Touted as the revolutionary alternative to traditional banking services for financial inclusion, Digital Credit is the latest wave of digital banking services to hit the East African region which promises to provide millions of low-income Tanzanian households with easy access to formal financial services such as savings and micro loans via their mobile phones.
Since the introduction of digital credit in 2014, the leading provider, M-Pawa, a mobile savings and loan product launched by Vodacom Tanzania and the Commercial Bank of Africa (CBA), has already acquired nearly 5 million subscribers and continues to expand alongside the growing adoption of the digital platform.
But beyond all the excitement and hype, has digital credit fulfilled its expectation in Tanzania?
The Consultative Group to Assist the Poor (CGAP) has recently published the findings of their nationally representative survey conducted in 2017 which they had set out to understand the profile of digital credit users and examine the impact and potential risks it has on the population of Tanzania.
Here are some of the key findings:
- A fifth of Tanzanian phone owners have taken out a digital loan.
- Digital borrowers are much more likely to have used banks and other financial services.
- Although most digital borrowers are self-employed, only a third report using a digital loan for business purposes.
- Late repayment and default are widespread.
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