This project set out to study the demand for mobile credit services in Tanzania. The study found that interest rate and lack of awareness are among the most important factors that affect the demand for mobile money loans in Tanzania.

1. MOBILE CREDIT SERVICES AND BORROWING
BEHAVIOR OF TANZANIA’S URBAN INFORMALLY
EMPLOYED:
A CASE STUDY OF KINONDONI DISTRICT
Author
Date
DUNIA YUSUF
July 2017

2. Overview: What is this study all about?
Methodology: How did I do it?
Results: What did I find?
Analysis: What do my findings mean?
Next steps: Areas for further research

3. This study is an evaluation of one aspect of Tanzania’s
progress towards financial inclusion i.e. Mobile
phone technology.
At a high level, achieving Financial Inclusion can be seen to
depend on a solid foundation of three pillars:
Policies, laws and regulation (Enabling environment)
Supply of financial services reaching the un-banked populations
Demand for financial services among the un-banked populations
Overview: What is this study all about?

4. This study is focused on the Demand for financial services.
More specifically, I focused on demand for mobile credit
services that are offered by three mobile network operators
(MNOs) in Tanzania. The services are:
o Vodacom’s M-Pawa
o Airtel’s Timiza
o Tigo’s Nivushe
This study is a part of an Outcome Evaluation that looks at
the Relevance of these services to the target population
Overview: What is this study all about?

5. • Mobile Money
ecosystem
• Laws &
Regulation
• Strategic
partnerships
• Develop
credit score
logic
• Design loan
products
• Prepare
marketing
campaign
Mobile Credit
services
• M-Pawa
• Timiza
• Nivushe
• Mobile loan
Take-up to
smoothen
consumption
• Mobile loan
Take-up to
fund micro-
enterprises
• Better life
Financial Inclusion Results Chain
Inputs Activities Outputs Outcomes Impact

6. Main Research Objective
In this study, I set out to find out:
What are the factors that informally employed people in
Kinondoni district take into consideration when seeking to
finance their needs through credit?
Overview: What is this study all about?

7. Research Questions
– What do informally employed people in Kinondoni
district consider in choosing a formal credit service?
– What challenges discourage informally employed people
in Kinondoni district from taking mobile money loans?
– What is the current estimated size of the mobile credit
market among informally employed people in Kinondoni
district?
– What do mobile phone users in Kinondoni district want
in a mobile loan service?
Overview: What is this study all about?

8. Methodology: How did I do it?
- Through a cross-sectional study that:
o Targeted four areas in Kinondoni district where there is
a concentration of diverse informal businesses
o 3 enumerators interviewed 160 randomly-selected
respondents in these four locations. Simple random
sampling was used to select respondents.
o Collected responses on up to 49 questions through a
semi-structured questionnaire
45 structured questions
4 un-structured questions

9. Results(1/4): What did I find?
Question 1 What do informally employed people in
Kinondoni district consider in choosing a formal credit
service?
Response Rate: 100%
– Top 3 considerations in terms of number of respondents
are:
1. Interest
2. Relationship with the lender
3. Ability to repay

10. Results(1/4): What do informally employed people in Kinondoni district
consider in choosing a formal credit service?

11. Analysis: What does this finding mean?
Interest: This targeted population is sensitive to service
pricing. Uptake can be improved by adjusting price.
Relationship with lender: This means mobile credit has
tough competition from informal lending. A social
relationship with the lender means loan terms can be highly
flexible. MNOs may find this difficult to emulate
Ability to repay: This refers to the respondents income flow.
Respondents consider their ability to repay the full amount
within the committed period before taking up a loan. It is
therefore not a factor that can be manipulated to stimulate
loan uptake.

12. Results(2/4): What did I find?
Question 2 What challenges discourage informally
employed people in Kinondoni district from taking mobile
money loans?
Response Rate 100%
– Over 35% (59 out of 160)of respondents have never
tried the service, so they do not know of any challenges.
Using 2016 estimates, this percentage represents
around 275,000 informally employed people in
Kinondoni district:
– Challenges identified are:
1. Lack of understanding of the service
2. Offered amounts are too low to have utility

13. Results(2/4): What challenges discourage informally employed people in
Kinondoni district from taking mobile money loans?

14. Analysis: What does this finding mean?
Never tried it: This is not a challenge that people face. It can
be influenced by marketing and awareness campaigns
Lack of understanding of the service: This means people in
the targeted population do not know how the service works.
It therefore calls for education of the service mechanics
rather than mere marketing campaigns.
Amount too low: This means that the offered loan amounts
are simply too low to have utility for the customers. both the
initial amount and the progression towards maximum loan
amount need to be adjusted

15. Question 3 What is the current estimated size of the mobile
credit market among informally employed people in
Kinondoni district?
Response Rate 100%
– Nearly half (48.75%) of respondents say they like or they
would like to use mobile money credit service. Using
2016 estimates, this represents over 383,000 people in
the target population
Response Rate 100%
– Over half (52.5%) of respondents say they need a loan at
least once per year. This percentage represents or
412,504 people
Results(3/4): What did I find?

16. Results(3/4): What is the current estimated size of the mobile
credit market among informally employed people in Kinondoni district?
47.5%
45.6%
5.0% 1.9%
Average annual need for loan
Don’t need
Once or twice
Two to five times
More than five
times

17. Results(3/4): What is the current estimated size of the mobile credit market
among informally employed people in Kinondoni district?
48.75%
51.25%
Do you like/ would you like to use mobile money loan
service?
Yes
No

18. Analysis: What does this finding mean?
 The mobile credit market has not reached saturation yet
 A nationally representative estimate of these statistics can
be found for use in forecasting loan uptake. This
information is necessary in working out revised interest
rates

19. Question 4 What do mobile phone users in Kinondoni
district want in a mobile loan service?
Response Rate 100%
– Interviewing respondents uncovered the following to be
most popular features in a loan:
1. Cash disbursement
2. Flexible repayment period
3. Flexible loan amount
Results(4/4): What did I find?

20. Other findings and observations:
– Over 81% of the targeted population use Tigo as their
primary network
Results: What did I find?
2.50%
9.38%
81.25%
6.25% 0.63%
Halotel
Vodacom
Tigo
Airtel
Smile

21. Analysis: What does this finding mean?
– To 81% of the targeted population, mobile credit service
has only been around since March 2016 when Tigo
launched Nivushe.
– In order for any marketing/awareness campaign to have
a higher chance of success, Tigo must run it for this
target population.

22. Next steps: Areas for further research
The present study has revealed the underlying reasons behind low
uptake of mobile credit services. It has not, however, explored the
following areas:
• Reasons for loan aversion that is observed in this market segment
• What price point will be considered reasonable and/or acceptable by the target
market
• What approach for awareness campaign will be effective in educating this market
segment on the features, benefits and use of mobile credit services
• What amounts are most suitable for first loan, and what increments should be
applied in subsequent loans so that the borrower finds the service to have utility
• What differentiates Tigo from other MNOs in this target population? Can MNOs
use Tigo’s business strategy to increase awareness of their mobile credit services
among this target population?