Open Banking in Tanzania

Introduction

Open banking, a system that allows third-party financial service providers to access consumer banking data through APIs, is transforming financial services globally. While Tanzania has a thriving fintech ecosystem, and is one of East Africa’s fastest-growing economies, open banking still remains in its early stages. However, with increasing financial inclusion efforts, mobile money dominance, and digital transformation initiatives, open banking could play a pivotal role in reshaping the country’s financial landscape.

This article explores the current state of open banking in Tanzania, its opportunities and challenges, and a comparative analysis with global leaders like the UK. Finally, it presents a future outlook with key recommendations for regulators, banks, and fintechs.

The Current State of Open Banking in Tanzania

Tanzania has yet to implement a formal open banking framework, but the regulatory and financial infrastructure is gradually evolving to support digital financial services. Key aspects of the current landscape include:

Regulatory Developments

Bank of Tanzania (BOT) Initiatives: The National Payments System Act (2015) provides a foundation for digital payments and fintech regulations.
Fintech Regulatory Sandbox (2022): Introduced by BOT, this sandbox allows fintechs to test innovative financial products, including API-based services.
Personal Data Protection Act (2022): While this law is a step toward data security, its implementation status remains unclear. Data privacy is critical for open banking adoption.

Key Players

Banks: Major banks like NMB Bank, CRDB Bank, and Stanbic Tanzania are experimenting with digital transformation but have not fully embraced open APIs. In 2021, NMB Bank, Tanzania’s largest commercial bank, launched the country’s first fintech sandbox, providing fintech companies with controlled access to banking APIs, allowing them to develop and test digital financial products.
Fintechs & Mobile Money Providers: Companies like Tigo Pesa, Airtel Money, and Selcom dominate digital financial services. Mobile money interoperability has advanced, laying the groundwork for API-based integrations. This reliance on mobile payments also creates an opportunity to bring financially excluded consumers into the broader digital financial ecosystem, offering them new financial products such as micro-savings, credit scoring, and affordable lending solutions.
Regulatory Authorities: The Bank of Tanzania (BOT) is the primary regulator leading financial sector oversight. It has played an active role in promoting financial inclusion, especially through the National Financial Inclusion Framework (NFIF), which seeks to bring more Tanzanians into the formal financial system.

Current Progress & Milestones

Mobile Money Dominance: Over 72% of Tanzanian adults use mobile money (BOT 2023), making mobile-based financial integrations crucial for open banking.
Interoperability Between Mobile Wallets: Since 2018, Tanzania has achieved full interoperability among mobile money operators, facilitating cross-platform transactions.
Emerging API Integrations: Some fintech startups and banks are offering API-based services, though standardization remains a challenge.

Opportunities for Open Banking in Tanzania

Despite the regulatory and technical gaps, open banking in Tanzania presents several opportunities:

Financial Inclusion & Alternative Credit Scoring

Unbanked Population: According to Finscope 2023, around 24% of Tanzanian adults remain unbanked. Open banking could enable alternative credit scoring using mobile money transactions and utility payments.
SME Financing: APIs could allow fintechs to assess SME cashflows and provide tailored financial product.

Innovation & New Business Models That Open Banking will Support

Aggregator Apps: Fintechs could create apps that combine bank accounts, mobile money, and microfinance services in one interface.
Agri-Fintech Solutions: Open banking could integrate farmers’ mobile money transactions with weather and market data to provide microloans.

Cross-Border Payments: APIs could facilitate East African Community (EAC) financial integration, enabling seamless transactions between Tanzania, Kenya, Uganda, and Rwanda.
Digital Trade Expansion: E-commerce platforms could integrate open banking for direct payment processing, reducing cash dependency.

Challenges & Barriers to Adoption

Regulatory & Legal Gaps

No Formal Open Banking Policy: Unlike Kenya, which has drafted an API regulation framework, Tanzania lacks clear open banking guidelines.
Data Protection Uncertainty: The Personal Data Protection Act (2022) is still not fully enforced, raising concerns about consumer data privacy.

Infrastructure & Standardization Issues

Limited API Standardization: Banks and fintechs currently use proprietary APIs instead of universal open banking standards.
Internet & Digital Gaps: Rural areas face poor internet penetration (63% as per TCRA), making digital banking services inaccessible.

Consumer Adoption & Trust

Cash Dependency: 85% of transactions in Tanzania are still cash-based, limiting digital adoption.
Low Digital Literacy: Many users, particularly in rural areas, may struggle to understand open banking benefits.

Comparative Analysis: Tanzania vs. Kenya & the UK

Factor	Tanzania (Emerging)	Kenya (Leader)	UK (Global Benchmark)
Regulation	No formal framework	Draft CBK API rules	PSD2 Mandate (EU)
API Standardization	Proprietary APIs	Staged rollout	Universal standards
Consumer Adoption	Mobile-first	Mature M-Pesa adoption	App-based banking culture
Key Lesson	Can learn from Kenya’s phased API rollout strategy	Strong mobile money foundation	Emphasis on consumer data rights

Future Outlook: The Path to Open Banking in Tanzania (Our predictions)

Short-Term (2024-2026)

BOT drafts open banking guidelines with phased implementation.
Banks introduce developer-friendly APIs to attract fintech collaborations.
Fintech startups test API-driven services in the regulatory sandbox.

Medium-Term (2026-2030)

API standardization efforts lead to sector-wide adoption of open banking frameworks.
Regulatory enforcement of data protection laws enhances trust.
Bank-fintech partnerships expand SME lending and financial inclusion.

Long-Term (2030 & Beyond)

BOT drafts open banking guidelines with phased implementation.
Banks introduce developer-friendly APIs to attract fintech collaborations.
Fintech startups test API-driven services in the regulatory sandbox.

Looking Ahead

Open banking in Tanzania is at an early stage but holds immense potential to drive financial inclusion, fintech innovation, and economic growth. While regulatory gaps, infrastructure challenges, and cash dependency remain obstacles, Tanzania can leverage its mobile money strength and adopt a phased approach to API regulation.

By implementing clear regulatory frameworks, fostering fintech collaborations, and investing in digital literacy, Tanzania could unlock a thriving open banking ecosystem that benefits consumers, banks, and the broader economy.