The Phenomenal Strength of Mobile Money in Kenya: Tanzania Reduces Levy on its Mobile Money

One in every three Kenyan shillings spent by consumers, businesses, and the government in Kenya in the first 6 months of this year moved through mobile money, cementing the country’s position as a global leader in the mobile money revolution. The latest data published by the Central Bank of Kenya (CBK) shows that the cash handled by mobile money agents in the first half of the year increased by 17.5%  to Sh3.8 tn. The data, which tracks the monthly performance of mobile money, shows growth from Sh3.26 tn over the same period last year. The money, which is mainly handled by Safaricom’s M-Pesa agents, represents 31% of the country’s 2021 gross domestic product (GDP – Sh12 tn). The number of mobile wallets crossed the 70m mark in May and grew to 70.3m at the end of the first half of the year against an adult population of 25m, indicating some people hold multiple subscriptions.

The Tanzanian government has announced that it will reduce its mobile money transaction fees (levy) by a further 43% to ease the burden placed on citizens by providers in a time of rising inflation. Last year, the government’s amendment of the Electronic and Postal Communication Act (CAP 306) imposed a levy of between 0.0043 and $4 on mobile money transactions that came into effect amid public outcries. GSMA did a mobile money levy impact analysis report last year that shows that the introduction of the mobile money levy had an adverse effect on gains the country had previously made in financial inclusion since becoming the first nation in Africa to implement payments interoperability.

Tanzanians were returning to using cash and the government started thinking about how to get them back to mobile money platforms. Despite collecting $28m from the fees since imposing the levy, last September the government yielded to public pressure and reduced the levy by 30%. Even with the latest levy reduction, Tanzania’s mobile money economy is expected to be on a much lower growth trajectory than before the tax was introduced and it is estimated that there has been a 12% contraction in the market compared to pre-tax levels.