ATMIA Africa Regulatory Liaison Committee Africa Country Profiles:

Africa Banking Country Profiles - Focus on Tanzania

Hosted by ATMIA Africa Regulatory Liaison Committee

Michael Lee, CEO, ATMIA Andrew Dean, Executive Director, Africa and Middle East, ATMIA

Guest Speaker: Danford Mbilinyi, CEO, Umoja Switch, Tanzania Housekeeping

. Your control panel

. Audio options

. Submitting your questions

. Webinar recording

. For technical issues – [email protected] Agenda

. ATMIA Africa country profile Tanzania – Stakeholders, Regulation, Country and Banking Data

. Tanzania in-country insight – interpretation and opportunities

. Umoja Switch profile and role

. Q&A, items for future discussion ATMIA Africa Regulatory Liaison Committee – Country Profiles

A service for ATMIA members from the ATMIA Africa Regulatory Liaison Committee

Profiles of select African countries for banking, ATM and payments stakeholders

Country Profile for: United Republic of Tanzania Content – ATMIA Africa RLC Country Profile for Tanzania

. Country Snapshot

. Industry Stakeholders . , switches, solution providers, associations

. Legislation and Regulations . Banking, payments, privacy and data protection

. Country Metrics . Addressable population, road and electricity infrastructure, banking maturity, technology penetration, business environment

. Banking and Payment Metrics . Mobile, ATM, payments, financial inclusion United Republic of Tanzania - Snapshot

Population: 52 million Bukoba Musoma Regional co-operation: Part of (EAC) - , Kenya, Rwanda, Uganda Neighbours: Also include DRC, Zambia, Malawi, Mozambique Wete Top cities: Manyara Mkoani Kigoma • – 4.4m Tabora Tanga • Mwanza – 700k Sansibar • Arusha, Dodomo, , Morogoro – 300 to 400k+

Morogoro Top industries: Dares Salam • Agriculture – 34% • Wholesale & retail trade; repair of vehicles household Sumbawanga Iringa goods; Restaurants and Mbeya hotels – 13% • Finance, real estate and business services – 10.2% • Construction – 9.9% Lindi

Songea Industry Stakeholders – Banking and Payments

. Central , Switches and Clearing Houses . Licensed Banks . Industry Associations . Regional Economic and Banking Co-operation . Mobile Money Operators . Other Telecoms and Solution Providers Industry Stakeholders – Banking and Payments

Central Bank, Switches and Clearing Houses – TISS (Tanzania Inter-bank Settlement System) DECH (The Dar es salaam Electronic Clearing House) UmojaSwitch

Licensed Banks https://www.bot-tz.org/BankingSupervision/registeredBanks.asp

Industry Associations Tanzania Institute of Bankers (TIOB) Tanzania Bankers Association The National Payment System Advisory Council (NAC) SCCULT (Savings and Credit Co-Operative Union of Tanzania) CBA (Community Bankers Association) TAMFI (The Tanzania Association of Microfinance Institutions)

Regional Economic and Banking Co-operation EAC (East African Community) ASBEA (Association of Savings Banks in East Africa) EAC PSSIP (EAC Payment and Settlement Systems Integration Project) Kenswitch (Kenya) Interswitch (Uganda) and RSwitch (Rwanda) Industry Stakeholders – Mobile, Telco and Payment Solutions

Mobile Money Operators Airtel Money Tigo Pesa Vodacom M‐Pesa Zantel Ezy Pesa

Other Telecoms and Solution Providers Tanzania Telecommunications Company Limited (TTCL) - telecommunications provider Smart - telecommunications provider Halotel - telecommunications provider Selcom - solution provider for banking and payments Maxcom - solution provider for banking and payments Legislation and Regulations – Banking and Payments

. Banking

Supervisory Methodologies, Acts, Regulations and https://www.bot- Circulars in Place tz.org/BankingSupervision/SupervisoryMethodololgies.asp#LicensingConditions The Banking And Financial Institutions Act, 2006 https://www.bot-tz.org/BankingSupervision/BAFIA2006.pdf https://www.bot- tz.org/BankingSupervision/documents/New%20Docs/The%20Banking%20and%20 The Banking And Financial Institutions (Internal Control Financial%20Institutions%20(Internal%20Control%20and%20Internal%20Audit)%2 And Internal Audit) Regulations, 2014 0Regulations,%202014.pdf

. Payments, Agency, Mobile and Electronic Banking

https://www.bot- Guidelines On Agent Banking For Banking Institutions, tz.org/BankingSupervision/GUIDELINES%20ON%20AGENT%20BANKING%20FO 2013 R%20BANKING%20INSTITUTIONS%202013.pdf https://www.bot-tz.org/PaymentSystem/GN- The Electronic Money Regulations, 2015 THE%20ELECTRONIC%20MONEY%20REGULATIONS%202015.pdf http://www.bot- Electronic Payment Schemes Guidelines, 2007 tz.org/paymentsystem/Docs/e_Schemes%20Guidelines%20June%202007.pdf Payment Systems https://www.bot-tz.org/PaymentSystem/paymentSystem.asp The National Payment Systems Act, 2015 https://www.bot-tz.org/PaymentSystem/NPS%20Act%202015.pdf https://www.bot-tz.org/PaymentSystem/GN- The Payment Systems Licensing And Approval THE%20PAYMENT%20SYSTEMS%20LICENSING%20AND%20APPROVAL%20 Regulations, 2015 REGULATIONS%202015.pdf Legislation and Regulations – Inter-bank Settlement, Financial Inclusion, Data Protection

. Inter-bank Settlement

Inter-bank Settlement System https://www.bot-tz.org/PaymentSystem/TISS%20Bronchure.pdf TISS Rules and Regulations http://www.bot-tz.org/paymentsystem/TISS%20Rules%20and%20Regulations.pdf

. Financial Inclusion National Financial Inclusion Framework https://www.bot-tz.org/NFIF/Governor's%20Speech%20rev_10122013.pdf

. Data Protection, Privacy and Data Sovereignty

Data Protection Bill https://www.privacyinternational.org/sites/default/files/privacy_tanzania.pdf Constitution - Article 16 http://www.judiciary.go.tz/downloads/constitution.pdf Data Sovereignty Awaiting feedback from Michalsons Country Metrics

Tanzania Kenya South Nigeria Ghana Africa

Addressable Population GDP per capita (US$) 955 1 358 6 484 3 203 1 442 Population (millions) 52 45 54 178 27 Employment of working age pop. (of age 15+) 86% 61% 39% 52% 68%

Road and Electricity Infrastructure Quality of roads 43% 61% 70% 38% 53% Data sources: Quality of electricity supply 35% 55% 51% 23% 42% • World Bank • World Economic Forum Banking Maturity • Transparency Availability of 52% 67% 88% 59% 57% International Soundness of banks 60% 75% 93% 68% 62% Account at financial institution (of age 15+) 19% 55% 69% 44% 35% Please see next slide for branches (per 100,000 people) 2 6 11 6 6 comments on data ATMs per 100,000 (per 100,000 people) 6 10 66 16 8 Mobile accounts (per 100,000 people) 32 58 14 2 13

Technology Penetration Mobile cellular subscriptions (per 100 people) 63 74 149 78 115 Fixed broadband subscriptions (per 100 people) 0.2 0.2 3.0 0.0 0.3 Internet users (per 100 people) 5 43 49 43 19 Fixed telephone subscriptions (per 100 people) 0.3 0.4 6.9 0.1 1.0

Business Environment Corruption Percpetion Index (Rank out of 168) 117 139 61 136 56 Ease of doing business (Rank out of 189) 139 108 73 169 114 Retail Banking Data - Access

Retail Banking Channels Access Tanzania South Africa Number of bank branches 1 200 5 140 Number of ATMs 1 600 30 000 Number of Bank Point of Sale (POS) 3 500 500 000 Number of agents (mobile and bank) 242 000 NA

Adult population per access point Tanzania South Africa Bank branch 24 310 7393 ATM 18 233 1267 POS 8 335 76 Agents 121 Not available Retail Banking Data - Access

Account and Cardholders - Tanzania Mobile money users 17.6m Bank account holders 5.5m Debit card holders 3.4m holders 0.2m

Number of Number of Top Retail Banks - Tanzania branches ATMs National Microfinance Bank (NMB) 175 600 CRDB Bank 120 400 National Bank of Commerce 52 301 Official Data – BOT and TCRA

Official Statistics Banking and payments statistics - BoT June 2013 Inter-bank settlement system volume and value Electronic clearing house volume and value ATM volume and value POS volume and value Internet banking Mobile banking Mobile payments Cross border money transfers

Telecommunications statistics - TCRA Dec 2015 Mobile money subscriptions * Airtel Money 3 999 453 Tigo Pesa 5 252 523 Vodacom M‐Pesa 7 963 700 Zantel Ezy Pesa 423 673 TOTAL 17 639 349 *Source: Tanzania Communications Regulatory Authority (TCRA) Next Steps

. Extend profile to include required metrics and profile information for bank and non-bank stakeholders

. Obtain input from broader members and non-members on profile contents and scope

. Finalise profile scope

. Obtain participation and input from in-country central bank or switches or banking association in Tanzania

. Expand country profiles to rest of “Group of 5”

. Expand country profiles to “Top 15” in sub-Saharan Africa The Payment Space in East Africa

Presented by Danford Mbilinyi CEO UmojaSwitch, Tanzania The United Republic of Tanzania The Country Tanzania

Size: 939.3 square kilometers (including water bodies) 38% of land used for agriculture GDP: An average of 7% annually Literacy Level: 70.6% (male 75.9, female 65.4) Population:44.9 m(2012), around 50m in 2015 In 2012, more than 50% were below 18

Interpretation

INTERPRETATION

More than 50% are below 18 years 5.6% are above the age of 60 Due to the demographics above, it is evident that Tanzania has technology-ready generation. A young generation, easy to adopt new tech However, what are the channels and spending habits?: ATMs (cash), mobile (mobile) Financial Inclusion

Banked community is around 13.9 % (Finscope Survey, 2013) Total Financial Inclusion: 57.4% -formal mechanisms The Payment Situation

There has been a significant evolution in the payment space in Tanzania. Major channels being ATMs, Mobile and POS. Major players:

- UmojaSwitch: Running shared infrastructure - Selcom: Dominant in mobile banking and aggregation - MaxCom: Strong player in retail payments – non bank - Banks (running own switches) - MNOs – the dominant ones in mobile money - Other players The Trend…

4000

ATMs keep increasing (slow 3500 growth compared to POS)despite stiff competition 3000

from other channels 2500

ATM 2000 Rapid increase in number of POS

POS in 2014 attributed to new 1500 agency banking regulations 1000

Given the demographics, 500 ATMs will keep increasing 0 2013 2014 2015 The trend……

•Number of ATMs: Around 1600 by end of 2014 pushing TZS 720 billions in value.

•Number of bank driven POS: Around 3500 pushing TZS 17 billion per month in value

•With banked community still at 14%, mobile money drives more than 70% of all payments in EA. The East African Perspective

GDP (PPP) GDP (Nominal) № Country Population (Billions of (Billions of Literacy (%) $US) $US)

East African 153,301,178 297.791 122.672 73.34 Community

1. Burundi 10,395,931 7.884 2.723 67.2

2. Kenya 45,010,056 125.77 55.3 87.4

3. Rwanda 12,337,138 17.362 7.431 71.1

4. Tanzania 49,639,138 84.884 42.3 70.6

5. Uganda 35,918,915 61.891 22.926 73.2 26 The EA Payment Players

Regional switches: UmojaSwitch, Kenswitch, Paynet, Interswitch, R-Switch and the newly anticipated National switch of Burundi. • Mobile Network Operators: Vodacom, Tigo, Airtel, Safaricom, MTN, Zantel • The Bankers Associations, ASBEA, the Central Banks • The EAC The EAC interoperability initiative

There are different initiatives for EA cross border payments:

Mobile Money: Tigo TZ –Tigo RW, Vodacom TZ, Safaricom KE

Switches: A meshed interconnectivity of regional players to allow total regional interoperability.

The EAC interoperability roadmap: Driven by EAC to ensure total local and regional interoperability The EAC interoperability initiative

Interconnections of switches: Key Issues - Technical: All switches connected to one another - Operational issues: Operational procedures agreed and signed between parties - Settlement issues: Using ASBEA (Association of Servings Banks in EA) members opening accounts among each other. Later on, the use of EA payment system (EAPS) - Project Management: nominated team from each player - Current Situation: All networks already connected, testing in progress. Going commercially live before end of the year. The Future prospects in the region

• Chip card, EMV and NFC migration • Total interoperability of all payment channels • ATMs and POS ‘going rural’ • Rapid growth of banked community • A hybrid of bank-MNO led agencies taking new shape technologically (probably with ATMs) • Strong political will, driven from EAC level About Umoja Switch

Is a shared network of Payment systems connecting banks and other players for the purpose of facilitating interoperability and ease of financial inclusion • From 6 to 27 banks (more than 50% of all banks) • From 30 to 210 ATMs • From 3 to all regions in Tanzania • From one service all possible payment solutions a bank wants Umoja Switch – Company Profile

About UmojaSwitch • UmojaSwitch is a company registered in Tanzania and 100% owned by member banks, there are currently 27 member banks out of which 11 are shareholders. Shareholding is open to every UmojaSwitch member bank; any member bank of UmojaSwitch can become a shareholder by buying shares.

Vision • “To become the largest provider of electronic payment services across the country by providing services which are reliable, affordable and accessible for the benefit and convenience of its members and their customers”.

• Currently the network has over 200 ATMs distributed all over the country covering both Tanzania mainland and the Isles ( and Pemba)

Payment channels • When it was established, UmojaSwitch was operating with only one channel i.e. ATMs. However, due to change of technology and market demand, the Company is now providing various other channels like mobile banking, Point of Sales (POS) and agency banking. Our Services

• Switching services • ATM services • Card Personalization • Mobile banking • Agency banking • Institutional/retail payments • Official Distributor of DIEBOLD ATMs in Tanzania Our role – Keep sharing

Banks Personalization VISA/MasterCard/ Bureau UnionPay

BOT Agency Banking UmojaSwitch

Mobile ATM Network Banking

Another POS network Switch (Retail, Fuel) EA Integration Umoja Switch – Company Profile

Phase I: Products and services • Cash withdrawal, Product provision for UmojaSwitch was categorized in • Balance enquiry, two phases • PIN change, • Cheque book request, • Mini statements, • Intra-card transfer

Phase II: • Inter-bank/Inter-card Transfer: Direct and real-time transfer from one account to another; same bank and different banks • Card-less Transfers: Transfer to a normal telephone number holder • Mobile Banking: To allow bank customers to operate accounts directly from their mobile phones in a shared environment allowing customers to perform various payments like utility bills, electricity and other biller payments. • Agency Banking: to provide technology and to facilitate technological sharing of bank agencies • Point of Sale: Provision of retail and fuel POS • Internet Banking: To allow bank customers to operate accounts directly from secure internet in a shared environment • Payment Transfer: Use of presence of shared infrastructure to facilitate payments across various sectors of the economy e.g. customs, TRA • Statement Request. • Regional and International integration: Integration with other switches around East Africa as well as facilitation of international transactions (VISA, MASTERCARD, UNION PAY etc.). Our Role: Help the future—Share or impose exclusivity?