What Does it Mean for Financial Inclusion for Women and Youth in Tanzania?
By Eric Massinda, Chief Executive Officer-FSDT
First and foremost, FSDT would like to commend the Minister of Finance, Hon. Dr. Mwigulu L. Nchemba, and the Ministry of Finance for delivering a poised budget for the financial year 2024/25. The overall theme of the budget, “Fostering Inclusion for Sustainable Growth,” aligns well with FSDT’s strategic objectives to strengthen an inclusive financial sector that serves all Tanzanians, especially women and youth. Reflecting further on the proposed national budget, FSDT would like to highlight the following areas in alignment with its own strategic objectives.
Addressing high costs in agriculture
We have observed a variety of measures proposed to strengthen the agricultural sector in Tanzania, including the following: zero-rating VAT on the supply of fertilizer manufactured locally for one year and on the supply of textile products (fabric and garments) made using locally grown cotton; VAT exemptions for single axle tractors (power tillers); VAT exemptions on the supply of double refined edible oils from locally grown seeds by a local manufacturer for one year; VAT exemptions for tea processing companies that have been persistently making losses for three years from the requirement of paying alternative minimum tax; and duty remissions at a duty rate of 0% on inputs used for manufacturing dairy products such as yogurt and powdered or UHT milk. These measures can ease agricultural production costs for many farmers, increasing their production yields and competitiveness in both local and international markets.
Improving access to healthcare
The introduction of a 10% excise duty on the value of stakes in betting, gaming, and the national lottery, with the collected amounts remitted to the Universal Health Insurance Fund (UHIF), and the allocation of 2% of excise duty collections from carbonated soft drinks, cosmetic products, and alcoholic drinks to the UHIF, are key deliberate efforts towards improving the uptake of insurance in the country. According to FinScope Tanzania 2023, the uptake of insurance decreased from 15% in 2017 to 10% in 2023. However, with the national target of having 50% of the adult population using at least one insurance solution by 2029, national health insurance funds need substantial support.
We foresee a strengthened UHIF, which will provide improved services to citizens and increase the uptake of insurance in the coming years. Therefore, we commend the government for its creative approach of earmarking tax allocations to the UHIF, which also tends to increase citizens’ acceptance of tax and trust in the fiscal regime, as the results will directly impact their livelihoods and well-being through access to affordable and quality healthcare.
Strengthening SMEs
The budget has also taken into consideration the important contribution of SMEs to the country’s GDP and aims to establish a venture capital fund to provide capital for small and medium-sized enterprises, thereby promoting economic growth through targeted support mechanisms. We commend the government for considering the establishment of such a vehicle and hope that, in its implementation, it will include increased entrepreneurship and investor readiness support to ensure that women- and youth-led businesses can benefit from these funds. Furthermore, we hope that the operationalization of the fund considers emerging climate change risks and circular economy business models to foster more sustainable market development.
Improving access to mobile phones
One of the systemic financial sector market access challenges that prevent many Tanzanians, especially underserved women and youth, from accessing financial services is the limited ownership of mobile phones. Duty remissions on inputs used in the assembly or manufacturing of mobile phones can encourage investors to manufacture phones locally, thereby eliminating the costs associated with importing mobile phones internationally. This should lower the cost of mobile phones, improve access for many, and boost the uptake of digital financial services in the country.
Improving internet connectivity
Duty remissions on raw materials for manufacturing fiber optic cables can also improve internet access, as investors would be encouraged to manufacture these cables locally, thereby lowering costs for mobile network operators in supplying internet. Such measures could lead to improved internet connectivity, facilitating access to and usage of digital financial services, especially for those residing in remote areas.
Promoting usage of financial infrastructure
FSDT commends the government efforts towards developing relevant financial infrastructure to enable financial service providers with the ability to meet the needs of women and youth, including the Tanzania Instant Payment System (TIPS) and we are particularly encouraged with the call to increase the use of merchant payment through TIPS. To intentionally support this directive, we hope to see deliberate and actionable measures that drive affordability and increase the penetration of merchant payments, particularly in rural areas and among women-owned MSMEs.
Fast tracking issuance of universal ID
We are excited to see that the government is making deliberate efforts towards swiftly scaling the issuance of the universal ID by removing the duty on smart cards imported by the National Identification Authority (NIDA) for one year. This is a much-needed step towards issuing universal IDs from birth, enabling all Tanzanians to access essential social and financial services from the beginning of their lives. It would also reduce costs for NIDA, making it easier to issue IDs to all Tanzanians.
Conclusion
The national budget has set a clear direction for fostering inclusion for sustainable growth and development in the country. Now, it is our responsibility as financial sector actors to work together to ensure that we can build on this foundation and further advance these efforts. The budget is strategically poised, addressing key areas to foster sustainable growth across crucial economic sectors. To further ensure inclusivity of women and youth, we hope to see subsequent intentional measures that enable the financial sector to uplift these population segments, as outlined in the Five-Year Development Plan and the National Financial Inclusion Framework (NFIF) III. Therefore, public and private sector partnerships will be crucial in fostering this desired inclusion for sustainable growth.
FSDT will continue to convene and support the financial sector in the coming financial year towards financial inclusion and sustainable growth for all Tanzanians to benefit from regular use of formal financial solutions for the improvement of their livelihoods, wellbeing, and empowerment.
