How Ecosystem Issues Fail Rural Financial Institutions to Promote Digital Financial Services

Digitization of financial services is critical for microfinance institutions (MFIs) to “go-rural, reach the unbanked” and achieve the financial inclusion goal. Studies show that MFIs stand to gain value if they digitize their finance services. MFIs get the opportunity to reach a higher scale, grow their loan assets, and earn additional non-interest revenues.

This briefing note shares findings from MicroSave’s work with a group of small-holder farmers in southern Tanzania. It shows that as many as 62 percent of the farmers owned basic feature mobile phones. About one in five (18 percent) did not own a mobile phone at all – an indication that access to and ownership of mobile phones is not universal yet and remains an impediment to accessing services by a large proportion of people in rural locations. Some of the farmers bought new sim cards, rather than renew their existing numbers every time they lost their mobile phones leading to the loss of valuable information, which the MFIs would have used to disburse loans, necessitating new registration.