: financial sector providers, 29 MNOs have Mobile money users can save in their created an ecosystem to meet a large m-wallets and accumulate interest on spectrum of the more advanced financial the balances.30 In addition, most MNOs needs of their customers at reduced costs. have recently started to offer micro- One out of three mobile money users use insurance products (mostly health at least one of a broader set of services insurance) with affordable premia and provided by MNOs in addition to P2P coverage ranging from 2 to 13 months; transfers (see Figure 29): and • Credit: These include micro-loans • Advanced use cases for mobile extended by MNOs to mobile money money payment services: These customers with a monthly maturity. Figure 29: Mobile Money Advanced Uses – 2013 and 2015 (% of adults and % of each group) Source: WBG analysis on data from InterMedia Tanzania FII Tracker Surveys Wave 1 (November 2013-March 2014) and Wave 3 (September-October 2015). __________ 29 In order to provide saving and credit products, MNOs need to rely on financial sector providers. 30 Calculated daily, but allocated by the provider on a quarterly basis. PAGE 38 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Box 3: Examples of Advanced Mobile Money Products Offered in Tanzania Energy / Utility Bills Payment: • The Tanzania Electric Supply Company Limited (TANESCO) has reached agreements with all MNOs that allow mobile money customers to pre-pay electricity (“Luku”) directly from their m-wallets. • Similarly, the Dar es Salaam Water and Sewerage Corporation (DAWASCO) and other providers including Auwsa in Arusha, Iruwasa in Iringa, Tuwasa in Tabolra, Shuwasa in Shinyanga, Uwasa in Tanga, and Mwauwasa in Mwanza allow water bills to be paid via mobile money. • M-Kopa, which operates in Tanzania as well as Kenya and Uganda, has connected 400,000 homes to off-grid solar energy through its digital finance, pay-as-you-go model. Approximately 175,000 positive credit records are another by-product of M-Kopa’s finance model, as the firm participates in local credit bureaus. International Remittances: • MoneyGram allows Tanzanians located in more than 200 countries worldwide to send money to Vodacom’s M-Pesa account holders, who will receive it without additional charges. • Similar services are offered by WorldRemit to mobile account holders of Vodacom M-Pesa, Tigo Pesa, and Zantel’s Ezy Pesa. Savings Products: • M-Pawa was launched by Vodacom in partnership with Commercial Bank of Africa (CBA) in June 2014. M-Pawa allows customers of M-Pesa mobile money services to save money through their mobile phones. With over 5 million customers registered since inception, M-Pawa recorded deposits to a total value of TZS 34.6 billion (US$ 17.6 million) in September 2016. Interest on savings is calculated on a daily basis and paid back to the customer every quarter through his/ her M-Pesa account. Insurance Products: • Bima Mkononiby was jointly launched in 2016 by Tigo and Bima Milvik and offers hospitalization, life and personal accident insurance at affordable, flat rates, that can vary from as low as TZS 1,999 (US$ 0.96) for 2-month coverage, to TZS 15,999 (US$ 7.7) for 13-month coverage. Compensation can go up to TZS 3 million (US$ 1,450). The product has already registered more than 500,000 subscribers across the country since it was launched. • Linda Mbegu, offered by Airtel in partnership with ACRE Africa, Seed Co. Tanzania and UAP Insurance Tanzania Ltd. to provide the first mobile crop insurance in Tanzania. The product provides an opportunity for maize farmers to register for insurance against climate risk for free. • BimaAFYA, a health coverage launched by Jubilee Insurance Company Tanzania and powered by Vodacom’s M-Pesa, is an affordable and comprehensive medical insurance plan that gives subscribers access to over 150 hospitals. The insured can get in-patient, out-patient and maternity services in the hospitals. Credit Products: • M-Pawa by Vodacom and CBA also offers its customers unsecured, micro-loans that they can obtain instantly and that they can repay through their mobile phones. The loans start from a minimum value of TZS 1,000 (US$ 0.48) and go up to a maximum of TZS 500,000 (US$ 240), with a maturity period of one month. The total value of loan disbursements reached TZS 5.5 billion (US$ 2.7 million) in September 2016. • Timisa, launched in 2014 by Airtel in partnership with Jumo (a microfinance institution), also offers micro loans to its Airtel Money subscribers, repayable within 7 to 28 days. • Nivushe, launched more recently in March 2016 by Tigo, also in partnership with Jumo, provides micro-loans to its Tigo Pesa customers. The average value of loans is TZS 10,000 (US$ 4.8). Note: The list of products described is not intended to be exhaustive. PAGE 39 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Insurance products are also becoming more 2.3 The Backbone of Financial popular and are highly valued, in particular Intermediation: Bank Credit as a by members of more disadvantaged groups. Constraint to Growth Although penetration of insurance products About 56 percent of Tanzanians borrow remains limited (only about 17 percent of money to meet their consumption needs the adult population), they are critical in and to access social services such as mitigating risk and have a considerable impact health and education, although only a on poorer groups’ livelihoods and wellbeing, small proportion of these loans come from since these groups are more sensitive to crises financial intermediaries. Borrowing allows and unexpected events, as they live close to individuals to smooth consumption over subsistence levels. For example, farmers show time and to access housing and education a high level of awareness with regards to the and other services. While more than half need for insurance against price fluctuations of Tanzanians borrow money, with this and weather-related events, but also for proportion increasing since 2011 and in line health issues that may prevent them from with the rest of SSA, only a small share of working. In fact, almost nine out of ten these loans are contracted through the smallholder households believe that having formal financial sector. Less than seven an insurance plan is important both for percent of the population has access to their family and their agricultural activities loans through a financial intermediary, with (CGAP 2016). This is why some MNOs have this figure having remained stagnant since recently started providing mobile insurance 2011 (see Figure 30). products.31 Figure 30: Trends in Borrowing Behavior – Cross-country Comparison (% of adults) Source: Global Findex 2014. __________ 31 An example is provided by the Bima Mkononi micro-insurance (see Box 2). PAGE 40 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region While for individuals, informal channels the share of borrowers who access micro- remain the most common channel for loans offered by MNOs of the type provided borrowing, loans from mobile money to Hadiya (17 percent) is higher than those services are becoming increasingly who access loans from banks (7 percent), popular. While the majority of borrowers but also from other financial institutions access credit through informal networks of such as MFIs, Saccos, etc. (see Figure 31).32 family and friends (63 percent of borrowers), Figure 31: Borrowing Channels (percent of borrowers) Source: InterMedia Tanzania FII Tracker Survey Wave 3 (September-October 2015). Box 4: Are MFS crowding out NBFI in Tanzania? It is estimated that more than 2,000 NBFIs in Tanzania, including microfinance institutions (MFIs), savings, credit cooperatives (SACCOs), the Postal Bank and other NGOs, provide credit in various forms (Eusebius 2010). Despite their large number, NBFIs appear to play a more limited role in Tanzania than in other countries (see Figure 32). Figure 32: NBFI usage in Tanzania and Cross-Country Comparison (% adults), 2015 Note: Question for usage of different providers in Tanzania allowed for multiple responses. Note: NBFI mostly serve low- and middle-income households located in urban and peri-urban areas around the main cities, but with the expansion of banks’ branch network on the one hand and the advent of MFS on the other, their role has significantly diminished. Interestingly, NBFIs appear not to be very popular among smallholder farmers, with only five percent of farmers having ever used MFI services and only three percent using SACCOs (CGAP 2016). However, some banks are currently working with Village Savings and Loan Associations (VSLAs), which are informal savings group at the community level, to integrate them into MFS through tailored products. Source: InterMedia Tanzania FII Tracker Survey Wave 3 (September-October 2015). __________ 32 An example is provided by the M-Pawa product launched by Vodacom in partnership with Commercial Bank of Africa (CBA) in June 2014. M-Pawa provides both savings and micro-loans to customers subscribed to M-Pesa mobile money services (as of end March 2015 the product was actively used by 1.8 million subscribers), who can either disburse or repay through their mobile phones. Monthly loan disbursements have reached TZS 5.5 billion as of September 2016, while monthly deposits stand at TZS 34.6 billion as of the same date (Source: Bank of Tanzania). PAGE 41 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION In particular, the availability of credit to Despite the expansion of MFS, the finance business remains very limited, banking sector continues to play a with Tanzania lagging behind other central role to intermediate savings and countries in the region. A limited availability access to credit. Aggregate data show of credit (particularly long-term credit) limits that the volumes intermediated by MFS are the capacity of countries to invest and push very small compared to those intermediated forward their production possibilities frontier, by the banking sector. At the end of 2015, severely limiting productivity increases the value of mobile money stocks (i.e., the Figure 33: Bank Deposits and Mobile Trust Account Balances (TZS billion and % GDP) Source: Bank of Tanzania, 2016. and economic growth. The financial and money deposited in trust accounts by MNOs real sectors are closely linked, as finance is in commercial banks) accounted for less essential to the ability of enterprises to invest than three percent of total bank deposits (at in capital assets. Consequently, the absence around TZS 452 billion33 or US$ 229 million, of access to financial products constrains with total bank deposits standing at TZS economic development. Despite some 18.6 trillion or US$ 9 billion – see Figure 33). progress over the last five years, the ratio of Similarly, loans extended through mobile credit to the private sector over GDP shows money products were estimated to make up that Tanzania lags behind most comparator less than one percent of the total value of countries (see Figure 34). bank credit.34 __________ 33 Bank of Tanzania Department of Banking Supervision Report 2015. 34 While comprehensive data are not yet available, one should consider that for the month of September 2016 Vodacom’s M-Pawa monthly loan balance amounted to TZS 5.5 billion (USD 2.6 million), while total credit from the banking sector was TZS 15.2 trillion (USD 7.4 billion). PAGE 42 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Figure 34: Credit to GDP Ratio – Cross-Country Comparison, 2015 Note: The figure for SSA refers to 2014. Source: IMF 2016b, World Bank Open Data. In particular, MSMEs are still largely business (WBG 2013a), with this constraint un-served or under-served in terms of having its most significant negative impact their borrowing needs, with this limiting on small enterprises. Only 13 percent of their productivity, growth potential and small, formal firms have a bank loan, a ability to create jobs. While individuals figure considerably lower than the average can compensate for the limited availability figure of 17 percent for Sub-Saharan Africa of bank credit by resorting to other (see Figure 35). Most notably, 97 percent informal borrowing channels, access to of those loans require collateral, with the credit remains particularly problematic value of this collateral standing at up to for micro, small and medium-sized 265 percent of the loan amount. This enterprises (MSMEs) that need financing considerably restricts the number of eligible for productivity-enhancing investments. applicants, as smaller entrepreneurs, More than 40 percent of Tanzanian formal particularly women entrepreneurs, do not enterprises identify access to finance as have fixed assets of a sufficient value to the most significant constraint to doing pledge as collateral. Figure 35: Access to Finance as Key Business Constraint and Percent of Formal Firms with a Bank Loan Source: Enterprise Survey (WBG 2013a). PAGE 43 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION In addition to the limited access, the cost borrow do so to start, operate or expand of finance remains high and the tenure of a business activity or a farm.36 Credit is a loans is generally short, with both of these constraint for most of the 4.5 million informal factors acting as constraints on business micro-businesses and for the 12 million growth. Not only do firms struggle to access self-employed agricultural workers. This is bank credit, but those who do so must relevant, as data show a positive relationship provide high collateral and pay interest rates between the use of financial services and of up to 20 percent (see Figure 36).35 Loans the probability of a firm’s purchase of fixed Figure 36: Banks’ Interest Rates on Domestic Currency Source: WB analysis on BoT data. with high interest rates and short durations assets (WBG 2016b) that could result in an are mostly suitable for financing working expanded scale of operations. Credit provided capital, but not for investment purposes. through mobile micro-loans and NBFIs tends The short-term nature of the available to be of limited value and comes with very loans on the market, compounded with the short periods of tenure, which constrains the high interest rates, makes debt repayment potential of these subsistence entrepreneurs problematic, with loans mostly suitable only to achieve higher levels of business and for financing working capital. productivity growth and job creation (see Box 5). Providing these entrepreneurs with These constraints also affect informal, self- access to more consistent and longer-term employed and individual entrepreneurs, sources of funding could therefore help who need more affordable and longer- enhance private sector development and term credit to expand their activities. More stimulate economic growth. than one out of five Tanzanian adults who __________ 35 A survey performed by the Tanzanian Banking Association in January 2017 among its members indicated an average “prime rate”, i.e. the rate at which banks lend to their best customers, of about 19 percent. 36 Global Findex, 2014 PAGE 44 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Box 5: Using Mobile Phones to Boost Productivity of Tanzania’s Farmers - A Partnership between Olam International, the Connected Farmer Alliance (CFA) and Vodafone The Connected Farmer Alliance (CFA) is a public-private partnership that was established in 2012 by the U.S. Agency for International Development (USAID), Vodafone and TechnoServe to increase the productivity, income levels and resilience of farmers, particularly women farmers, in Tanzania, Kenya and Mozambique by developing and scaling mobile solutions tailored for the agricultural sector.In October 2014, the CFA signed its first commercial agreement with Olam International and Vodacom Tanzania in an effort to assist 30,000 smallholder coffee, cotton and cocoa farmers in Tanzania to improve their livelihoods through the use of M-Pesa and M-Pawa mobile finance services. Under the agreement, farmers can benefit from agronomic advice delivered by experts via text messages and from real-time information about market prices. They can also use mobile money transfers to increase the efficiency and security of their financial transactions. At the same time, the mobile-enabled supply chain benefits Olam’s business by enhancing communications with farmers, strengthening relationships and mutual confidence and improving overall efficiency. During the set-up phase, TechnoServe business advisors provided technical training to farmers and to Olam staff on the functioning of the new system. Connected Farmer Modules Note: By 2016, more than 10,700 smallholder farmers were successfully using M-Pawa mobile finance solutions, and more than 3,800 of them were applying new technologies or management practices as a result of the solutions developed through the program (TechnoServe 2016). Source: TechnoServe 2016. 2.4 Enhancing Financial Sector Tanzania Financial Inclusion Framework Development: three directions (see Box 7), these being: Tanzania is on the right track to make 1). Reaching the last mile: Extending further progress in the area of financial access to financial services access to inclusion. However, to address the remaining proportion of the unserved remaining gaps and challenges, it is population, particularly women, to necessary to focus future efforts in three achieve universal financial access; main directions, as identified in the PAGE 45 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION 2). Deepening inclusion: Consolidating 3). Expanding access to credit: Making the gains and progressively affordable credit available to businesses advancing the use of financial as a tool to achieve the economic services to increase the benefits of growth envisaged in Tanzania’s Five financial access; and Year Development Plan. Box 6: The Tanzania National Financial Inclusion Framework The National Financial Inclusion Framework establishes the context for the Financial Inclusion vision based on the concrete improvements that Tanzania would like to see in the lives of all Tanzanians through the use of financial services. It galvanizes all relevant stakeholders in the financial services sector through the formulation of one common vision of success and provides strategic direction for all initiatives for financial inclusion in the country. The working definition of financial inclusion for Tanzania entails the regular use of financial services, through payment infrastructures to manage cash flows and mitigate shocks, which are delivered by formal providers through a range of appropriate services, provided with dignity and fairness. In working towards the long-term vision and achieving set targets in the medium term, the Framework has identified fundamental barriers that limit the growth of financial inclusion in Tanzania. These include supply-side barriers ranging from high interest rates, inappropriate services that do not meet demand-side needs, and high costs due to inefficiencies of service delivery. There are also demand-side barriers such as information asymmetry, irregular income patterns, and financial literacy. In addition, structural and regulatory barriers include stringent or disproportionate requirements for client on-boarding, the lack of regulatory framework for broad based micro-finance services, and delays in rolling out a national identification system, to mention a few. Hence, the Framework attempts to address the broad barriers on financial inclusion through the implementation of key priority areas for identified core enablers to build a robust infrastructure that will enable growth and outreach of all financial services. The key priority areas include: Proximity: Enhancing and implementing access channels, such as agent banking, mobile telephony financial services, point of sales, stand-alone ATMs etc., and a regulatory framework that creates a conducive environment; Robust electronic platforms: Improving and developing Information and Communication Technology (ICT) payment platforms that facilitate cost effective access to financial services; Robust information and easy client on-boarding: Implementing, monitoring and enhancing the use of credit bureaus, proportionate Know Your Client (KYC) requirements, and an improved Identification (ID) system that is linked to financial systems and credit bureaus; Informed customers and consumer protection: Implementing a financial consumer protection mechanism and a financial education strategy. The Framework comprises of a monitoring mechanism to ensure that key stakeholders implement the key priority areas. The National Financial Inclusion Council, a policy body, shall ensure that the priority activities stipulated in the Action Plan are implemented and the set targets are achieved within the agreed timelines. The Framework is a private-public initiative and has been developed through a consultative approach using the various committees encompassing representations from all relevant stakeholder institutions.” Source: National Financial Inclusion Framework, Tanzania National Council for Financial Inclusion. PAGE 46 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region 1. Reaching the “last mile” users – account has increased, a significant gender the challenge to serve the most gap remains (45 percent of men compared disadvantaged to 34 percent of women). This has a negative impact at both the individual and Almost 40 percent of Tanzanians still societal levels, since research indicates that lack access to financial services, with when women have financial accounts, they significant gaps remaining in terms of tend to spend more than men on food, income levels, gender and location. The education, and health care, increasing the mobile money revolution has benefitted welfare and productivity of their family consumers at the bottom of the pyramid, (Doepke and Tertilt, 2011). For example, and a significant portion of the most asset ownership is an important issue vulnerable individuals are now financially that negatively impacts women’s access included, including a significant proportion to financial services (AFI 2016).38 A man of the people living below the poverty line,37 is close to three times as likely to be the and particularly women and subsistence head of a smallholder farming household farmers in rural areas. However, significant in Tanzania and to own the related land gaps in terms of access still persist, titles than a woman (74 percent of men including a remarkable 16 percent access compared to 26 percent women – CGAP gap between people living in urban and 2016). As a result, women are often rural areas (see Figure 37). determined by financial institutions to be A gender gap is acute in rural areas, ineligible customers due to their lack of particularly among women involved physical collateral. in agriculture activities. Although the proportion of women with access to an Figure 37: Demographic Trends for Active Mobile Money Account Use (% of adults) Source: Global Findex 2014. __________ 37 Approximately 28.2 percent of Tanzania’s population still lives below the poverty line, and inequality has widened between urban and rural populations: of the approximately 12 million Tanzanians living in poverty, 10 million are in rural areas (WBG 2015). 38 In an experimental study carried out in Tanzania, researchers encouraged co-titling of land between husbands and wives through price discounts (AFI 2016). These small financial incentives achieved almost complete gender parity without affecting demand for land titles, representing a low-cost, yet effective way to achieve gender equality in land ownership, and at the same time stimulate access to finance. PAGE 47 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Lack of accessibility, bankability, that are not reached by financial service affordability and knowledge of financial providers. Efforts are under way on products are among the binding the mobile telecommunication side to constraints most commonly quoted by enhance coverage in remote areas, but the unserved population (see Box 5). often, the limited volumes of transactions An interesting perspective regarding why does not justify a financial access point. Figure 38: Main Reasons for Not Signing Up for a Mobile Money Account (percent of adults who access mobile money but are not registered) Source: InterMedia Tanzania FII Tracker Survey Wave 3 (September-October 2015). some people remain financially excluded is Channeling a large share of Government provided by users who may have had only payments, such as TASAF, through sporadic access to mobile money through electronic channels could generate family members or friends. Limitations in volumes, justify new financial access accessing agents or POS, lack of identification points, and contribute to increased documents required to open an account, or inclusion and efficiency. Payments by cost issues are the most commonly quoted the Government to citizens (G2P) and reasons for not having a registered account by citizens to the Government (P2G) can by people who use mobile money, but do not be critical in driving individuals’ habits have a personal account (see Figure 38). 39 and increasing the volume of electronic transactions. If the Government were Accessibility remains an issue, to redirect more of its payments to especially for last mile customers people through electronic channels, this living in remote rural areas. Despite the could create higher transaction volumes increase in the number of financial access and gradually increase the low rate of points resulting from the expansion of penetration of financial access points. MFS, there remain areas in the country, This is particularly true for programs in particular in rural and remote areas, such TASAF, which specifically target __________ 39 “Indirect” access has negative implications on customer care and servicing, for example, in case the person indirectly using a mobile money account registered on another name loses the phone or PIN. PAGE 48 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region the poor and most vulnerable members especially last mile customers. Although of society, often concentrated in specific 90 percent of adults in Tanzania were areas where financial access points are reported in 2015 to have a voter card,41 currently lacking. A strategic approach to this is not a sustainable nor effective the digitization of Government payments, solution for providing the population with including both back- and front-end, could identification, especially for KYC/CDD create significant efficiency gains for both purposes (see Figure 39). Voter cards and the Government and the citizens, while their underlying systems are designed for increasing the demand for electronic a single purpose: to facilitate elections. payment services. In turn, this would Unlike a national ID system, voter cards are increase the scope for expanding access not accessible on a continuous basis (and points, significantly contributing to the thus are difficult to replace and are not objective of advancing financial inclusion always available when individuals turn 18) in Tanzania. 40 and do not offer a cost-effective electronic authentication capacity for individuals to Additional efforts are needed to improve reliably verify that they are who they say the bankability of these last mile they are.42 This is evidenced by the fact customers. Efforts to expand financial that customers opening a bank account inclusion should be focused on assisting in Tanzania must still provide at least two the most vulnerable people, including or three documents to verify their identity women, and informal businesses to and personal information, including meet the minimum conditions to introductory and ward letters, which become bankable by MNOs and financial should be provided for free but typically institutions, these being identification and cost around TZS 3,000. These are required basic financial and digital knowledge. because of the unreliability of existing identity documents and the difficulties The absence of a universal national ID in having them verified by the issuing system increases the costs and risks for authorities. The last mile customers are financial service providers to fulfill KYC/ likely to be disproportionately affected by CDD requirements, while also creating the costs and difficulties of gathering the burdens and barriers for customers, different documents they need. __________ 40 A few success cases have been identified in Tanzania – such as the collection of motor vehicle license fee payments (BTCA, 2016) – however, initiatives remain limited to few Government agencies developing dedicated solutions. 41 Importantly, the figure on voter coverage is biased because the survey was undertaken in the two months before the election and after a mass biometric voter registration drive. The figure that will exponentially go down over time as people lose or damage their voter cards. 42 For the 2015 Presidential election in Tanzania, voters were registered with fingerprints by the National Election Commission to prevent them from being registered twice. Voters were not verified with fingerprints at the time of voting, since the cost of the necessary equipment and infrastructure could not be justified for use once every five years. On the other hand, a national ID offers enhanced capabilities and economies of scale when it comes to verification because it is designed to be used for any time someone needs to prove they are who they say they are when accessing services, including for future elections, financial services, healthcare etc. PAGE 49 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Figure 39: Type of identification reported by adults in Tanzania Source: InterMedia Tanzania FII Tracker Survey Wave 2 (September-October 2015). The National Identification Authority publishing standards and fees for verification (NIDA) is rolling out a national ID system 43 methods. Once rolled out, the NIN could in line with the G-20 High Level Principle become the primary unique identifier for on facilitating customer identification people in Tanzania. In the financial services for digital financial services. Apart from sector alone, seeding NINs on all account completing the enrolment, 44 much work records will facilitate the development of a still needs to be conducted to develop the robust and comprehensive credit reporting underlying infrastructure for the national regime and the streamlining of payments ID system’s core functions and to enable by linking NINs to bank or mobile money its use by service providers for identity accounts. Likewise, the central population verification. This includes reviewing the database could form the foundation for all legal and regulatory framework (especially Government information systems, which as it pertains to privacy and data security), will reduce duplication and ensure that setting up registration centers in all of biographic and biometric data is accurate Tanzania’s districts, and developing and and up-to-date. __________ 43 NIDA was established in 2008 and launched the current national ID system in 2011, which utilizes biometrics (10 finger prints) to ensure the uniqueness of each person and holds 72 fields of data. By March 2016, approximately 2.5 million adults had registered and received their NINs and smart cards. NIDA has since then changed its approach to use the biographic and biometric data already in the National Election Commission (NEC) database to enroll citizens and generate NINs. As of December 2016, 11.5 million NINs have been generated this way (but not issued) and NIDA has separately enrolled and issued NINs to 500,000 civil servants as part of a Government initiative to remove ghost workers from the public payroll. The adult population of Tanzania is estimated to be 25 million. 44 The process foresees the initial issuance of unique national ID numbers (NINs) and smart cards to all adult citizens, residents and refugees by June 2017. PAGE 50 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Finally, the expansion of MFS to members principles and on how to use mobile of the more vulnerable groups calls money services. This training could also be for broad-based financial literacy (FL) accompanied by community sensitization training and community sensitization programs aimed at explaining the programs to ensure that all Tanzanians advantages and benefits that electronic understand basic financial concepts and payments can bring. the value added of the services they are being offered. Financial service providers The Government has already committed identify the significant gaps in FL in to raise the level of Tanzania’s financial Tanzania, especially among lower-income literacy by launching a new National earners, as one of the main obstacles to the Financial Education Framework (NFIF) deepening of financial inclusion (Principle 6 in 2016. As part of the broader NFIF, the of the G20 High-Level Principles for Digital new framework for financial literacy was Financial Inclusion). For example, a recent launched in February 2016 by the BoT in World Bank survey of maize farmers in collaboration with the Financial Sector Tanzania revealed that less than 10 percent Deepening Trust (FSDT) of Tanzania. The of farmers had ever tried to access any form Framework explicitly targets women, youth of credit, while others did not see a need and low-income households. 46 for it or had a fear of debt (WBG 2016d). 2. Deepening inclusion – moving Some poor people may even not be literate beyond payments at all. For example, 42 percent of the adult beneficiaries of conditional cash transfer Protecting the trust in MFS and in the programs cannot read simple text. 45 Even financial sector overall is a key pre- those who have access to finance are often requisite to capitalize the gains made in not fully aware of its terms, with almost increasing inclusion and to move to the one out of three individuals who borrow next step. As the range of MFS functions through informal channels not being aware expands and inclusion deepens, there is of the interest rate on their loan. Therefore, need for effective consumer protection (CP) it is of paramount importance that a push and deposit insurance mechanisms that help for financial inclusion be accompanied by secure confidence in the financial system. targeted training to educate people on the The Electronic Money Regulations 2015 principles of basic financial management include several consumer protection-related __________ 45 World Bank feature story: “Tanzania’s Conditional Cash Transfer Program Helps Reduce Extreme Poverty”, November 2016. http://www.worldbank.org/en/news/feature/2016/11/18/tanzanias-conditional-cash- transfer-program-helps-reduce-extreme-poverty 46 A financial literacy gap is also to a large extend responsible for lower usage of advanced financial services: for example a gap of as much as 26 percentage points remains between advanced users of in urban as opposed to rural areas. Most people in rural villages, in fact, use their accounts mostly to receive money transfers from their relatives in the cities, and often lack the digital knowledge to explore more advanced uses by their own initiative. PAGE 51 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION provisions. However, a more comprehensive the bank’s liquidation. Such an event could CP framework needs to be established in not only have disastrous consequences line with the directions of the NFIF. The at the individual level, with mobile money design of CP principles and standards (such users linked to those providers losing all as recourse and redress mechanisms, and their savings, but it would also rapidly alternative dispute resolution arrangements) result in a general mistrust of the whole should cover not only banks but also non- financial system, leading to a backward bank service providers, given the large leap to informal transactions. Thus, a case share of the population relying on mobile could be made for pass-through of deposit money services. In addition, the new CP protection of trust accounts held in the framework would need to include explicit banking system to protect the savings gender-specific provisions and indicators of mobile money account holders and to that have so far not been addressed. create a level playing field among providers. These suggestions are consistent with the G-20 High Level Principle 1, which aims Efforts to deepen financial inclusion should to encourage the provision of a digital be aimed at progressively expanding the approach to financial inclusion through use of value adding financial services and a national strategy and action plans, supporting the graduation of customers and Principle 3, which recommends the from purely transactional mobile services provision of an enabling and proportionate to other bank products. Financial legal and regulatory framework for digital inclusion can be deepened only if an financial inclusion. integrated network of financial and other service providers is in place, with this The current lack of deposit insurance network creating incentives and tangible schemes for mobile money accounts benefits for individuals and businesses to represents a threat to the stability of switch from cash to MFS. By entering this the system and risks undermining the network, some of the users, particularly progress achieved so far. While MNOs are the ones with the greatest financial needs, required to place all e-money balances in such as small entrepreneurs, should also trust accounts at banks, these balances are be able to progressively graduate from covered by deposit insurance only up to the an exclusive reliance on basic services to maximum coverage limit (currently TZS 1.5 access to a broader spectrum of banking million or US$ 720), which de facto nullifies services. At present, only about one third the coverage for the underlying mobile of mobile money holders use it beyond money depositor. In other words, if a deposit relatively low values (TZS 40,000 or US$ bank were to fail, these trust deposits from 19 on average) P2P or CICO transactions47 the MNO would be lost with claims going to (see Figure 40). __________ 47 Source: CGAP 2015b. PAGE 52 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Figure 40: Mobile Money Account Uses – 2015 (% of active mobile money users) Note: Multiple responses were allowed. Source: WBG analysis on InterMedia Tanzania FII Tracker Surveys Wave 3 (September-October 2015) data. In particular, the low penetration of Tanzanian entrepreneurs do not use MFS consumer-to-business (or merchant) unless their customers or their suppliers payment services results in Tanzanian do not use or accept mobile payments enterprises’ broader reliance on cash (WBG 2016b). This creates inefficiencies, transactions (see Figure 41). Network as the majority of businesses report effects justify technology adoption in that use of MFS result in reduced every sector, including financial services, transaction costs. G2P, P2G and P2B/ as positive network effects are lost if merchant payment channels need to be most users (senders and receivers) of strengthened for this access evolution to payments do not participate. In fact, fully materialize. Figure 41: Firms’ reasons for using / not using mobile money Source: WBG 2016. PAGE 53 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Financial inclusion can be deepened in the area of tailored, low-cost financial and its benefits made more pervasive by services. Tanzania is currently characterized incentivizing the usage of advanced MFS by a fragmentation and segmentation of the functions among and between consumers retail payment platforms. The existing local and businesses. In turn, this could be switch, Umoja (see Box 6), currently connects enhanced through the establishment 27 small to medium-sized banks out of the of an integrated payment ecosystem. total 58 financial institutions active in Tanzania. Following the example of countries such All the larger banks issue VISA/MasterCard as India, which is making efforts to rapidly cards, for which transactions are switched by expand the digitization process to a larger VISA abroad.49 This means that customers of number of services by offering incentives to Umoja-linked banks have no access to POS consumers and businesses, Tanzania could 48 terminals and are unable to use the ATMs of gain substantially from a broader use of MFS. larger banks.50 Similarly, the customers of larger In fact, it is estimated that by promoting banks and those such as tourists or business the transition from cash-based, traditional travelers who come from abroad cannot use financial services to an integrated ecosystem Umoja ATMs. In addition to Umoja, a few other of digital financial services, financial service payment service providers, such as Selcom and providers could achieve cost savings of up Maxcom, are currently competing to provide to 80-90 percent (McKinsey Global Institute banks with payment processing services.51 A 2016 – see Figure 42). In a competitive number of technical solutions are currently market, the savings could enable these under discussion among the banks and MNOs service providers to make their products more on how to achieve the increased integration of affordable. However, while expanding the the retail payments environment in Tanzania, financial service ecosystem, providers should aiming to increase the level of interoperability also ensure that they meet their customer between payment instruments. It is expected needs regarding the terms and conditions of that the resulting business model innovations the products (for example, interest charges). will result in lower costs due to a sharing of investments, scale and network economies, To this end, there is a strong case for the and reduced capacity redundancies, thus achievement of further integration of the moving away from competition in the area fragmented retail payments landscape to of payment infrastructure, and focusing on encourage a transition from competition competition in the area of the quality and price in the area of infrastructure to competition of payment services. __________ 48 Through the pilot project “Catalyst – Inclusive Cashless Payment Partnership” (a collaboration among USAID, the Indian Government and the non-profit organization IFMR LEAD launched in October 2016), India is supporting the establishment of a platform to expand consumer-to-merchant digital payments, especially among low- and middle-income populations. The project will provide incentives and rewards to consumers and businesses to embrace digital payment mechanisms, such as the availability of digital cash-management tools to gain higher interest on balances, or guaranteed loans (with up to 50 percent insurance against default). Source: USAID 2016. 49 Settled at TISS via a consortium of the issuing/acquiring banks (except for foreign-issued cards) 50 Which significantly limits their choice of ATMs, as there are only 250 Umoja ATMs over a total of 1,800 ATMs in the country. 51 These are often referred to as “aggregators”, however the definition does not reflect the fact that these providers are adding significant value to the offer of banks and MNOs as well as offering their own services directly to individual customers, such as some closed-loop prepaid cards. PAGE 54 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Figure 42: Cost Savings from Enhanced Use of Digital Technologies Note: To reach full cost savings, sufficient improvements are necessary in system design, scale, and operational efficiencies. Source: McKinsey Global Institute 2016. At the same time, advances in biometric, card graduation and enhance competition and mobile technology have made it possible between financial services providers. for all of the information required for KYC/ Although the E-Money Regulations CDD purposes to be verified immediately 2015 helped establish a transparent and and reliably using a single identity credential. homogeneous tiered system for KYC/CDD That credential can be a smart card (with requirements, inequalities persist between offline verification against data stored on the MNOs and banks, with the latter lacking the card) or a national ID number (with online options of a tiered KYC system (see Annex verification against data stored on a central 1).52 This is one of the main factors for the database). The simplicity of these forms of rapid expansion of mobile money and the verification allow them to be utilized not inclusion of members of more vulnerable just for opening an account, but also for groups who often lack the documentation initiating or accepting payments and any required to access bank products (such other transaction, anytime and anywhere. as proof of address). Once the national ID system is fully rolled out, all service A standardization in the requirements and providers would be able to access KYC/ processes for the verification of customers’ CDD data through a standardized process, identity could remove barriers to customers’ which would help homogenize costs and __________ 52 For example, banks offering MFS cannot rely on individual agents but are required to license established businesses – active since more than two years – that can operate as agency points. PAGE 55 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION increase competition. A standardized KYC/ the barriers to entry and exit for enterprises CDD regime across all financial services will are low, companies do not grow or create also make it easier for customers to move employment if they do not have access to between providers and to graduate from credit.54 As seen below, Tanzania’s formal mobile money to banking. In addition, such credit to GDP ratio remains very low (15 a system would also facilitate the transition percent) compared not only to industrialized of G2P payments such as salaries and countries but also to other developing ones. pensions, which at present our constrained Without affordable credit that supports by governance issues related to recipients’ investment in equipment, technology, and identity, to the electronic channel. 53 quality upgrade, Tanzanian firms cannot grow and be competitive on either regional The mobile money network could also be or international markets. In turn, without used to develop retirement savings products a competitive private sector, Tanzania for informal sector workers and to expand has only limited chances to achieve its pension coverage. The pension system is industrialization objectives. currently far from inclusive, covering less than 10 percent of the workforce in the The cost of credit is a key constraint to formal sector through the five mandatory access. Even when borrowers are deemed social security funds. These funds have creditworthy, credit availability is constrained been developing schemes designed to by the level of interest rates. High interest attract other groups of workers (traders rates have multiple effects on access to etc.). Mobile money based pensions credit. First, they may deter borrowers savings for informal sector workers have such as Hamzi from turning to the formal been developed in Kenya (for example, the financial sector when in need offunds. Mbao scheme), and could be rolled out in Second, they may create an adverse Tanzania. Some form of incentive (e.g. a selection process according to which only public matching contribution) would likely less creditworthy borrowers apply for a loan. be required for such initiatives to reach scale. Third, prohibitively high rates may push even creditworthy borrowers into default. 3. Expanding credit – making the case for reducing interest rates Interest rates on loans in Tanzania are largely Limited access to credit represents a key driven by the upward pressure exercised by constraint on the further development of Government borrowing on the domestic the Tanzanian private sector. International market, which leads to lending to the private experience clearly shows that even when sector being crowded out. Banks have a __________ 53 The recent cases of “ghost pensioners” and related losses in public funds call for interventions to increase the transparency in the delivery of G2P payments. A unique, national ID system supported by a centralized database could greatly help in this direction. 54 Turkey’s Investment Climate Assessment (World Bank, 2010). PAGE 56 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region major disincentive to lend to the private The cost of lending is further exacerbated sector, as they can obtain very attractive by the uncertainty, slowness and non- returns lending to the Government in the transparent nature of the credit recovery form of purchases of Government securities process. Tanzanian banks complain about with different maturities (see Figure 43). 55 the difficulties of recovering collateral and Public sector borrowing requirements resolving NPLs. This is a symptom of a drain liquidity, therefore putting significant dysfunctional insolvency and creditor rights upward pressure on interest rates. Returns system and a slow, costly and unpredictable are particularly high for the larger banks court system, as well as of the multiple that collect cheap customer deposits difficulties in enforcing contracts and (mostly sight deposits) through their large repossessing collateral.56 This has an Figure 43: T-Bills and Banks’ (Nominal) Interest Rates on Domestic Currency Source: WBG analysis on data from Bank of Tanzania. branch networks. T-Bills set the floor or the adverse impact on access to credit. Banks reference rate for the rest of interest rates therefore try to protect themselves from on domestic currency in the economy, thus substantial potential loss-given default creating upward pressure. As a result, a (LGD) by creating a large buffer in the form large number of individuals and businesses of high effective interest rates, determined are financially constrained. Either they do with reference to the Government set floor not have access, or they face very high cost rate plus spreads depending on the riskiness for loans or mortgages (see Box 7). of the operation and the collateral offered by the borrower. __________ 55 This is not only due to the risk-free interest rate being high, but also because of the zero risk-weight given to these securities in calculating the risk-weighted capital-asset ratio, resulting in credit representing only 55percent of total banking sector assets (the median value for low-income countries is around 70-80percent). . 56 Judicial recovery procedures are considered very uncertain, lengthy and costly (lasting 4-5 years, on average), characterized by lack of transparency and, in many instances, by corruption and Court injunctions on behalf of delinquent borrowers. PAGE 57 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION To improve access to credit, Tanzania and MNOs are currently not legally required needs to improve the bankability of to submit their credit information to the its customers, thus lowering the risk Databank (although they may choose to of lending for financial institutions. If provide it to the credit bureaus). This poses banks were provided with more and better a significant challenge when it comes to information about their customers, they expanding access to loan products, because would be better able to assess the individual critical information regarding the credit customers’ creditworthiness. This would history of users of mobile money loans or decrease their lending risk, with a positive informal micro-loans, possessed by MNOs impact on their willingness to extend credit and NBFIs respectively, is not shared with and on the pricing of credit. the rest of the financial system. Instead, such information is kept confidential and Gaps in the credit information and customers are thus locked into a limited reporting system constrain the availability range of low-value products. of data on customers’ creditworthiness available to suppliers and thus limit access Finally, from the supply side, the market to loan products. The absence of a unique is dominated by the three largest ID system undermines the reliability of the banks, which account for 45 percent data provided to the credit reporting system. of total bank lending and face limited Individuals can indeed register with (slightly) competition from the vast pool of different names at various institutions and, smaller banks. Although the number of in any case, identity verification process licensed banks is very high in Tanzania remains very cumbersome and imprecise. In (58, compared to, for example, only 43 in addition, the credit information, composed Kenya), competition is surprisingly limited. of a Credit Reference Databank (“Databank”) This is exacerbated by the common practice managed by the BoT, and of two licensed of layering of funding from large to small private credit bureaus (CreditInfo Tanzania banks (reflected in significant interbank and D&B Tanzania), is characterized by a deposits, and wholesale deposits from number of shortfalls. First, this model is pension funds and MNOs). This raises the rather sui generis, as it implies a dual role cost of funding for the latter group to up to of the BoT as both regulator and provider 6-6.5 percent, compared to an average of of credit information to the bureaus. 2 percent for large banks. This gap is then Second, the quality of the data available reflected through the higher lending rates remains questionable. 57 Third, the system imposed by medium/small banks. is fragmented and incomplete, since NBFIs __________ 57 For example, banks report common mistakes and duplications, while Community Banks are not yet providing information to the Credit Bureau PAGE 58 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Box 7: The importance of a stronger banking system: “The tail cannot wag the dog” While there has been significant progress in providing access to basic financial services in Tanzania, there is a long, pending reform agenda in the banking sector going forward, for the sector to contribute even more to Tanzania’s economic development. The IMF’s Financial Development Index shows that, with the exception of access to finance, Tanzania has seen very limited progress since the 1980s. Small size of the Banking System: First, Tanzania’s financial system is too small for the needs of the country. Standard measures of financial depth look at the ratio of total financial assets to GDP, and Tanzania’s ratio is very low at 43 percent, out of which 30 percentage points are total banking assets, and 15 percent the credit to the private sector. All are well below the levels recorded by other low-income countries. The banking system has not shown much increase over the past decade. Moreover, the latest IMF Regional Economic Outlook for Sub-Saharan Africa (2016) points out that: “The region’s median ratio of private sector credit to GDP has increased by almost 10 percentage points since 1995, to about 21 percent in 2014. However, it remains only about half the size of that in the Middle East and North Africa, East Asia, and Latin America and the Caribbean, driven by sub-Saharan Africa’s relatively high number of low-income countries in which the median level of credit to the private sector is comparable with other low- income countries.” This is critical because the lack of finance reduces the options to increase economic growth and productivity-enhancing investments. Mobile banking is a good complement to, but cannot replace, the formal banking sector. Number and concentration of Banks: Paradoxically, Tanzania might have too many banking institutions (58), but not enough competition, as the skewed structure of its banking system is very concentrated. The four largest banks have a 50 percent market share of total loans and deposits, with the ten largest banks having a market share of 72 percent, followed by a proliferation of small banks (47) which do not have the scale or the sources of funding to perform adequate intermediation functions. Banking Products: The third structural characteristic of the Tanzanian banking system is the very short-term nature of the deposits collected, with an average maturity (as of December, 2015) of only 136 days, reflecting the high share of sight deposits in the system (i.e. deposits which could be withdrawn any time). This makes it very risky for banks to undertake meaningful term transformation: that is, financing longer-term loans with a short-term deposit base. This feature makes banks a vehicle for funding the short-term consumption of individuals and short- term working capital of enterprises, being unable to fund longer-term investment projects. Intermediation Costs: The fourth feature is the high cost and relative scarcity of bank credit. It should be noted that in Tanzania, interest rates are largely determined in a less than perfect Government Securities Market, where an often cash-strapped Treasury (in view of a structural and rather wide fiscal deficit) seeks short-term funds. Only two or three of the largest banks, each of which has a large branch network and a large deposit base, buy most of the Government securities, yielding very high interest rates. The result is that the interest rate on Government paper is determined in this imperfect market at a very high level: currently, it stands at 14-15percent. This rate is the risk-free rate. As such it sets a very high floor on all (flexible) interest rates in the economy, while at the same time it reduces the incentive for banks to lend to the private sector. The latter is made worse by the fact that banks do not need to put capital in their lending to the Government or the Bank of Tanzania, as the risk-free assets have a zero risk-weight for calculating their capital asset ratio. PAGE 59 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Asset Quality: Banks’ asset quality has deteriorated, with the NPL ratio for the whole banking system reaching 9 percent as of September this year. However, NPLs have grown to worrisome levels (over 15percent) in some of the smaller, rural, community and cooperative banks. Out of 58 institutions reporting to the BoT, 14 (almost one third in number, but representing only 9 percent of the total value of banks’ gross loans) report very high NPL ratios as a group, with an average of 30 percent. Unique Identifier: Tanzania needs to improve the conditions for the operation of financial institutions with the right measures to have a national identification card with unique identifiers to allow banks to reduce fraud and to improve the collection and dissemination of financial information through the Credit Bureaus. Without these reforms, banks face too many risks in their lending activities. As discussed later, the operation of the two credit bureaus is less than adequate. Loss Given Default: Banks do not operate in a vacuum. Complementary reforms to the judicial and court systems in the country are essential for banks to be able to collect efficiently on the loans granted and to repossess quickly the collateral backing some of their credit exposures. Without an efficient and clean court system, the losses given default would continue to be too high and banks will respond by lending less to the private sector and increasing their interest spreads in a perverse system where honest borrowers are penalized by delinquent ones. Financial Stability: Needless to say, financial stability is a precious public good, being essential to reduce poverty and make the financial system an engine of growth and poverty reduction. 2.5 Suggested Actions towards • 1.A Channeling Government payments Broader and Deeper Financial such as TASAF through electronic Inclusion channels: This would reduce the costs and risks of cash payments processing Continued efforts are needed to consolidate and increase the volume of transactions, the progress already achieved in Tanzania, justifying investments in access points in by broadening and deepening financial currently unserved areas. G2P transfers inclusion and by increasing access to credit should gradually evolve from a cash-base to enterprises. To achieve these goals, efforts to payments through electronic channels. should be undertaken in the following priority This would enable these payments areas: to reach the beneficiaries safely and without leakages, to provide a store of 1. Reaching the “last mile” users: value and in turn to stimulate savings. An Extending access to finance to the increase in the use of electronic payment 40 percent of Tanzanians currently channels would increase demand and excluded from the financial system justify coverage of currently unserved and thus achieving universal financial areas. For this purpose, individuals could access would contribute to accelerating be provided with financial accounts. Tanzania’s poverty reduction process. To If needed, additional financial access this end, three actions to tackle demand points could be designed. For instance, and supply-side constraints are proposed, the planned transition of TASAF to as follows: PAGE 60 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region electronic payments could be used collection, the value added for citizens as a pilot initiative to assess the to have an account would be even tangible benefits for the beneficiaries. higher and the usage of the payments On the other hand, by increasing the infrastructure would be optimized. automation of Government payment Box 8: Transfers through the Productive Social Safety Net program (PSSN) implemented by the Tanzania Social Action Fund (TASAF) One potential way to include many of the “last mile” consumers would be to integrate electronic payment mechanisms into conditional cash transfer programs. Currently, the PSSN relies on a manual, cash-based distribution mechanism. Beneficiaries are gathered at the pay-point, typically located outside a local Government office, to attend a community informative session which usually last about 45 minutes. They then wait for Community Management Committee (CMC) members to go to the bank where they collect the program funds. Once the CMC return to the pay point, they organize themselves into stations or ‘desks’ where a number of payment activities are carried out, including the verification of names against the payroll list, checking program ID cards against beneficiaries’ personal IDs, disbursing the cash transfers and issuing payment receipts. The waiting time between the start of the community session and the disbursement can range from between two to four hours. Moreover, for beneficiaries based in rural areas, it can take up to two to three hours to commute to the pay-point, with a transportation costs of up to TZS 10,000, or 35 percent of the value of their cash transfer (ISPA 2016). Some informal arrangements exist among beneficiaries to share the cost of transport (such as a motorbike fare) or to nominate a single person to travel and collect transfers for multiple peers. The security required during the cash payment disbursements also raises the costs of the program. CMC members are escorted by the police from the bank branch to the pay-point and then overseen by municipal officials at the pay-point. In addition, gathering large numbers of beneficiaries and paying them in a public setting exposes them to the risk of robbery. This is a higher risk in urban areas where external parties may be aware of who beneficiaries are and when and where payments take place. A recent study has demonstrated that up to one third of G2P cash payments may be lost through the manual delivery system (CGAP 2015a). The case could be made for a transition to an electronic payment system, including through mobile services. In fact, Mobile, 2G network coverage is estimated to cover up to 85 percent of the Tanzanian population, with 77 percent of adults possessing a mobile phone (InterMedia FII 2016), placing Tanzania in the top ranks of African countries in terms of mobile phone ownership.58 An electronic social payments system could be catalytic in providing volume and scale to make it profitable for providers to reach these last mile consumers. 59 In turn, it would allow recipients to save time for more productive, income-generating activities, eliminate the transport costs for collection, and avoid the risks of being robbed of their cash. The transition of such programs to an electronic payment system could not only increase the transparency, cost-effectiveness and security of funds, it could also facilitate the inclusion of vulnerable consumers into the financial system, enabling beneficiaries to become familiar with mobile money and to gradually start using those services for personal or even small business transactions. __________ 58 Smallholder farmers in Tanzania – who are largely located in remote, rural areas, seem to reflect the national trend. Two-thirds (66 percent) of them have their own mobile phone, and 82 percent have used a phone. In contrast, only 46 percent of smallholder farmers in Uganda and 33 percent in Mozambique have their own phone (CGAP 2016). 59 TASAF has been envisaging a transition to electronic payments for some time, and is expected to start piloting the approach in early 2017. The transition should be first implemented in communities with existing presence of financial access points (for CICO services), such as urban and peri-urban areas (ISPA 2016), and then expand towards rural areas. Moving to electronic transfers would also provide greater transparency and hence security of funds, as it would spare people from being exposed to outsiders and to potential corruption instances when collecting their money. PAGE 61 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION • 1.B Accelerating the universal to individuals at low costs, reducing coverage of the national ID system a major constraint on serving the to: (i) remove a barrier to access unserved population.60 Granting and reduce the costs of delivery access to financial institutions, of financial and public services to MNOs, and credit bureaux to a central underserved populations, including population database through a simple women and (ii) protect financial and standardized data request process intermediaries from fraud: As would not only increase the efficiency discussed above, providing proof and lower the costs of complying with of legal identity to individuals and legal requirements to provide financial enabling that legal identity to be easily, services, it would also reduce credit reliably and quickly verified is essential risk. Thus, in turn, it could be expected to enable financial service providers to improve the supply of credit to and mobile network operators to the economy. India presents a good meet Know Your Customer (KYC) example of how a low-income country requirements. Recent advances in was able to introduce online biometric biometric and mobile technology verification (see Box 8), removing create an outstanding opportunity for the need for costly smart cards and the National Identification Authority card readers (as is required for offline (NIDA) to roll-out a system where verification) and opening up space an individual’s identity could be for innovation and greater investment authenticated simply with a unique in network connectivity. With this number and a fingerprint or iris system, a low-value bank account can scan (electronic KYC or e-KYC). This be opened instantly in the most remote could be used to create a platform to areas at limited costs (see Box 10). provide access to financial accounts __________ 60 As a new ID system is implemented, AML Law (art. 15) and corresponding regulations should also be amended to ensure that this can satisfy KYC/CDD requirements, for example by removing the requirement of introductory letters. PAGE 62 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Box 9: National ID system in India In 2009, the Indian Government, through the Unique Identification Authority of India (UIDAI), launched an ambitious biometric identification program named “Aadhaar” (which means “Foundation” in Hindi). Aadhaar assigns a unique 12-digit random ID number to all residents of India based on the secure registration of their personal (name, address, gender and date of birth) and biometric data (fingerprints, iris and face). The data is stored and reduplicated in a centralized database managed exclusively by UIDAI, which service providers can use to verify an individual’s identity quickly and easily. For instance, a customer who wants to open a low value bank account or make a transaction requiring verification would present his/her Aadhar number to a bank representative and have their fingerprints/iris scanned using a low-cost machine (as low as US$ 100). The number and biometric data are sent to UIDAI on a GPRS or faster network for verification against the database, and a positive or negative response is returned, usually within five to 60 seconds, and other relevant data for the transaction is made available (in the case of a bank account, this is the name, address and date of birth of the individual – the only additional information that requires verification in Tanzania, according to AML regulations, is the place of birth). This online verification model means that the Government does not have to issue expensive smart cards and that service providers need only have a fingerprint or iris scanner (and not a card or NFC reader as well), which are increasingly common features on regular tablets and smartphones. Aadhaar has not only facilitated a cost-efficient, accurate and fully electronic KYC (e-KYC) process, it has also improved Indians’ access to financial services and social protection. By April 2016, Aadhar had established 1 billion digital identities, linked to 254.8 million bank accounts. Aadhaar has also generated substantial fiscal savings. By utilizing Aadhaar to verify the identity of fuel subsidy recipients, the Government was able to identify individuals who were claiming subsidies in excess of their entitlement or more than once, which resulted in savings of nearly US$ 1.5 billion. • 1.C Women and youth in particular 2. Deepening inclusion by consolidating will benefit from strengthened progress and by ensuring a level programs to develop people’s playing field to reduce barriers to the financial literacy and digital skills: access and usage of financial products With an improved understanding and services: Broadening the use of of the benefits associated with more advanced financial services, such financial products, customers will as savings and business services, could progressively graduate from the help Tanzania move towards a cash-lite use of basic financial products to economy characterized by lower costs, more complex ones. The recently greater transparency and accelerated adopted National Financial Education formalization. This transition needs to Framework should be implemented be accompanied by a number of priority by the Government through the use interventions: of innovative instruments and in partnership with financial institutions • 2.A Extending a deposit insurance and MNOs. This would allow leverage mechanism to MFS and enhancing of the agent network and technical the overall consumer protection experts to implement FL programs framework: Attention should be and ICT skills training that reach given to preventing cases of fraud members of the poorest groups at or bankruptcy that could undermine limited cost. confidence in the financial sector and PAGE 63 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION in mobile money in particular, thus the convergence towards shared unravelling the recent progress made infrastructures would reduce costs towards higher levels of inclusion. The and develop scale. Most importantly, development of a deposit insurance providers would be able to compete mechanism to cover mobile money in terms of product/service offerings deposits could be complemented by and competitive pricing, rather than the implementation of an adequate on the basis of infrastructure and consumer protection framework for access points. In consultation with financial services. the market, a number of options should be considered to identify the • 2.B Facilitating the sharing of technical solution most suitable to infrastructures and the achievement Tanzania. For example, these may of full scale interoperability include the upgrading of existing between banks and other retail systems (Umoja Switch) and/ payment service providers: The or the implementation of a new existing fragmentation of the infrastructure. A more advanced digital retail payment ecosystem level of interoperability is desirable increases costs for providers and also for mobile money to reduce the users and stifles competition. The inefficiencies of the current model de-fragmentation and integration (see Box 10). of retail payment platforms and Box 10: Interoperability of payment instruments Interoperability of payment instruments is achieved when users are able to pay through their instrument of choice at any terminal present in the country, regardless of such terminal being affiliated directly with the issuer of the said payment instrument. For example, terminals may include ATMs, POS terminals at merchants’ premises, unmanned kiosks, and, in a conceptual sense, the websites of e-commerce merchants. There are a number of means to achieve the interoperability of payment instruments across a national payment system. In essence, all require that banks and other providers of payment instruments and terminals be somehow interconnected to each other. This can be achieved by participants being directly connected to each other on a bilateral basis or by interconnecting to some sort of multilateral infrastructure. This infrastructure may be domestic or international. It may also consist of a single infrastructure or of multiple infrastructures interconnected to each other. Finally, hybrid models also exist. In a bilateral arrangement, the authentication and clearing of payments flowing between two financial institutions is handled by the institutions themselves. Multilateral clearing arrangements are based on a set of procedures whereby financial institutions present and exchange data and/or documents relating to funds transfers to other financial institutions under a common set of rules. The following notable differences can be identified between bilateral and multilateral arrangements: • Bilateral arrangements do not typically provide efficient solutions when large volumes of payments need to be processed by a large number of participants (i.e. issuers and acquirers). Rather, multilateral arrangements make the processing of payment instructions more efficient PAGE 64 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region by coordinating and simplifying the exchange of payment instructions across participants and operating communications networks and by providing processing services. • In principle, multilateral arrangements could make the access of a new entrant onto the market easier, as a single link needs to be established by the new participant with the central entity. By contrast, where bilateral arrangements are in place, a new entrant needs to negotiate conditions with each existing participant, hence creating a potential barrier to entry. • Lastly, multilateral netting allows participants to minimize the liquid balances necessary for settlement. “Payment switch” in general refers to the technical infrastructure, on top of which there are business rules, procedures, branding, and products, defined as a “scheme”. A “national payment switch” is an infrastructure mandated to process all card payments and also, in some cases, mobile and internet payments. A country can have one or more switches that operate nationally. National payment switch(es) are a common way to achieve interoperability. These switch(es) can play a critical role in a retail payment system by facilitating the establishment of direct connections between transactional accounts of multiple payers and payees operated by diverse providers. Direct connections enhance transactional efficiency and reduce friction costs. In this way, national payment switch(es) enable fungibility and ease of use of money balances held in electronic form. In turn, this propels universal financial inclusion and access. • 2.C Creating a level playing field Financial institutions will then have to between various financial sector take advantage of the new regime and service providers by standardizing design products that suit the needs of KYC/CDD requirements: The the low-income population. introduction of tiered KYC requirements for electronic money accounts allowed 3. Expanding access to credit by electronic money issuers, particularly lowering the cost of risk through MNOs, to comply with lighter better selection of borrowers and requirements that are sufficient for improved recovery and by reducing products that pose a lower AML/CFT disincentives on lending to the private risk. However, full KYC continues to sector. Increasing the number of be the only option for bank accounts, individuals and businesses that have thereby creating an uneven playing access to credit is critical to ensuring field. The AML/CFT law and regulation that informal, micro entrepreneurs should be amended to match the risk- have access to access investment and based approach that was adopted working capital to formalize and expand for electronic money and to allow their operations. It is also critical to traditional financial institutions to support established enterprises’ efforts also offer bank accounts with basic to participate in global value chains. features and transactional limits, with Efforts to expand access to credit corresponding lower KYC requirements. should be concentrated on: PAGE 65 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION • 3.A Reducing the crowding out enabling financial institutions to provide effect of public borrowing on credit credit information directly to the two to the private sector: Actions should credit bureaus. BoT should retain access be undertaken to reduce the risk-free to the information for supervisory rates on Government bonds in local purposes and to regulate the bureaus, currency. In turn, this will result in a as required by law and to ensure the reduction to the floating interest rates quality of the data provided by individual on bank credit. First and foremost, this institutions. In addition, MNOs and requires lowering the funding of the NBFIs should be included in the reporting Government’s significant recurrent fiscal system. A legal framework should be deficits in the small domestic market. established to facilitate the sharing An option that could be considered of information on these institutions’ might be opening up the market for customers to improve assessment. Government securities to international investors. However, significant results • 3.C Expanding the range of collateral could also be achieved through that can be used for loans, would improvements to the cash and debt benefit women in particular. Extending management process. 61 the range of collateral that can be used to contract a loan to include movable • 3.B Improving the quality of the data collateral (such as inventory, receivables, available through the credit reporting etc.) could be expected to expand the system and extending its reach to range of borrowers and to reduce costs. include credit information generated through the digital footprint of MFS: • 3.D Improving the efficiency and The roll out of the single national ID (see efficacy of the judicial system to enforce recommendation 1.A) would create the contracts and recover credit: In the basis for a significant improvement to longer run, reforming the judicial system the credit infrastructure, providing for to reduce collusion and to accelerate the secure and unique identity validation, NPL resolution and recovery process is a which would also lead to more reliable fundamental step to reduce banks’ LGD. data quality data to the credit bureaus. This would incentivize banks to increase From the institutional side, BoT’s control the availability of credit and reduce rates. over the CRD should be eliminated, __________ 61 The IMF concluded in a recent Report that “Budget credibility needs to improve, and needs to be accompanied by better cash forecasting on the part of the fiscal authorities. This will also allow the authorities to announce and stick to a Government securities issuance schedule, which ultimately would strengthen the Government securities market. Tap sales should be phased out while transparent rules that govern the bidding process in primary auctions should be adopted. Arbitrary changes (changing or even canceling offered amounts) should be eliminated. Greater communication with financial market participants would also help in setting the stage for a more effective Government securities market.” IMF, Tanzania. Selected Issues — Macrofinancial Issues, June 30, 2016. PAGE 66 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Annexes PAGE 67 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Annex 1: Key Macroeconomic Indicators Indicator Unit 2010 2011 2012 2013 2014 2015 2016 Population (Mainland) Mn 43.6 44.8 44.9 46.1 47.4 48.8 48.8 Per Capita Income US$ 725.8 765.3 870.0 969.1 1028.8 968.8 932.0 GDP Growth % 6.4 7.9 5.1 7.3 7.0 7.0 6.5 Inflation (Period Average) % 7.2 12.7 16.0 7.9 6.0 5.6 5.2 Exchange Rate (Period Average) TZS/US$ 1432.3 1579.5 1571.7 1597.6 1658.1 2002.8 2179.1 External Sector Exports - Goods & Services (f.o.b) Mn US$ 6370.0 7398.2 8675.6 8459.8 8726.8 8921.9 9381.6 Imports - Goods & Services (f.o.b) Mn US$ -9054.4 -12035.6 -12678.0 -13517.6 -13583.2 -12513.0 -10797.4 Current Account Balance Mn US$ -2684.4 -4637.3 -4002.4 -5057.9 -4856.4 -4011.6 -2054.8 Balance of Payments (Overall Balance) Mn US$ 369.8 -202.0 326.2 495.7 -233.8 -199.1 305.5 Foreign Reserves Mn US$ 3948.0 3761.0 4068.1 4678.0 4388.0 4093.7 4325.6 External Debt (as a % of GDP) 28.0 26.3 27.0 29.0 29.0 30.0 29.0 Foreign Direct Investment Mn US$ 991.1 1009.0 1574.3 1836.0 1924.0 2152.0 -- Monetary Sector Average Deposit Rate % 9.1 7.3 9.6 11.4 8.3 8.3 10.8 Average Lending Rate % 13.8 13.9 13.9 14.1 13.9 13.9 14.2 Growth in Money Supply (M3) % 25.4 18.2 12.5 10.0 15.6 18.0 9.2 Government Financeb Total Domestic Revenue (as a % of GDP) 11.8 12.2 12.6 13.1 13.3 14.1 14.4 Tax Revenue (as a % of GDP) 11.1 11.2 11.6 12.0 12.1 12.5 12.8 Non-Tax Revenue (as a % of GDP) 0.6 0.9 1.0 1.0 1.1 1.3 1.5 Total Expenditure (as a % of GDP) 20.0 19.1 19.1 18.8 18.0 19.2 18.3 Recurrent Expenditure (as a % of GDP) 13.9 12.9 13.0 13.4 13.2 13.7 13.9 Development Expenditure (as a % of GDP) 6.1 6.2 6.1 5.4 4.8 5.4 4.5 Grants (as a % of GDP) 3.5 3.0 2.3 2.1 1.6 1.3 0.5 Fiscal Balance (After Grants) (as a % of GDP) -4.8 -4.0 -4.1 -3.6 -2.9 -3.6 -3.5 Note a Based on first three quarters. b Fiscal year, which ends June 30th, is used. -- data not available. Sources: Bank of Tanzania, Ministry of Finance and Planning, and National Bureau of Statistics. PAGE 68 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Annex 2: Real GDP Growth Rates Economic Activity 2010 2011 2012 2013 2014 2015 2016a Agriculture and Fishing 2.7 3.5 3.2 3.2 3.4 2.3 2.0 Crops 3.7 4.8 4.2 3.5 4.0 2.2 1.1 Livestock 1.4 1.6 1.8 2.0 2.2 2.4 2.6 Forestry and Hunting 3.4 3.3 3.5 4.7 5.1 2.6 4.5 Fishing 0.9 2.6 2.9 5.5 2.0 2.5 3.4 0.0 0.0 0.0 0.0 0.0 Industry and Construction 9.1 12.0 4.0 9.5 10.3 11.3 -- Mining and Quarrying 7.3 6.3 6.7 3.9 9.4 9.1 15.6 Manufacturing 8.9 6.9 4.1 6.5 6.8 6.5 7.0 Electricity 13.4 -4.3 3.3 13.0 9.3 5.8 8.3 Water 2.2 -1.2 2.8 2.7 3.7 0.1 5.5 Construction 10.3 22.9 3.2 14.6 14.1 16.8 6.7 Services 7.8 8.4 7.2 7.1 7.2 6.9 -- Trade and Repairs 10.0 11.3 3.8 4.5 10.0 7.8 5.6 Hotels and Restaurants 10.7 4.4 4.2 12.2 12.5 2.3 2.2 Transport 3.7 4.1 6.7 2.8 2.2 7.9 16.9 Communications 24.4 8.6 22.2 13.3 8.0 12.1 13.4 Financial Intermediation 12.6 14.8 5.1 6.2 10.8 11.8 11.6 Real Estate 1.8 1.9 2.0 2.1 2.2 2.2 2.4 Professional, Scientific & Technical Services 29.9 4.8 -5.8 5.4 0.5 6.8 5.4 Administrative and Support Service Activities 8.6 5.1 23.8 12.2 6.0 4.7 2.9 Public Administration & Defense -5.0 15.9 9.1 7.8 3.9 4.6 7.0 Education 6.4 5.6 7.4 4.3 4.8 6.3 7.6 Health 3.3 5.3 11.4 8.8 8.1 4.7 5.5 Other Services Activities b 6.0 6.2 6.4 6.5 6.7 6.9 6.5 FISIM (Financial Intermediation Services Indirectly Measured) 7.9 22.6 1.2 0.1 9.7 11.7 11.9 Net Taxes 3.8 12.1 0.4 14.2 7.7 9.6 6.8 0.0 0.0 0.0 0.0 0.0 GDP Growth Rates 6.4 7.9 5.1 7.3 7.0 7.0 6.5 Notes a Based on the first three quarters of 2016. b From Q3 2016, Arts, Entertainment and Recreation and Activities of Households as Employers are aggregated in other service activities --data not available. Source: National Bureau of Statistics. PAGE 69 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Annex 3: Shares of Economic Activities in GDP (Current Market Share) Economic Activity 2010 2011 2012 2013 2014 2015 2016 Agriculture and Fishing 26.3 25.2 24.8 23.8 23.0 22.3 28.3 Crops 13.4 13.0 12.9 12.5 12.1 11.7 -- Livestock 9.2 8.6 8.4 7.9 7.6 7.3 -- Forestry and Hunting 2.3 2.2 2.1 2.1 2.1 2.0 -- Fishing 1.5 1.4 1.4 1.3 1.3 1.2 -- 0.0 0.0 0.0 0.0 0.0 Industry and Construction 20.5 21.3 21.1 21.5 22.2 22.7 -- Mining and Quarrying 3.4 3.3 3.4 3.3 3.4 3.4 4.7 Manufacturing 7.5 7.5 7.4 7.3 7.3 7.3 4.5 Electricity and Water 1.8 1.6 1.6 1.6 1.6 1.6 1.3 Electricity 0.9 0.8 0.8 0.9 0.9 0.9 0.9 Water 0.8 0.8 0.7 0.7 0.7 0.7 0.4 Construction 7.8 8.9 8.7 9.3 9.9 10.4 15.4 0.0 0.0 0.0 0.0 0.0 Services 47.6 47.8 48.8 48.7 48.8 48.9 -- Trade and Repairs 10.0 10.4 10.2 10.0 10.2 10.5 10.3 Hotels and Restaurants 6.0 5.8 5.7 6.0 6.3 6.6 0.9 Transport 1.6 1.6 1.6 1.5 1.5 1.4 4.5 Communications 3.4 3.4 4.0 4.2 4.3 4.3 2.0 Financial Intermediation 3.8 4.0 4.0 4.0 4.1 4.3 3.8 Real Estate 5.3 5.0 4.9 4.6 4.4 4.2 2.9 Professional, Scientific & Technical Services 2.0 1.9 1.7 1.7 1.6 1.5 1.2 Administrative and Support Service Activities 2.7 2.6 3.1 3.2 3.2 3.0 2.2 Public Administration & Defense 6.1 6.5 6.8 6.8 6.6 6.6 6.0 Education 3.4 3.3 3.4 3.3 3.3 3.2 2.4 Health 1.6 1.6 1.7 1.7 1.7 1.7 1.4 Other Services Activities 1.0 0.9 0.9 0.9 0.9 0.9 1.1 0.0 0.0 0.0 0.0 0.0 FISIM -1.4 -1.6 -1.6 -1.5 -1.5 -1.5 -1.2 Net Taxes 7.1 7.3 7.0 7.5 7.5 7.7 8.2 Total GDP 100.0 100.0 100.0 100.0 100.0 100.0 100.0 -- data not available. Source: National Bureau of Statistics. PAGE 70 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Annex 4: Fiscal Framework (Percent of GDP) 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17a Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Total Domestic Revenue 12.2 12.7 13.8 12.9 15.6 13.8 13.3 13.0 14.5 14.4 15.8 Total Expenditure 22.2 18.9 20.9 20.6 22.7 18.9 18.6 17.3 18.7 18.3 21.8 Overall Deficit Before Grants -10.0 -6.2 -7.1 -7.8 -7.0 -5.1 5.3 -4.3 -4.2 -4.0 -5.9 Grants 4.8 3.3 3.1 2.6 3.2 2.2 1.3 1.2 1.0 0.5 1.3 Overall Deficit After Grants -5.2 -3.6 -4.0 -5.0 -3.8 -3.4 4.0 -3.3 -3.3 -3.5 -4.6 Overall Primary Balance -5.2 -3.6 -4.0 -5.0 -3.8 -3.4 4.0 -3.3 -3.3 -3.5 -4.6 Financing 5.2 3.6 4.0 5.0 3.8 3.4 4.3 3.1 -3.3 -3.5 -4.6 Foreign (Net) 4.2 3.0 5.5 3.9 3.8 3.1 4.3 3.1 1.9 1.5 3.7 Domestic (Net) 0.7 0.6 -1.4 1.1 0.0 0.3 -0.3 0.2 1.3 2.1 0.9 Source: Ministry of Finance and Planning. a Actual data are not available at this time. Annex 5: Balance of Payments (Percent of GDP, except where noted otherwise) Column1 2010 2011 2012 2013 2014 2015 2016 1. Curent Account Balance (Including Transfers) -7.2 -11.6 -9.6 -11.0 -10.7 -7.3 -3.5 Exports of Goods 13.9 13.5 14.9 11.6 10.4 9.8 9.7 o/w Gold 4.9 5.9 5.4 3.8 2.7 2.2 2.5 Import of Goods -23.0 -26.0 -26.2 -24.4 -21.9 -17.9 14.7 Services (Net) 0.5 0.2 1.1 1.6 1.5 1.5 2.6 Trade Balance -8.6 -12.3 -10.1 -11.2 -10.0 -6.5 -2.4 Income (Net) -2.0 -1.7 -1.5 -1.6 -1.7 -1.6 -1.7 Current transfers (Net) 3.4 2.4 2.0 1.7 1.0 0.9 0.6 2. Capital and Financial Account 11.5 9.3 11.8 12.6 8.1 6.2 -- Capital Account 1.7 1.8 2.0 1.5 1.0 0.6 -- Financial Account 9.8 7.5 9.8 11.1 7.0 5.6 -- o/w Direct Investment 5.8 3.3 4.6 4.6 3.4 2.9 -- 3. Overall Balance 1.2 -5.3 0.8 1.1 -0.5 -0.4 -- Gross International Reserves (Mn US$) 3948.0 3744.6 4068.1 4689.7 4377.2 4093.7 4331.7 In Months of Imports (Current Year) 5.2 3.5 3.6 4.1 4.2 4.5 4.2 -- data not available. Source: Bank of Tanzania. PAGE 71 Annex 6: Monthly Imports of Goods and Services 72 PAGE (Mn US$) 2015 2016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Imports of Goods and 1106.2 1105.4 1136.0 978.7 1018.9 1216.8 1229.3 1229.3 970.4 1004.1 851.5 880.4 930.3 871.2 849.9 848.8 857.2 1003.4 849.2 959.3 908.1 868.3 890.6 870.5 Services Imports of Goods (f.o.b.) 874.4 858.0 917.7 788.8 813.4 987.0 975.5 975.5 751.1 777.6 643.7 670.0 730.2 686.8 650.6 667.0 693.7 810.4 709.4 812.1 755.9 716.8 733.4 694.9 Capital goods 360.8 381.4 357.3 351.8 345.6 312.9 325.2 325.2 289.2 315.3 238.7 237.9 235.6 211.4 200.8 200.0 195.5 213.2 205.6 249.1 240.7 222.3 226.4 229.5 Transport Equipment 105.5 98.0 107.5 90.3 102.3 106.0 108.3 108.3 70.6 105.7 66.9 57.0 70.7 56.4 65.2 64.9 59.8 61.1 50.4 78.0 86.9 47.5 70.5 87.1 Building and Construction 96.3 80.7 91.1 71.5 67.2 62.3 66.9 66.9 75.8 74.5 74.7 69.2 60.4 51.8 43.6 52.2 52.6 44.9 56.1 64.5 60.9 50.5 55.4 48.6 Machinery 159.0 202.7 158.7 190.1 176.1 144.6 149.9 149.9 142.8 135.0 97.1 111.7 104.5 103.2 92.0 83.0 83.1 107.1 99.2 106.6 92.9 124.3 100.5 100.6 TA N Z A N I A E C O N O M I C U P D AT E Intermediate goods 290.8 338.3 346.5 231.7 268.9 461.3 397.9 397.9 276.6 284.6 228.3 254.1 347.1 326.1 325.5 335.9 339.1 411.4 336.7 382.5 378.8 357.6 347.4 340.3 Oil Imports 211.8 269.8 280.8 172.0 211.0 322.6 290.3 290.3 190.6 204.0 163.6 183.3 247.9 245.7 244.4 243.5 247.1 282.1 261.1 292.4 286.4 278.3 275.4 275.4 Fertilizers 6.0 2.3 1.1 6.2 8.8 9.2 37.4 37.4 25.4 19.4 10.8 7.8 13.9 11.6 4.0 9.9 3.0 11.8 10.5 13.9 3.3 10.6 15.2 10.9 Industrial Raw Materials 73.0 66.3 64.5 53.4 49.1 129.5 70.3 70.3 60.5 61.1 53.9 63.0 85.3 68.9 77.0 82.5 89.0 117.5 65.1 76.2 89.0 68.7 56.8 60.9 Consumer Goods 222.7 138.1 213.7 205.1 198.7 212.5 252.2 252.2 185.1 177.5 176.6 177.8 147.3 149.1 124.1 130.9 158.9 185.7 166.9 180.2 136.3 136.9 159.5 125.0 Food and Foodstuffs 63.4 33.7 71.9 61.7 64.3 54.5 19.9 19.9 37.8 30.8 36.8 27.3 42.2 22.5 33.7 31.9 44.8 67.4 42.1 41.0 32.6 27.5 40.1 19.7 All Other Consumer Goods 159.3 104.5 141.8 143.4 134.4 158.1 232.3 232.3 147.3 146.7 139.8 150.4 105.1 126.7 90.5 99.0 114.1 118.3 124.8 139.2 103.7 109.4 119.4 105.3 Imports of Services 231.8 247.4 218.3 189.9 205.5 229.8 253.8 253.8 219.3 226.5 207.8 210.5 200.1 184.3 199.3 181.7 163.6 193.0 139.8 147.3 226.5 152.2 157.2 175.6 Transportation 96.5 95.3 97.0 83.6 94.3 107.3 107.4 107.4 83.0 83.8 67.9 72.8 76.7 72.4 69.8 84.8 72.9 82.4 73.9 83.0 Passenger 12.6 12.8 8.8 7.8 15.9 10.3 13.5 13.5 12.0 10.2 7.4 8.3 6.1 6.3 6.8 5.4 5.7 4.5 5.8 4.7 -- -- -- -- Freight 83.9 82.3 88.0 75.7 78.0 94.7 93.6 93.6 70.1 72.7 59.8 64.3 70.0 65.9 62.4 79.1 66.5 77.7 68.1 77.9 -- -- -- -- Other 0.1 0.2 0.2 0.1 0.4 2.3 0.3 0.3 0.9 0.8 0.6 0.3 0.6 0.2 0.6 0.4 0.6 0.1 0.1 0.4 -- -- -- -- Travel 99.0 123.6 85.7 80.4 79.1 93.1 116.8 116.8 100.0 105.7 102.4 100.1 94.7 85.0 78.3 69.6 64.5 63.2 42.9 40.6 -- -- -- -- Communications Services 3.8 2.1 2.8 4.7 4.5 3.3 4.0 4.0 6.0 4.2 6.4 6.1 3.5 3.4 3.7 3.3 3.3 1.8 2.5 2.6 -- -- -- -- APRIL 2017, 9TH EDITION Construction Services 3.6 0.2 0.1 0.0 0.0 1.7 0.3 0.3 1.6 1.9 1.7 1.2 1.1 1.9 1.8 1.7 1.1 1.3 2.4 1.6 -- -- -- -- Insurance Services 3.6 3.4 3.3 2.9 2.8 3.3 5.9 5.9 5.3 5.7 5.3 3.5 0.9 1.4 1.7 1.6 1.3 1.7 1.5 1.4 -- -- -- -- Financial Services 0.9 0.0 0.3 1.0 0.4 0.2 0.6 0.6 0.7 0.5 0.6 0.5 0.3 0.7 0.7 0.6 0.5 0.4 0.3 0.5 -- -- -- -- Computer and Information 2.2 2.5 2.1 0.2 1.0 0.8 1.1 1.1 1.2 0.1 1.3 0.5 1.2 1.4 0.9 0.8 0.6 0.9 0.8 0.8 -- -- -- -- Services Other Business Services 22.3 20.1 27.0 17.0 23.5 20.2 17.3 17.7 16.0 17.1 18.4 20.5 16.4 11.5 37.0 17.2 14.6 33.0 12.5 13.2 -- -- -- -- -- data not available. Sources: Bank of Tanzania (BoT) and International Monetary Fund. Annex 7: Monthly Exports of Goods and Services (Mn US$) 2015 2016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Exports of Goods & Services 738.5 819.2 848.3 705.8 635.0 670.9 647.0 822.7 782.8 840.0 917.7 934.3 995.3 913.4 980.0 807.1 768.0 795.6 698.7 884.9 815.9 779.4 856.2 940.9 Exports of Goods 428.0 518.2 548.9 438.1 378.9 379.7 344.9 414.7 402.4 391.3 500.9 548.1 428.0 518.2 548.9 438.1 378.9 379.7 344.9 414.7 472.3 492.5 546.4 608.4 Traditional Exports 111.6 94.6 52.1 25.7 37.3 13.7 13.6 50.0 54.1 73.4 100.9 154.0 111.6 94.6 52.1 25.7 37.3 13.7 13.6 50.0 83.8 100.6 194.3 96.3 Coffee 19.2 17.7 15.1 10.5 11.1 5.4 4.4 9.5 10.6 14.0 17.2 17.4 19.2 17.7 15.1 10.5 11.1 5.4 4.4 9.5 17.2 13.6 16.5 13.9 Cotton 2.3 2.1 0.6 0.7 0.8 0.3 3.7 12.5 7.8 4.1 4.3 2.7 2.3 2.1 0.6 0.7 0.8 0.3 3.7 12.5 17.2 5.0 1.6 0.1 Tea 5.5 6.1 5.4 4.6 5.2 3.6 2.6 2.1 2.4 2.2 3.2 4.8 5.5 6.1 5.4 4.6 5.2 3.6 2.6 2.1 1.4 1.9 3.5 2.8 Tobacco 18.9 48.5 22.7 7.5 16.7 1.5 0.3 19.6 29.7 43.1 20.5 52.9 18.9 48.5 22.7 7.5 16.7 1.5 0.3 19.6 45.7 60.2 47.6 11.1 Cashewnuts 48.2 12.3 4.1 0.3 1.1 0.3 0.0 0.1 0.0 6.0 49.7 59.7 48.2 12.3 4.1 0.3 1.1 0.3 0.0 0.1 0.3 13.2 123.7 66.9 Cloves 16.5 6.9 3.8 1.3 0.4 0.2 0.0 3.8 1.8 0.3 1.9 13.1 16.5 6.9 3.8 1.3 0.4 0.2 0.0 3.8 1.5 4.9 0.0 0.1 Non-Traditional Exports 316.5 423.6 496.8 412.4 341.6 366.1 331.3 364.8 348.3 317.9 400.0 394.1 316.5 423.6 496.8 412.4 341.6 366.1 331.3 364.8 326.9 327.7 280.9 432.7 Minerals 95.8 113.5 146.1 105.6 119.1 142.9 164.2 200.7 119.6 80.3 90.5 136.3 95.8 113.5 146.1 105.6 119.1 142.9 164.2 200.7 137.8 173.5 141.2 169.1 Gold 83.7 85.4 129.6 99.5 116.9 127.3 162.2 183.9 101.5 71.4 89.2 122.1 83.7 85.4 129.6 99.5 116.9 127.3 162.2 183.9 123.0 171.1 133.4 165.7 Diamond 9.3 25.2 12.0 0.5 0.0 12.7 0.0 14.0 12.2 0.0 0.0 12.3 9.3 25.2 12.0 0.5 0.0 12.7 0.0 14.0 6.3 0.0 0.0 0.4 Others 2.9 3.0 4.5 5.6 2.3 3.0 2.0 2.9 5.9 8.9 1.3 1.9 2.9 3.0 4.5 5.6 2.3 3.0 2.0 2.9 8.5 2.4 7.8 2.9 Manufactured Goods 66.2 162.0 184.1 141.9 97.0 74.6 71.4 61.0 81.6 147.8 153.0 126.7 66.2 162.0 184.1 141.9 97.0 74.6 71.4 61.0 55.2 64.3 56.2 58.1 Cotton Yarn 0.2 0.1 1.6 0.8 0.9 0.2 0.8 1.0 0.1 1.9 2.3 0.8 0.2 0.1 1.6 0.8 0.9 0.2 0.8 1.0 1.3 0.2 0.8 1.8 Manufactured Coffee 0.0 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Manufactured Tobacco 1.1 3.4 3.1 3.6 2.6 3.0 3.5 2.8 2.2 4.1 3.7 2.8 1.1 3.4 3.1 3.6 2.6 3.0 3.5 2.8 2.1 0.0 0.1 0.0 Sisal Products 1.3 2.4 3.1 1.5 1.6 1.5 2.0 2.1 1.0 0.8 1.2 1.4 1.3 2.4 3.1 1.5 1.6 1.5 2.0 2.1 1.9 2.1 2.5 2.8 Others 63.5 156.0 176.4 135.9 91.9 69.9 65.1 55.1 78.3 141.0 145.8 121.7 63.5 156.0 176.4 135.9 91.9 69.9 65.1 55.1 50.0 62.0 52.8 53.5 Fish and Fish Products 12.0 15.0 16.3 12.7 15.1 13.2 9.3 12.5 12.5 19.3 10.5 10.3 12.0 15.0 16.3 12.7 15.1 13.2 9.3 12.5 8.7 7.5 10.3 9.7 Horticultural Products 2.0 2.4 1.9 2.3 2.1 2.2 2.0 2.0 1.4 2.2 2.1 2.0 2.0 2.4 1.9 2.3 2.1 2.2 2.0 2.0 2.1 2.0 1.9 1.9 Other Export Products 57.7 99.4 92.7 106.4 93.6 107.9 68.6 78.7 106.9 42.7 109.2 86.2 57.7 99.4 92.7 106.4 93.6 107.9 68.6 78.7 10.3 8.8 62.2 20.7 Re-Exports 82.7 31.3 55.6 43.5 14.6 25.2 15.8 9.8 26.4 25.6 34.8 32.5 82.7 31.3 55.6 43.5 14.6 25.2 15.8 9.8 112.8 71.5 9.0 173.3 Services Receipts 310.5 301.0 299.5 267.7 256.1 291.1 302.1 407.9 327.9 326.0 326.4 326.9 310.5 301.0 299.5 267.7 256.1 291.1 302.1 407.9 343.6 286.9 309.7 332.5 Transportation 78.3 79.4 77.7 78.8 74.9 92.7 96.6 103.4 88.4 80.9 90.1 88.0 78.3 79.4 77.7 78.8 74.9 92.7 96.6 103.4 -- -- -- -- Passenger 0.8 1.2 0.7 1.6 1.2 1.7 1.8 4.6 1.5 1.5 3.1 2.1 0.8 1.2 0.7 1.6 1.2 1.7 1.8 4.6 -- -- -- -- Freight 56.5 58.1 56.5 56.0 55.7 71.0 73.7 78.5 65.6 61.3 63.5 65.1 56.5 58.1 56.5 56.0 55.7 71.0 73.7 78.5 -- -- -- -- Other 21.0 20.1 20.5 21.2 18.0 20.1 21.1 20.3 21.4 18.1 23.5 20.8 21.0 20.1 20.5 21.2 18.0 20.1 21.1 20.3 -- -- -- -- Travel 198.3 189.3 180.5 150.3 143.5 164.0 172.3 267.8 202.1 198.8 189.9 203.7 198.3 189.3 180.5 150.3 143.5 164.0 172.3 267.8 -- -- -- -- Communications Services 4.5 4.3 4.7 4.5 3.0 1.5 2.3 2.8 5.0 7.1 5.3 4.6 4.5 4.3 4.7 4.5 3.0 1.5 2.3 2.8 -- -- -- -- The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Insurance Services 2.6 2.3 6.0 3.8 2.8 3.5 3.9 4.4 3.4 2.4 4.2 2.8 2.6 2.3 6.0 3.8 2.8 3.5 3.9 4.4 -- -- -- -- Financial Services 3.0 2.2 2.8 2.4 2.6 0.6 0.8 0.7 1.2 1.6 1.5 1.2 3.0 2.2 2.8 2.4 2.6 0.6 0.8 0.7 -- -- -- -- Computer & Information Services 0.1 0.0 0.1 0.0 0.1 0.0 0.0 0.0 0.8 1.0 0.1 0.0 0.1 0.0 0.1 0.0 0.1 0.0 0.0 0.0 -- -- -- -- Other Business Services 22.7 22.5 25.7 25.3 28.0 26.9 24.9 26.5 24.1 29.0 30.0 24.1 22.7 22.5 25.7 25.3 28.0 26.9 24.9 26.5 -- -- -- -- 73 PAGE -- data not available. Source: Bank of Tanzania and International Monetary Fund. Annex 8: Inflation 74 PAGE (Mn US$) Month Headline Food Transport Housing, Furnishing, Clothing & Restaurants Miscel. Alcoholic & Communication Education Recreation Health Overall & Non Water,Energy Housing Footwear & Hotels Goods & Tobacco & Entertainment & Culture Index Alcoholic Equipment & Services Beverages Maintenance Jan 2012 19.7 27.8 10.9 18.8 14.4 12.5 12.8 9.1 6.3 -0.4 2.9 4.5 3.4 Feb 2012 19.4 26.7 10.9 19.5 8.2 13.9 15.8 12.1 8.3 -0.8 4.8 8.7 2.5 Mar 2012 19.0 25.7 9.7 17.4 9.0 15.0 18.2 12.3 9.3 -0.7 4.8 9.1 2.8 Apr 2012 18.7 25.3 8.6 16.2 9.1 15.4 18.8 12.8 9.3 -0.7 4.7 9.1 3.2 May 2012 18.2 25.3 6.7 14.7 9.1 15.5 17.5 13.2 8.7 -0.7 4.7 9.2 3.2 Jun 2012 17.4 23.5 5.9 14.6 9.0 15.1 17.8 13.1 11.7 -0.9 4.7 11.7 3.3 Jul 2012 15.7 20.8 4.7 12.5 8.7 15.0 16.1 10.8 18.0 -1.6 4.7 11.9 3.7 TA N Z A N I A E C O N O M I C U P D AT E Aug 2012 14.9 18.8 3.8 14.4 8.6 14.4 16.0 11.6 20.4 -1.7 4.7 11.0 3.3 Sep 2012 13.5 15.6 1.7 16.5 8.3 13.4 17.5 8.3 20.3 -1.7 4.7 11.3 3.0 Oct 2012 12.9 14.9 2.7 17.4 7.9 12.4 16.3 8.4 20.3 -1.8 4.7 11.1 2.3 Nov 2012 12.1 13.4 2.3 17.3 8.4 12.0 16.1 8.0 21.3 -1.7 4.7 10.8 2.9 Dec 2012 12.1 13.1 3.2 17.1 8.2 11.6 15.7 9.1 22.8 -1.9 4.7 10.5 3.4 Jan 2013 10.9 11.9 2.7 15.3 7.2 9.8 13.5 8.8 23.0 -1.9 4.2 8.9 2.9 Jan 2013 10.4 12.0 2.5 16.3 6.1 7.9 9.0 6.6 18.9 -0.4 2.1 3.6 3.0 Jan 2013 9.8 11.1 1.3 20.4 5.1 6.4 6.8 5.0 17.4 -0.4 2.2 3.1 3.7 Jan 2013 9.4 10.2 4.2 19.9 4.6 5.8 5.9 5.2 17.7 -0.6 2.2 3.5 3.2 Jan 2013 8.3 8.0 7.5 19.0 4.4 5.3 5.5 4.9 18.0 -0.7 2.2 3.5 3.0 Jan 2013 7.6 7.6 7.1 15.4 4.0 5.2 5.5 4.8 15.0 -0.6 2.2 0.3 2.9 Jan 2013 7.5 8.0 7.5 14.4 3.8 5.2 5.9 5.9 12.0 -0.1 2.4 0.2 2.7 Jan 2013 6.7 6.5 9.0 14.3 3.5 5.2 4.9 4.9 10.6 0.0 2.4 0.7 2.9 Jan 2013 6.1 6.5 7.8 9.6 3.2 4.9 2.2 6.5 10.4 0.0 2.4 0.4 2.9 Jan 2013 6.3 6.9 9.3 9.0 3.3 4.6 2.9 6.0 10.7 0.2 2.4 0.5 2.8 APRIL 2017, 9TH EDITION Jan 2013 6.2 7.2 8.6 8.7 2.5 4.4 2.7 5.6 9.9 0.1 2.4 0.7 2.1 Jan 2013 5.6 6.0 8.2 10.2 2.3 3.9 2.2 4.0 7.8 0.5 2.4 1.0 1.5 Jan 2014 6.0 6.0 8.9 14.9 2.0 3.9 1.7 4.1 7.1 0.5 5.9 0.6 1.8 Feb 2014 6.0 6.2 9.0 13.3 1.8 3.5 1.5 4.6 7.1 0.5 5.3 1.2 2.0 Mar 2014 6.1 7.2 8.7 9.0 1.8 3.3 1.7 5.2 7.1 0.5 5.3 1.3 2.1 Apr 2014 6.3 7.8 5.3 9.2 2.5 3.2 2.2 7.7 6.8 0.7 5.3 0.8 3.6 May 2014 6.5 8.7 2.3 8.3 2.4 3.1 2.6 8.3 6.6 0.7 5.3 0.6 3.6 Jun 2014 6.4 8.1 2.7 11.3 2.2 2.9 2.6 8.1 5.4 1.6 5.3 0.8 4.2 Jul 2014 6.5 8.1 2.4 11.7 2.1 2.8 2.4 6.8 4.7 1.1 5.1 0.6 3.9 Aug 2014 6.7 8.8 2.1 10.3 2.0 2.4 2.7 6.6 4.6 1.0 5.1 0.5 4.0 Sep 2014 6.6 8.5 2.0 10.7 1.7 2.2 4.1 5.6 5.0 0.7 5.1 0.6 4.7 Oct 2014 5.9 7.1 1.6 10.8 1.5 2.7 3.6 5.5 5.4 0.7 5.1 0.7 4.6 Nov 2014 5.8 7.0 1.6 11.3 1.4 2.8 3.2 5.6 5.4 0.6 5.1 0.7 4.6 Dec 2014 4.8 5.7 0.5 7.8 1.2 3.2 3.5 5.3 5.5 0.4 5.1 0.6 4.5 Jan 2015 4.0 4.9 0.0 4.9 1.5 3.1 3.6 5.3 5.4 0.5 1.2 0.6 4.7 Feb 2015 4.2 4.9 -1.4 6.6 1.5 3.4 5.2 5.2 5.4 0.7 2.2 0.7 4.4 Mar 2015 4.3 5.9 -2.4 3.6 1.0 3.7 5.1 4.8 5.4 0.6 2.2 0.3 3.2 Apr 2015 4.5 7.1 -2.3 0.6 0.3 3.6 5.3 1.6 5.3 0.6 3.3 0.3 2.1 May 2015 5.3 8.5 5.0 2.0 0.9 4.1 4.8 1.4 5.2 0.9 3.5 0.9 2.3 Jun 2015 6.1 10.1 -1.3 1.0 0.9 4.5 4.3 1.1 5.9 -0.1 3.3 1.5 1.9 Jul 2015 6.4 10.6 -0.5 0.2 1.6 4.5 5.6 1.6 3.4 -0.2 3.3 1.3 2.8 Aug 2015 6.4 10.2 0.9 0.2 1.9 5.3 5.2 1.8 2.6 -0.4 3.3 1.5 3.0 Sep 2015 6.1 9.6 0.7 1.3 2.2 4.6 3.7 2.5 2.0 0.0 3.3 3.3 2.4 Oct 2015 6.3 10.2 -0.1 1.3 2.0 4.5 3.9 3.0 1.2 0.2 3.3 3.3 2.9 Nov 2015 6.6 11.2 -0.2 -1.7 2.4 4.5 4.4 3.3 1.1 0.2 3.3 3.2 3.3 Dec 2015 6.8 11.1 1.0 -0.3 3.0 4.1 3.9 3.4 1.2 0.4 3.3 3.2 4.0 Jan 2016 6.5 10.7 1.3 1.1 3.5 4.8 4.3 4.0 1.7 0.5 3.4 3.6 4.4 Feb 2016 5.6 9.5 2.0 0.8 3.1 4.5 2.8 3.9 1.8 0.4 3.6 3.3 6.0 Mar 2016 5.4 8.3 2.6 5.5 3.8 4.2 2.8 3.6 2.1 -1.0 2.6 4.1 6.2 Apr 2016 5.1 7.1 2.0 7.0 4.9 4.3 4.8 3.9 4.1 -1.0 2.6 4.1 6.4 May 2016 5.2 7.0 1.6 8.8 4.4 4.5 4.9 3.9 4.9 -0.6 2.7 3.9 6.6 Jun 2016 5.5 8.1 1.3 7.6 4.2 4.6 5.3 3.7 4.9 -0.6 2.7 3.4 6.8 Jul 2016 5.1 7.6 0.4 7.4 3.4 4.2 4.3 4.0 5.5 -0.4 2.8 3.3 6.0 Aug 2016 4.9 6.9 -0.4 6.8 3.6 3.7 5.2 3.9 5.2 -0.2 3.0 3.5 5.9 Sep 2016 4.5 6.0 -0.8 6.5 3.5 4.2 5.2 3.3 5.3 -0.4 2.9 1.2 6.0 Oct 2016 4.5 6.0 0.1 7.2 3.6 3.8 4.3 3.2 5.3 -0.7 2.9 1.5 5.8 Nov 2016 4.8 6.2 0.7 10.9 4.3 3.9 4.4 3.1 5.6 -0.6 2.9 1.8 5.5 Dec 2016 5.0 7.0 0.3 9.9 4.0 3.7 4.2 2.9 5.1 -0.9 2.6 1.8 4.7 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Jan 2017 5.2 7.6 0.6 9.5 3.3 3.4 3.9 2.3 5.0 -0.9 1.8 0.7 4.8 Feb 2017 5.5 8.7 0.6 8.7 3.8 3.2 3.9 1.9 5.2 -1.5 0.8 1.4 3.3 75 PAGE Source:National Bureau of Statistics. TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Annex 9: Food Crop Prices (TZS per 100kg) Maize Rice Wheat Beans Sorghum Month Arusha DSM Mbeya Arusha DSM Mbeya Arusha DSM Mbeya Arusha DSM Mbeya Arusha DSM Jan 2014 50,250 54,792 44,625 130,000 143,958 114,167 80,688 108,750 105,000 132,625 156,458 132,708 62,333 69,167 Feb 2014 50,773 53,864 45,364 127,727 128,182 114,318 79,318 109,091 107,000 139,545 157,727 135,000 60,773 70,364 Mar 2014 49,750 57,750 47,458 130,000 148,042 128,750 78,667 98,542 110,000 146,875 167,708 135,000 56,417 70,364 Apr 2014 50,400 56,000 41,850 130,000 143,625 139,000 77,900 115,625 113,500 136,500 164,250 135,100 57,000 72,375 May 2014 53,654 57,789 39,923 133,846 146,931 139,038 82,500 130,673 115,000 144,615 171,298 134,654 59,462 72,572 Jun 2014 49,192 54,692 44,077 129,231 134,923 121,731 81,423 129,808 111,923 132,500 174,872 132,500 54,808 73,395 Jul 2014 45,227 49,700 40,364 135,000 131,492 117,591 77,318 123,045 106,591 127,955 157,007 125,000 52,227 68,583 Aug 2014 40,458 42,398 34,958 127,083 123,750 107,292 73,375 121,389 97,500 127,917 146,250 115,000 52,500 66,181 Sep 2014 38,577 34,212 36,615 128,846 123,173 104,423 75,577 120,193 102,308 137,885 159,423 116,538 54,346 66,539 Oct 2014 36,250 35,107 39,714 131,071 131,126 116,786 78,036 118,956 111,429 136,786 165,119 118,571 54,893 66,742 Nov 2014 35,125 37,334 34,375 140,000 145,729 128,750 76,792 121,875 112,500 152,083 168,646 123,125 50,667 66,771 Dec 2014 35,712 39,452 33,538 143,846 151,538 134,731 76,923 122,116 115,000 149,423 165,866 123,462 46,808 59,308 Jan 2015 36,521 36,136 32,727 150,625 155,682 126,818 77,500 130,000 115,000 162,083 167,500 127,273 53,792 57,273 Feb 2015 35,500 37,444 32,625 150,000 162,778 139,375 77,000 146,111 115,000 161,250 178,333 161,250 49,250 58,889 Mar 2015 40,167 41,850 32,000 156,250 179,500 143,333 83,833 140,750 115,000 151,458 181,250 122,500 47,958 59,500 Apr 2015 52,909 52,636 39,955 159,455 180,909 154,182 83,955 122,727 115,000 157,955 174,818 122,500 50,955 64,545 May 2015 52,563 51,333 44,667 175,000 178,333 141,667 78,875 120,417 117,083 171,875 188,333 122,500 53,750 68,958 Jun 2015 55,083 53,813 44,667 171,667 170,000 139,833 78,833 110,000 127,500 174,167 205,625 122,500 55,333 80,000 Jul 2015 58,964 58,730 42,238 169,345 175,411 134,792 77,500 120,833 101,539 138,897 175,411 117,024 59,940 76,486 Aug 2015 71,455 59,115 46,676 159,470 166,563 136,167 77,848 117,090 97,611 130,540 175,000 113,259 69,500 75,146 Sep 2015 67,402 58,872 49,667 162,803 162,969 133,954 77,273 113,250 98,796 136,800 171,042 127,500 75,515 67,663 Oct 2015 60,883 62,457 51,100 170,333 170,313 149,200 77,389 111,200 97,500 145,063 164,563 133,500 78,944 80,825 Nov 2015 66,731 67,325 57,208 182,212 183,194 151,125 77,500 118,120 102,500 170,128 186,768 142,500 80,000 73,029 Dec 2015 69,600 65,027 61,091 174,000 190,581 161,909 77,861 121,364 104,773 161,000 194,773 142,500 78,500 76,742 Jan 2016 70,515 64,942 68,000 158,859 193,322 162,500 83,364 129,195 116,818 168,208 201,097 143,182 83,542 88,276 Feb 2016 66,269 66,122 64,455 183,942 194,093 162,500 78,917 134,880 122,273 145,756 194,802 145,000 71,109 106,756 Mar 2016 59,908 64,428 60,400 185,250 191,493 171,000 75,967 124,484 125,000 131,617 183,556 157,000 74,733 109,673 Apr 2016 54,612 63,417 53,875 168,846 187,139 163,333 73,000 120,833 131,875 124,833 177,618 152,500 68,038 117,167 May 2016 47,955 58,881 53,400 161,515 173,144 154,250 88,894 109,630 119,500 131,970 176,486 137,500 63,773 111,074 Jun 2016 50,972 59,974 50,923 158,194 162,884 136,346 77,806 115,019 110,385 122,472 177,866 135,192 68,042 99,103 Jul 2016 52,188 60,000 48,708 163,146 164,730 135,375 77,667 119,286 113,750 133,035 178,585 135,000 62,542 99,405 Aug 2016 49,625 58,840 49,038 164,167 163,770 138,846 75,104 117,708 110,000 137,660 185,470 135,000 55,389 95,833 Sep 2016 51,514 59,702 49,833 160,451 161,635 136,250 74,986 116,667 114,792 151,354 179,110 135,000 71,264 96,167 Oct 2016 59,674 65,310 53,364 159,410 163,929 140,000 77,625 119,643 116,818 153,299 188,095 135,000 69,208 102,500 Nov 2016 67,389 74,566 59,583 162,708 162,866 140,000 77,764 114,848 117,500 152,882 188,923 135,000 65,215 101,852 Dec 2016 77,381 92,193 62,800 156,845 163,115 140,000 77,500 115,167 118,500 155,952 188,079 136,400 65,262 99,071 Jan 2017 97,833 98,298 79,031 165,000 172,443 146,500 76,667 117,413 116,241 176,875 194,732 140,583 73,500 106,424 Feb 2017 96,833 111,000 80,556 168,750 191,413 160,889 81,417 131,250 118,375 168,750 205,357 152,188 71,875 120,435 Source: Ministry of Industry, Trade, and Marketing. PAGE 76 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Annex 10: Average Food Wholesale Prices (TZS per 100kg) Month Beans Maize Rice Round Potatoes Sorghum Jan 2014 137,265 56,152 124,104 72,145 75,425 Feb 2014 137,265 56,152 124,104 72,145 75,425 Mar 2014 141,477 50,632 128,953 69,178 70,264 Apr 2014 138,796 49,970 135,418 67,986 68,285 May 2014 141,767 48,111 134,266 69,551 74,421 Jun 2014 139,049 48,099 123,060 62,664 69,972 Jul 2014 130,472 44,932 116,644 63,838 64,966 Aug 2014 130,656 41,414 113,291 68,420 55,512 Sep 2014 133,970 40,552 115,675 67,112 56,083 Oct 2014 142,283 39,020 123,562 68,639 62,631 Nov 2014 146,785 38,190 135,062 69,846 58,266 Dec 2014 148,541 38,781 141,923 73,360 66,383 Jan 2015 153,210 37,929 144,929 73,316 63,886 Feb 2015 150,431 37,205 149,765 69,975 62,227 Mar 2015 149,534 39,940 161,422 68,249 63,548 Apr 2015 151,733 48,628 166,902 71,221 65,779 May 2015 156,789 47,163 162,702 77,508 69,222 Jun 2015 163,723 47,429 155,360 77,753 69,381 Jul 2015 158,313 52,154 153,402 71,723 67,397 Aug 2015 158,477 56,310 158,170 73,096 78,478 Sep 2015 158,241 56,840 161,727 70,011 69,548 Oct 2015 164,537 58,009 170,589 79,483 76,586 Nov 2015 174,853 63,404 176,644 87,659 73,399 Dec 2015 172,852 65,104 176,237 82,791 81,638 Jan 2016 173,501 67,045 178,803 78,981 85,907 Feb 2016 171,919 67,316 184,137 77,635 92,338 Mar 2016 158,487 64,207 178,886 77,353 91,721 Apr 2016 151,563 57,945 174,746 86,147 90,966 May 2016 150,430 54,992 158,951 91,921 93,854 Jun 2016 149,125 53,987 148,129 89,686 97,811 Jul 2016 149,624 55,803 144,652 84,007 89,777 Aug 2016 149,699 55,855 139,596 82,074 89,886 Sep 2016 151,357 56,984 138,551 77,548 84,896 Oct 2016 164,656 64,054 145,466 81,764 96,778 Nov 2016 169,726 72,620 147,787 81,386 102,691 Dec 2016 171,743 85,160 152,274 79,426 104,545 Jan 2017 175,602 93,356 162,745 83,468 94,900 Feb 2017 183,213 105,108 175,278 79,567 100,626 Source: Ministry of Industry, Trade, and Marketing. PAGE 77 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Annex 11: Interest Rates Structure (Percent) Item 2015 2016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec A: Domestic Currency 1. Interbank Cash Market Rates Overnight 10.1 6.9 6.4 9.7 6.1 18.0 30.0 9.8 6.3 12.3 10.5 7.1 11.9 13.3 10.1 11.1 12.3 12.8 14.4 16.3 16.2 15.5 13.2 13.7 2 to 7 days 10.7 7.6 6.4 8.9 7.1 21.1 29.4 9.8 7.3 12.8 12.1 14.4 12.5 13.4 11.1 11.6 12.6 13.2 14.6 16.5 16.5 15.9 13.5 13.2 8 to 14 days 9.8 5.4 7.7 9.4 7.9 23.3 33.6 14.7 9.1 9.1 12.4 12.4 15.0 13.7 11.1 6.8 12.5 12.6 15.0 16.7 16.5 15.0 13.5 13.6 15 to 30 days 14.5 8.1 4.3 10.3 10.3 30.0 18.5 18.5 18.5 18.5 18.5 18.5 12.2 18.0 11.5 11.5 11.5 10.5 13.0 14.6 14.5 16.3 16.3 13.0 31 to 60 days 10.0 9.5 9.5 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 16.0 16.0 16.0 16.5 16.5 12.9 61 to 90 days 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 14.6 91 to 180 days 14.0 25.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 181 and above 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 12.9 Overall Interbank cash market rate 10.3 7.1 6.4 9.5 6.4 18.7 29.7 9.8 6.6 12.4 10.7 7.3 12.0 13.3 10.4 11.2 12.3 12.8 14.5 16.4 16.2 15.6 13.4 13.5 2. Lombard Rate 12.2 9.0 7.7 11.7 9.1 27.0 45.0 17.7 10.6 18.5 15.7 11.1 17.8 19.9 15.2 16.6 18.4 19.1 21.6 24.5 24.2 23.3 19.9 20.5 3. REPO Rate 4.2 4.2 4.2 6.0 6.0 6.0 22.4 11.8 6.1 6.1 6.3 5.4 5.4 5.4 5.4 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 5.1 4.Treasury Bills Rates 35 days 8.1 7.5 2.7 2.4 2.6 5.5 6.3 6.8 7.1 7.4 7.4 7.4 7.4 7.4 7.4 7.3 7.4 7.3 7.4 7.3 7.3 7.3 7.0 6.8 91 days 13.9 9.9 7.1 6.9 7.3 7.4 8.0 8.1 8.3 9.5 10.0 9.3 9.0 8.8 8.6 8.2 8.0 7.3 7.6 7.5 7.5 7.5 7.3 7.1 182 days 14.4 12.4 9.1 9.8 10.7 11.5 12.9 13.6 13.8 14.8 16.5 17.2 17.7 17.8 17.1 15.8 14.9 15.1 15.7 15.7 15.5 15.5 14.9 14.5 364 days 14.6 12.7 10.0 10.3 11.4 12.8 13.9 14.5 14.5 15.5 18.3 18.7 18.8 19.0 17.8 16.6 15.5 15.4 15.9 15.9 15.9 16.2 15.9 15.8 Overall Treasury bills rate 14.4 12.5 9.0 9.1 10.6 10.0 11.2 13.8 13.9 14.4 17.8 18.3 18.6 18.5 17.4 16.2 15.1 15.0 15.8 15.8 15.7 15.7 15.3 15.1 5.Treasury Bonds Rates 2-years 15.3 15.3 12.3 12.3 14.0 14.0 14.0 15.0 15.0 16.8 16.8 16.8 17.3 17.3 17.5 17.5 17.3 17.3 17.3 17.4 17.4 17.7 17.7 17.7 5-years 16.0 15.3 15.3 11.4 11.4 11.4 16.5 16.5 16.9 16.9 16.9 17.5 17.5 18.8 18.8 17.1 17.1 17.1 17.8 17.8 17.9 17.9 18.0 18.0 7-years 16.3 16.3 16.3 15.6 15.6 16.6 16.6 16.6 16.9 16.9 17.6 17.6 16.2 16.2 18.2 18.2 18.2 17.5 17.5 17.9 17.9 17.9 18.3 18.3 10-years 16.5 16.9 16.9 16.7 16.7 17.0 17.0 17.0 17.6 17.6 18.1 17.6 17.6 18.8 18.8 18.9 18.9 18.0 18.0 18.0 17.6 17.6 17.6 17.6 15-years 17.9 17.9 17.5 17.5 17.5 17.5 17.5 17.5 18.0 18.0 18.0 18.0 18.0 18.0 19.8 19.8 18.8 18.8 18.9 18.9 18.9 18.9 18.9 18.7 6. Discount Rate or Bank Rate 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 16.0 16.0 16.0 16.0 16.0 16.0 16.0 16.0 16.0 16.0 16.0 16.0 16.0 7. Savings Deposit Rate 3.2 3.5 3.4 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.1 3.5 8. Overall Time Deposits Rate 9.0 7.6 9.3 8.1 8.7 9.0 9.2 9.1 9.1 9.2 9.2 9.3 9.1 9.1 8.6 9.0 9.9 10.2 10.0 8.8 9.0 9.2 8.6 8.8 1 month 9.6 6.6 10.8 9.5 9.2 10.1 10.5 10.2 9.8 10.1 10.1 10.2 10.4 10.0 10.5 10.9 11.5 10.6 11.3 10.3 9.8 10.0 7.7 7.8 2 months 9.5 7.0 10.1 7.4 9.8 9.3 10.5 10.5 10.8 10.7 10.6 10.4 10.0 10.3 7.5 8.6 10.7 11.6 11.2 10.2 9.3 10.4 9.7 9.1 3 months 10.8 8.7 10.9 8.4 9.4 9.7 10.2 9.9 9.7 10.6 10.4 10.2 9.8 11.1 10.2 9.9 10.7 11.0 10.6 9.5 11.0 10.4 10.2 11.5 6 months 10.6 10.5 10.5 9.8 10.1 10.6 10.2 9.8 9.9 9.6 10.0 10.3 10.1 9.8 9.8 9.6 10.6 10.7 9.7 9.2 10.0 10.5 10.1 10.0 12 months 10.8 10.7 11.0 10.5 10.7 10.9 10.5 10.6 11.0 10.9 11.0 11.2 11.0 11.0 11.3 11.6 11.8 12.4 12.4 11.5 11.5 11.4 10.9 11.0 24 months 9.0 6.5 8.7 8.4 9.3 9.4 9.7 9.9 9.8 9.9 9.7 9.9 9.4 9.2 8.6 9.6 11.6 12.7 12.0 8.1 8.6 8.8 8.3 9.4 9. Negotiated Deposit Rate 10.0 9.7 9.4 9.5 9.4 8.6 11.3 11.4 11.7 10.9 10.4 11.2 11.3 11.2 11.0 10.9 11.4 11.2 11.9 11.8 12.0 11.7 12.0 11.3 10. Overall Lending rate 15.7 16.1 16.1 16.2 16.1 16.1 16.1 16.1 16.2 16.1 16.1 16.4 16.3 16.4 16.3 16.1 16.0 16.0 15.8 15.8 15.8 15.7 15.7 15.7 Short-term (up to 1year) 14.2 14.4 14.3 13.7 14.3 14.7 14.3 14.4 14.3 14.1 14.1 14.2 14.3 14.2 14.6 14.0 14.2 13.7 13.3 13.4 13.2 13.4 12.8 12.9 Medium-term (1-2 years) 16.3 16.8 16.3 16.3 16.8 16.6 16.9 17.2 17.2 17.2 17.3 17.7 17.8 17.8 17.6 17.6 16.1 17.1 16.6 16.6 16.9 16.5 16.4 16.7 Medium-term (2-3 years) 15.3 16.9 16.9 17.3 16.5 16.5 16.5 16.4 16.6 16.5 16.6 16.5 16.5 16.5 16.0 15.9 16.3 16.1 15.9 15.9 15.7 15.9 15.7 16.2 Long-term (3-5 years) 15.3 15.0 15.5 15.9 15.4 15.1 15.5 15.4 15.2 15.1 15.1 15.9 15.8 15.7 15.6 15.7 15.7 15.6 15.6 15.7 15.8 15.4 15.6 15.2 Term Loans (over 5 years) 17.3 17.6 17.6 18.0 17.4 17.5 17.2 17.3 17.7 17.5 17.7 17.7 17.1 17.9 17.7 17.5 17.5 17.6 17.4 17.5 17.5 17.6 17.8 17.4 11. Negotiated Lending Rate 12.6 12.3 12.0 12.5 12.7 12.3 12.9 11.8 13.8 13.8 13.7 14.4 12.2 12.0 11.3 12.2 11.8 12.1 12.0 11.9 12.3 12.3 13.1 12.5 B: Foreign Currency Savings Deposits Rate 0.8 1.0 1.0 0.9 1.2 1.2 0.7 2.0 1.8 1.1 0.9 0.8 1.0 1.2 1.0 1.8 1.6 1.6 1.4 1.4 1.4 1.4 1.5 1.7 Overall Time Deposits Rate 3.5 3.6 3.7 3.5 3.3 3.3 2.7 2.9 3.0 2.6 2.7 2.8 2.5 2.7 3.3 2.7 2.8 2.3 2.7 2.3 2.5 2.4 2.5 2.9 1-months 3.2 3.3 3.7 3.6 4.2 4.2 2.5 2.9 3.4 2.2 2.4 2.6 1.7 2.7 2.9 2.4 2.9 3.0 1.8 1.7 2.1 2.6 2.8 3.1 2-months 3.2 3.7 3.7 3.1 3.8 3.8 2.7 2.6 2.6 2.4 2.7 2.5 2.5 2.8 3.4 2.8 3.4 2.3 3.5 2.2 3.1 2.9 2.8 3.4 3-months 3.5 3.5 2.9 3.7 2.6 2.6 2.5 2.9 3.2 2.7 2.8 2.6 2.7 2.3 3.3 2.9 3.3 1.7 2.6 3.1 2.9 2.7 3.0 3.9 6-months 3.4 4.1 4.2 3.6 2.9 2.9 2.6 3.1 2.9 2.7 2.8 3.0 2.8 2.8 3.5 2.5 2.6 2.3 2.7 2.8 2.5 2.2 2.2 1.7 12-months 4.4 3.4 4.0 3.3 2.9 2.9 3.0 3.1 2.8 3.1 3.1 3.4 2.9 3.1 3.3 3.0 1.8 2.2 3.0 1.8 1.7 1.7 1.8 2.5 Overall Lending Rate 6.1 6.0 5.8 5.5 5.4 5.4 6.6 5.8 5.4 5.9 6.4 6.7 6.5 6.8 4.8 6.8 6.9 6.9 7.4 7.4 7.4 7.4 7.5 7.1 Short-term (up to 1year) 3.5 3.4 3.2 3.1 2.8 2.8 4.7 4.0 3.2 3.3 3.2 4.2 3.2 4.2 4.2 3.1 5.1 5.0 5.4 5.4 5.3 5.4 6.2 4.5 Medium-term (1-2 years) 6.6 6.6 6.6 6.0 6.1 6.1 8.2 7.5 6.2 6.0 7.5 7.7 7.7 7.7 7.3 8.7 7.7 7.8 7.9 8.0 7.8 7.8 7.8 7.9 Medium-term (2-3 years) 7.8 7.6 6.1 6.1 6.1 6.2 7.3 8.4 7.6 8.2 8.1 8.1 8.1 7.4 3.5 7.2 7.4 7.8 8.1 8.1 8.1 8.1 7.5 7.4 Long-term (3-5 years) 6.3 6.3 6.1 6.2 7.0 7.1 8.0 4.1 5.1 7.0 7.0 7.6 7.5 8.1 5.7 7.0 6.6 6.6 6.8 6.7 6.8 6.8 7.0 6.7 Term Loans (over 5 years) 6.1 6.1 7.1 6.2 5.1 5.1 5.1 5.1 5.1 5.1 6.1 6.1 6.1 6.5 3.2 7.8 7.4 7.5 8.9 8.9 8.8 8.9 9.0 8.9 Prices for Mbeya not regularly collected. Source: Ministry of Industry, Trade, and Marketing. PAGE 78 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Annex 12: Monetary Aggregates (Percent of GDP, except where noted otherwise) Item 2010 2011 2012 2013 2014 2015 2016 Monetary aggregates M3 25.3 24.7 24.0 22.7 23.3 24.3 23.4 M2 18.5 17.5 17.5 16.8 17.5 17.4 17.0 M3 Growth Rate (Percent) 25.4 18.2 13.1 10.0 15.6 18.8 2.9 M2 Growth Rate (Percent) 21.8 15.0 16.0 10.9 17.0 13.4 4.7 Domestic credit Total Domestic Credit 15.6 17.2 18.1 18.2 20.2 22.4 21.5 Total Domestic Credit (Percent) 32.8 33.8 22.0 17.4 24.3 26.8 2.5 Private Sector Credit 14.4 14.7 2.8 2.5 17.1 17.1 Private Sector Credit growth (Percent) 20.0 27.2 18.2 15.3 19.4 24.8 7.2 Interest rates structure (Percent) Overall Tbills Rate (Period Average) 4.8 8.3 13.6 14.2 13.6 12.9 16.2 Average Lending Rate 14.3 15.0 15.6 15.8 16.2 16.1 16.0 Average Deposit Rate 5.4 6.2 8.3 8.7 8.4 8.9 9.2 Source: Bank of Tanzania. PAGE 79 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Annex 13: National Debt Developments (Mn US$) 2015 2016 Item Jan Feb March April May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1. Overal Total Debt Committed 19446 18572 18274 19304 19117 20129 20625 20634 20607 20818 20562 22828 23054 23146 23131 22970 22996 23118 23539 24223 24197 23980 23852 23630 Disbursed outstanding debt 13188 13291 13233 13367 13301 13959 13946 14014 13918 13865 13781 14992 15163 15274 15376 15549 15797 15948 15927 16029 16018 15850 15769 15622 Undisbursed debt 6258 5281 5041 5937 5816 6171 6679 6620 6689 6954 6780 7837 7891 7872 7755 7421 7198 7170 7612 8194 8179 8129 8083 8008 2. Disbursed Debt by Creditor 13188 13291 13233 13367 13301 13959 13946 14014 13918 13965 13781 14992 15163 15274 15376 15549 15797 15948 15927 16029 16018 15850 15769 15622 Categorya Bilateral debt 1046 1045 1041 928 916 927 927 930 930 932 928 942 979 1002 1023 1036 1028 1113 1110 1119 1127 1107 1076 1074 Multilateral debt 6658 6774 6679 6771 6744 7149 7134 7154 7162 7190 7196 7815 7742 7835 8001 8076 8065 8044 8091 8184 8243 8116 8071 8002 Commercial debt 4545 4533 4567 4704 4603 4840 4841 4863 4805 4822 4739 5213 5291 5282 5199 5264 5504 5573 5281 5275 5196 5186 5186 5113 Export credits 939 938 947 963 1038 1043 1044 1067 1021 1022 918 1023 1152 1153 1153 1174 1200 1218 1446 1451 1453 1442 1435 1434 3. Disbursded Debt by Borrower 13188 13291 13233 13367 13301 13959 13946 14014 13918 13965 13781 14992 15163 15274 15376 15549 15797 15948 15927 16029 16018 15850 15769 15622 Categorya Central Government 10872 10975 10913 10901 10848 11476 11461 11502 11537 11615 11719 12391 12387 12498 12614 12727 12788 12945 12926 13022 13004 12842 12768 12653 Parastatal Companies 464 464 455 453 459 462 464 432 443 443 406 404 357 358 372 373 370 337 334 336 337 331 327 294 Private Sector 1852 1852 1865 2013 1995 2021 2021 2080 1939 1907 1657 2197 2419 2417 2391 2449 2640 2667 2667 2670 2678 2678 2674 2674 4. Disbursed Debt by Use of 13188 13291 13233 2360 2242 2287 2268 2278 2270 2280 2333 14992 15163 15274 15376 15549 15798 15948 15927 16029 16018 15850 15769 15954 Fundsa BOP & Budget Support 2366 2319 2306 2922 2893 3158 3214 3223 3195 3190 3023 2501 2479 2494 2462 2480 2497 2544 2693 2633 2646 2635 2613 2437 Transport & Telecommunication 2894 2917 2899 573 575 580 575 577 526 537 512 3362 3508 3626 3642 3682 3719 3649 3583 3624 3622 3605 3580 3652 Agriculture 565 583 569 2109 2213 2230 2227 2236 2318 2309 2403 567 556 560 551 568 575 616 612 614 614 611 606 1036 Energy & Mining 2067 2066 2092 325 318 331 329 333 307 310 312 2586 2561 2568 2557 2580 2525 2701 2679 2736 3502 3483 3460 2636 Industries 318 322 324 2114 2084 2164 2144 2153 2004 2038 2003 336 339 340 342 393 397 400 403 405 398 397 395 400 Social Welfare & Education 2071 2121 2098 599 599 611 606 616 666 660 520 2173 2166 2198 2261 2289 2331 2350 2298 2272 1549 1542 1714 2261 Finance and Insurance 469 599 597 93 93 94 93 94 85 87 79 633 676 598 674 637 708 733 763 783 753 750 745 738 Tourism 97 97 93 538 533 533 537 540 548 546 595 83 77 78 67 42 43 47 44 48 54 53 53 65 Others 2340 2265 2255 2271 2285 2504 2491 2503 1999 2010 2002 2176 2180 2184 2181 2230 2311 2175 2139 2169 2149 2046 1871 1939 5. Total Amount of Loan 1 0 0 59 2 200 15 2 1 3 4 113 10 32 246 24 20 27 7 76 1 24 146 23 Contractedb Government 0 0 0 0 0 200 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Parastatal Companies 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Private 1 0 0 59 2 0 15 2 1 3 4 113 10 32 246 24 20 27 7 76 1 24 146 23 6. Disbursementsb 62 70 61 52 53 536 44 55 8 75 128 171 53 72 173 114 363 199 84 89 64 25 150 146 Government 60 70 60 52 53 488 41 48 7 72 127 69 23 62 151 37 137 164 47 75 46 18 119 133 Parastatal Companies 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Private 1 1 1 0 0 48 3 8 1 3 1 102 30 10 23 78 226 35 37 14 18 7 31 14 7. Actual Debt Serviceb 21 16 40 33 14 30 23 18 35 39 23 54 59 122 78 91 64 82 64 28 149 37 15 129 Principal 5 12 4 24 10 28 5 14 8 27 17 17 24 90 38 41 47 73 45 21 95 27 9 105 Interest 16 4 36 9 5 1 18 5 27 12 6 37 35 32 40 51 17 9 19 7 54 10 6 24 Others 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 8. Net Transfersb 40 54 21 19 39 506 21 37 -27 36 105 118 -6 -50 95 23 299 117 20 62 -85 -12 135 17 9.Total Arrears by Creditors 3280 3145 3208 3082 3076 3147 3143 3068 2996 2988 2766 2835 2882 2940 3195 2363 2362 2351 2487 2482 2448 2504 2511 2748 Categorya Principal 1822 1677 1744 1768 1775 1811 1814 1720 1593 1581 1286 1342 1305 1353 1591 1135 1125 1118 1236 1233 1190 1192 1192 1369 Bilateral 374 365 427 426 420 427 429 308 309 309 308 319 271 319 325 325 323 328 327 327 329 328 328 336 Multilateral 28 26 27 31 31 35 34 39 59 56 42 46 48 49 61 36 28 28 33 32 36 36 35 34 Commercial 861 726 719 721 740 755 755 782 729 729 521 562 562 562 625 439 431 416 480 495 455 459 458 525 Export Credits 560 560 571 590 585 595 597 590 496 488 416 416 423 424 580 335 342 346 396 378 370 370 371 474 Interest 1457 1468 1465 1314 1301 1336 1328 1349 1402 1407 1480 1493 1577 1587 1604 1227 1238 1233 1251 1249 1259 1312 1320 1379 Bilateral 827 832 827 676 671 678 673 684 684 685 683 685 715 719 724 729 730 730 730 735 738 735 733 759 Multilateral 13 12 11 14 14 11 13 13 15 15 16 16 16 16 17 8 10 8 8 8 9 11 12 12 Commercial 423 427 429 422 421 440 440 437 471 463 460 468 481 481 489 290 297 295 291 285 290 329 333 339 Export Credits 194 197 198 202 196 206 202 215 232 245 321 324 364 371 375 201 201 199 222 220 221 237 242 269 10. External Debt Stock 14645 14759 14698 14680 14602 15295 15274 15362 15320 15372 15261 16485 16740 16861 16980 16777 17035 17181 17178 17278 17277 17368 17332 17333 11. Domestic Debt Stock 4288 4139 4204 4015 4551 4253 3591 3643 3642 3850 3913 3997 4046 4233 4345 4453 4595 4607 4694 4555 4641 4680 4684 4788 12. Total Debt Stock 18933 18898 18902 18696 19153 19548 18865 19006 18962 19221 19174 20482 20786 21093 21325 21230 21630 21788 21872 21832 21918 22048 22015 22122 End Period Exchange Rate 1746 1792 1786 1829 1999 1974 2086 2136 2149 2177 2149 2149 2177 2179 2180 2179 2182 2179 2179 2177 2175 2175 2171 2173 Note: End of Period; b Period Average; P = Provisional Statistics, r = Revised Statistics. Sources: Ministry of Finance and Planning and Bank of Tanzania . PAGE 80 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Annex 14: Poverty by Geographic Regions Poverty Headcount Distribution of the Poor Distribution of the Population HBS 2011/12 HBS 2011/12 HBS 2011/12 Basic Needs Poverty Line = TZS 36,482 a Rural 33.3 84.1 71.2 Urban (incl. Dar es Salaam) 15.5 15.9 28.8 Regions Rural 33.3 84.1 71.2 Dar es Salaam 4.1 1.5 10.1 Other Urban 21.7 14.4 18.7 Total 28.2 100.0 100.0 Food Poverty Linea = TZS 26,085 Rural 11.3 82.3 71.2 Urban (incl. Dar es Salaam) 6.0 17.7 28.8 Regions Rural 11.3 82.3 71.2 Dar es Salaam 1.0 1.0 10.1 Other Urban 8.7 16.7 18.7 Total 9.7 100.0 100.0 Monthly expenditure per adult. Source: National Bureau of Statistics. PAGE 81 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Annex 15: Business Sentiment Survey Annex 15: Business sentiment survey The views of business managers of the top 100 mid-sized companies in Tanzania have been collected every six months since April 2013. However, in December 2016, it was collected after 12 months. This data is collected by KPMG through electronic questionnaires, with anonymous responses. In December 2016, two thirds of responding managers assessed the performance of the economy to be worse than in the previous year, while less than one third reported that it had remained the same. Looking forward, more than half of the managers were pessimistic about the economy and their own businesses, a reversal of the opinions expressed in December 2015. How do you believe the Tanzanian economy is performing compared to last year? • In December 2016, only 18 percent of the managers believed that the economy performed better in the last 12 months than the preceding year. • 62 percent of the views were unfavorable, 28 percent higher than in December 2015, also worse since we started the survey in 2013. • 20 percent of the managers saw no change, which is 11 percent lower in December 2015 but almost the same as in May 2015. How do you expect the Tanzanian economy to perform in the coming year? • In December 2016, only 16 percent of the managers expected the economy to perform better in 2017 than in 2016, significantly lower than 53 percent in December 2015. • 55 percent of the managers anticipated economic to slowdown 2017, which is 30 percentage points higher than December 2015. How do you think that your own business will perform during the next 12 months compared to its current level of performance? • In December 2015, 52 percent of the managers expected the performance of their companies to improve during the next 12 months. This rate has decreased significantly to 19 percent in December 2016. • The rate for those expecting the same performance has remained the same between December 2015 and December 2016, at 23 percent. Source: KPMG/World Bank. PAGE 82 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region Annex 16: The CPMI – World Bank accounts and the use of electronic Payment Aspects of Financial Inclusion payment services (PAFI) • Contribute to the recognition that Having efficient, accessible and safe retail safe and efficient payment services payment systems and services is necessary are important for the well-being to be able to extend access to transaction of individuals, households and accounts for the 2 billion worldwide people businesses, as well as a gateway to who are still unserved by regulated financial a broader range of financial services service providers. • Advance market efficiency, flexibility, The World Bank Group and the Committee on integrity and competitiveness to Payments and Market Infrastructures(CPMI) support financial inclusion and of the Bank for International Settlements stability convened a task force on Payment Aspects of Financial Inclusion (PAFI) to comprehensively • Facilitate the establishment of examine how payment systems and services a balanced and proportional affect financial inclusion efforts. regulatory environment to facilitate effective, reliable, safe and cost- The PAFI task force, convened in 2014, efficient access to payment brought together experts from central services. banks, development banks and international organizations to examine this issue in a The PAFI work is essential to worldwide comprehensive manner. financial inclusion efforts, particularly to the World Bank Group’s UFA2020 initiative, Its mandate was to examine demand- whose goal is ensuring that all working- and supply-side factors affecting financial age individuals and businesses can have inclusion in the context of payment access to at least one transaction account systems and services, and to suggest what operated by an authorized and/or regulated measures could be taken to address these payment service provider to: issues. The demand side is comprised by payment service users, like consumers, • Perform most, if not all, of their businesses, and Government agencies payment needs and the supply side are payment service • Safely store some value providers, like banks and authorized and/ or regulated non-banks, as well as payment • Serve as a gateway to other financial system operators. services The task force’s objectives were to: The task force found that certain financial and other relevant infrastructures are • Support the efforts of authorities necessary for an efficient national to expand access to transaction payment system also form one of the basic PAGE 83 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION foundations for financial inclusion. They Report on Payment Aspects of Financial include: Inclusion • A large-value interbank settlement In September 2015, the PAFI task force system released a consultative report62v on Payment Aspects of Financial Inclusion, for a three- • An interbank system for retail month public consultation process which payments, in specific electronic ended in December 2015. As a result of the funds transfers comments received the report was updated • A payment card processing to strengthen the analysis and sharpen the platform or platforms and message and the final report was issued in April 2016. • An effective and efficient identification infrastructure The report analyzes how payment systems and services promote access to and use of • Credit reporting and other data- financial services. sharing platforms also play an important role It examines what elements of retail payments are critical to financial inclusion and how • Finally, all a robust communications improving the payments infrastructure and infrastructure and power supply services could accelerate access to and use system are essential. of transaction accounts. Without these financial infrastructures, the efficient provision of various transaction accounts and electronic would be very difficult. 62 Available at http://documents.worldbank.org/curated/en/806481470154477031/Payment-aspects-of-financial- inclusion. PAGE 84 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region It also discusses the relevance and • Guiding principle 4: Transaction importance of measuring the effectiveness account and payment product of financial inclusion efforts from a design: The transaction account payments perspective. and payment product offerings effectively meet a broad range of The report outlines seven guiding principles transaction needs of the target and suggests key actions countries could population, at little or no cost. take to advance access to transaction accounts, which then can serve as a • Guiding principle 5: Readily gateway to broader financial inclusion. available access points: The usefulness of transaction accounts These guiding principles are: is augmented with a broad network • Guiding principle 1: Public and of access points that also achieves private sector commitment: wide geographical coverage, and by Commitment from public and offering a variety of interoperable private sector organizations to access channels. broaden financial inclusion is • Guiding principle 6: Awareness and explicit, strong and sustained over financial literacy: Individuals gain time. knowledge, through awareness • Guiding principle 2: Legal and and financial literacy efforts, of the regulatory framework: The legal and benefits of adopting transaction regulatory framework underpins accounts, how to use those financial inclusion by effectively accounts effectively for payment addressing all relevant risks and by and store-of-value purposes, and protecting consumers, while at the how to access other financial same time fostering innovation and services. competition. • Guiding principle 7: Large-volume, • Guiding principle 3: Financial and recurrent payment streams: Large- ICT infrastructures: Robust, safe, volume and recurrent payment efficient and widely reachable streams, including remittances, financial and ICT infrastructures are leveraged to advance financial are effective for the provision of inclusion objectives, namely transaction accounts services, by increasing the number and also support the provision of of transaction accounts and broader financial services. stimulating the frequent usage of these accounts. PAGE 85 TA N Z A N I A E C O N O M I C U P D AT E APRIL 2017, 9TH EDITION Public and private sector commitment, legal and regulatory framework, and financial and ICT infrastructures are the basic foundation that countries need to have in place to be able to expand access to transaction accounts. Designing useful payment and transaction accounts products which are made available through widespread access points, coupled with awareness and financial literacy efforts to inform and educate people on how to select and use them, as well as accelerating adoption of transaction accounts by shifting large volume use cases like wage or social benefit payments into those accounts constitute key elements that will make universal access to and frequent usage of transaction accounts possible. PAGE 86 The World Bank Group Macroeconomics and Fiscal Management Global Practice, Africa Region References AFI (Alliance for Financial Inclusion). 2016. 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