Challenges of banking the poor

Thursday November 14 2019

Kelvin Mkwawa

Kelvin Mkwawa 

Many poor people in Tanzania feel alienated and neglected by the banking industry because most of the banking products and services are usually not tailored to their needs.

Research shows that only 17 per cent of the population in Tanzania have an official bank account which means over 80 per cent of the population in the country are outside the financial system. Complicated administrative processes, high costs, and insensitive bank staff are the main reasons why the majority of poor people do not have bank accounts.

Due to rapid growth in technology, the opportunity to increase the banked population has increased and it’s important for the government to play a major part in facilitating the process by looking closer at its policies to find out why they are not working and what more can be done.

Financial exclusion is bad for our economy as it can breed poverty traps and inequality, and delay the development of the country, hence it needs to be tackled with all the resources we have.

In this article, I will share some challenges of banking the poor which I hope the banks will take note of and work on them to ensure the poor population is not left behind.

• Technology Knowledge Gap – The growth of technology is fueling new financial products and services that will enable banks to reach the previously unbanked population.


While technology can help to reach the poor, we know that technology alone cannot help to solve the problem because of the illiteracy rate in the country.

The technology gap that exists in society can be reduced only by educating consumers about the new technology and the importance of banking products in their life, creating products, and developing engagement strategies that are better designed to meet the needs of the poor.

In addition, Government can play a big role by partnering with banks in financing the education programs that are aiming to educate the poor about the new “high-tech” products that serve their needs and improve their financial health.

• Lack of Collaboration among Stakeholders –Financial technology Companies known as Fintechs are in a unique position to identify customer challenges and needs of the market, and rapidly build solutions to address them because of the advanced technology that is now available.

Because of that, it will be a great idea for fintech companies to collaborate with banks to develop products for poor consumers. But it can be difficult to encourage collaboration in this current business environment.

Collaboration has its own challenges as stakeholders are usually struggling to find shared agenda, measure impacts and agree on sharing revenues.

These challenges can be solved by each stakeholder assessing its core strengths and seeking partners to outsource any functions that are not competent. Only through collaboration among the stakeholders of entire financial inclusion, can banks expand their reach to the more underserved population by combining available technology and government policies that prioritize and support these types of partnerships.

• Government Financial Inclusion Plan – According to the World Bank, only 50 countries globally have formal financial inclusions plans. Even with a plan, many are still struggling to support and maintain financial inclusion as a public priority policy and very few have data on the scope of the problem.

In Tanzania, we have a National Financial Inclusion Framework (NFIF2) 2018-2022 which builds on the first Framework (NFIF1), which was implemented over a period of three years from 2014 to 2016 but the results so far are not as expected.

Lack of coordination across Government agencies and poor private sector involvement is a major reason why the financial inclusion plan is far from reaching its goals.

As the largest stakeholder, the Government needs to do better in fostering the relationships among the stakeholders and create a better environment that promotes the offering of financial products to the poor.

To summarize, giving the poor access to financial services is accepted wisdom.

Kelvin Mkwawa is a Seasoned Banker

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