Mobile Credit Services and Borrowing Behavior of Tanzania’s Urban Informally Employed: A Case Study Of Kinondoni District

The first mobile credit service in Tanzania was launched in May 2014 through a partnership between a financial institution and a mobile network operator (MNO). Within the same year, a second operator joined this new market, also through a similar partnership. Both operators had country-wide network coverage and had mature mobile money ecosystems, supported by country-wide mobile money agent networks. The environment was therefore set for mobile credit services to thrive. Over 2 years since the first two launches, the mobile credit uptake is still quite low. Average loan amount is still around US$16 despite the maximum loan amount being over US$200. The present study set out to understand why the loan uptake is still so low, by directly interviewing a randomly selected sample of informally employed people in the largest district in Tanzania (by population). The study discovered that cost (interest) is the most important consideration, and that the (formal) mobile credit service is competing against informal lending from family and friends. This study also discovered that awareness and understanding of the available mobile credit services is quite low (fewer than 20% of the interviewed people know how to use these services). These findings indicate that operators need to rethink their business and marketing strategies in order to deliver services that address the people’s needs