THE NEXT LEAP

Tanzania 2014 | FINANCE | INTERVIEW

TBY talks to Benno Ndulu, Governor of the Central Bank of Tanzania, on technology being used in the financial sector for mobile money, data collection, and analysis.

Benno Ndulu
BIOGRAPHY
Benno Ndulu was appointed Governor of the Central Bank of Tanzania in January 2008. He started his career at the University of Dar es Salaam in the early 1980s before joining the World Bank as Lead Economist. He is best known for his involvement in setting up and developing one of the most effective research and training networks in Africa, the African Economic Research Consortium. He received an Honorary Doctorate from the International Institute of Social Studies (ISS) in the Hague in 1997 in recognition of his contributions to capacity building and research on Africa. Following his PhD degree in Economics from Northwestern University in Evanston, Illinois, he taught economics and published widely on growth, adjustment, governance, and trade.

How does technology influence monetary policy in Tanzania?

There are two media channels through which technology has a large influence on monetary policy. One is the payment system. There, we are seeing the introduction of the mobile payment as a platform for delivering a variety of services, which has already made a huge impact. The platform is widely available and the number of mobile money accounts that have been opened and registered is at almost 28 million; those in active use (defined as used once every 90 days according to a survey we undertook) number about 8.5 million. This comes from almost zero in 2008-2009, marking a very rapid rise. The reach is extremely wide, which means financial services are available for everyone, everywhere. This has also reduced the cost of delivering financial services. Using physical branches to reach everyone is simply too expensive. That is why we only have about 550 branches and 2,500 ATMs. Had we exclusively gone down that route, there is no way we could have reached the bulk of the country. Today, we are seriously working to increase the range of products that can be used on this platform. The first is money transfer, which has made a huge change in the way people interact in terms of transactions. It has also brought about a major change in terms of meeting social obligations. Funeral contributions, for example, are particularly important in Tanzanian society. Currently, for example, you can contribute to the cost a funeral from wherever you are over the phone. This method is also being used to pay bills and taxes. Additionally, banks have elected to use mobile payment agents to provide banking services, which means they can now expand the reach of their services. This has enabled us to leapfrog ahead to reach the majority of Tanzanians with financial services. Given our inadequate infrastructure, it has bridged distances. Of course, the big challenge now is to ensure that the system is secure. If we can't do so, mobile money services could well disappear. Fortunately, the tests that have been carried out internationally on mobile payment systems have proven very robust and resilient to abuse. As the Central Bank, our attitude is to let innovation take its course without being overcautious. However, that doesn't mean we can lower our guard on this. IT is another important direction, as it can do incredible things in terms of enhancing productivity and improving logistics. We often discuss the infrastructure bottleneck in Tanzania and investment in hardware; however, if we don't invest adequately on the logistics front too, we can't get the increased output to the destinations we require. The bulk of logistics operations depend on IT. It is time to seriously talk about the importance of technology in improving our logistics capacity. We have invested in more than 10,000 kilometers of fiber-optic network, covering the whole country, which also connects to undersea cables. We have also connected our neighbors to these cables using the fiber-optic network. It is now time to see how services can be offered using this particular investment. We need to define how IT and data firms can invest in providing services to Tanzania and make the country a gateway for data services in the region. There is no doubt that we have made huge progress in terms of the internet, enabling us to access financial services. We used to see people bring their bidding forms to the Central Bank in person; now, it is all done online. Given the ubiquity of access to high-speed, low-cost internet, I believe we should be able to automate a wider range of financial services and make them more efficient and cost effective.

What can regional central banks learn from each other?

Central banks have tended to be pioneers in the expansion of technology for financial inclusion. Most of the members of the Alliance for Financial Inclusion (AFI) are central banks. We have a chapter that deals only with mobile money among African central banks. This is one area where Africa is a pioneer, so we have a lot to learn from each other. Unfortunately, not everyone has moved as quickly as Kenya or Tanzania, but this provides us with an opportunity to engage in a dialogue about what it takes to be successful and sustainable.

How does technology influence the gathering of economic information?

First, it has significantly simplified data collection, storage, and analysis. There are surveys that we can now do simply via mobile phone, which is quicker, easier, and cheaper than ever before. These form the best set of attributes for good research. Secondly, it is important to interact at the frontier of knowledge, which is accessible via the internet, the data systems of highly reputable institutions, and video conferencing. Today, we can engage with leading economists without calling a conference and bringing them all here in person.

“ It is time to seriously talk about the importance of technology in improving our logistics capacity. "

How will the implementation of technology in Tanzania's banking sector help it to achieve its Vision 2025 goal of becoming a middle-income country?

IT is a powerful tool for productivity growth. In order to achieve the goals for 2025, we have to raise our growth rate above the current 7%. We have done the arithmetic and we need to grow by between 8% and 10%. Technology will help us to improve that productivity. Logistics and organization are important parts of gaining efficiency. Technology is also helping even SMEs get better market data, information on crop husbandry, and extension services—it provides remote access to expert information. The most significant aspect is the productivity-enhancing and growth-enhancing features of technology. Another part is simply giving us the ability to learn from others much more effectively and quickly in terms of access to information about best practices. Technology allows us to access non-resident expertise, also on the medical front. It is no longer necessary to fly in a consultant or surgeon to treat the patient. I also believe that technology will allow our diaspora to return virtually rather than physically to play a role in our economy. Top professors teaching elsewhere in the world can offer courses here and guide research remotely, even when they can't find time to come back physically. It is truly a platform for quantum change in the way we do business.