Digital credit hits Sh4.22 trillion as borrower demand soars

This sharp increase highlights the growing dependence on mobile-based lending services, which have become a critical financial tool for many Tanzanians.

Platforms such as Kamilisha, Timiza, M-Pawa, Agent Overdraft, Bustisha, Nivushe, Digital Salary Advance, Boom Advance, Songesha and Kibubu have played a central role in providing instant loans with minimal requirements.

Speaking with The Citizen, Dr Mwinuka Lutengano of the University of Dodoma attributed the rise in digital credit to its accessibility and convenience.

“Mobile financial services have bridged the gap for many people who previously had no access to banking services. The ability to secure credit without visiting a bank has made digital loans the preferred option for individuals and small businesses,” he said.

Dr Lutengano added that digital credit has contributed to financial inclusion, particularly in rural areas where traditional banking services are limited.

“Many Tanzanians now rely on mobile credit for emergencies, business investments and day-to-day expenses. However, while this expansion is beneficial, we must ensure that borrowers understand the risks involved and do not fall into cycles of debt.”

Also read: Why digital payments are key to Tanzania’s cashless economy goal

The surge in digital credit is evident across various sectors, with small businesses and individuals increasingly relying on mobile loans.

Entrepreneurs, traders and service providers are using these loans to expand their businesses, purchase inventory and manage operational costs.

The Executive Director of Research on Poverty Alleviation (Repoa), Dr Donald Mmari, said mobile credit has become a driving force behind economic activities.

“The ease of access to credit has allowed businesses to grow, contributing to employment creation and economic stability. Many entrepreneurs, particularly those in informal sectors, now have a financial cushion that enables them to manage risks and invest in their businesses,” he noted.

However, Dr Mmari  cautioned that without proper regulation, some borrowers may struggle with repayment.

“Many people take out multiple loans without considering the long-term impact on their financial stability. It is essential to strengthen consumer protection measures and ensure that digital credit is used responsibly.”

Dr Mmari also pointed out that while digital lending has been beneficial, its long-term sustainability depends on financial education and regulatory oversight.

“We need policies that protect borrowers from predatory lending practices and ensure that interest rates remain fair. Financial literacy programs should also be introduced to help people manage their loans effectively,” he said.

While digital credit has provided financial relief for many Tanzanians, concerns over debt accumulation are growing. Some borrowers find themselves trapped in cycles of debt, taking out new loans to pay off old ones.

Commenting on this, Dr Daudi Ndaki of Mzumbe University noted that the speed and ease of borrowing can lead to financial distress if not managed properly.

“Unlike traditional bank loans, mobile credit is often accessed within minutes. This convenience, while useful, also increases the risk of impulsive borrowing. Many people do not fully understand the repayment terms, which leads to difficulties when it’s time to repay the loans,” he warned.

While digital credit has witnessed a sharp increase, digital savings transactions have shown mixed performance.

The BoT report reveals that the volume of digital savings transactions declined slightly by 1.72 percent, dropping from 47.28 million in 2023 to 46.47 million in 2024.

However, the total value of digital savings transactions rose by 10.16 percent to Sh1.21 trillion.

Dr Isack Safari from Saint Augustine University of Tanzania (SAUT) said although fewer people are making digital savings transactions, the increase in value suggests a shift in savings behaviour amongst Tanzanians.

“People are saving larger amounts per transaction, which indicates growing confidence in digital savings platforms. More Tanzanians are beginning to see the value of structured savings rather than keeping their money in cash,” he said.

However, Dr Safari emphasised that more should be done to encourage a savings culture.

“While digital savings platforms are becoming more popular, many people still prioritise borrowing over saving. Financial institutions should create more incentives to promote saving, such as higher interest rates on digital savings accounts or reward programmes for consistent savers.”

Dr Safari also noted that financial literacy plays a crucial role in shaping saving habits.

“Many people do not save because they lack the necessary financial education to understand its importance. There should be more initiatives to educate people about the benefits of saving and how it can provide financial security in the long run.”

Tanzania Institute of Accountancy lecturer Dorence Kalemile attributed the surge in digital credit to strategic marketing by mobile lenders, emphasising ease of access and minimal requirements.

“Mobile lenders have positioned themselves as quick financial solutions, especially for small businesses and emergencies,” she said.

However, Dr Kalemila warned that aggressive promotion may fuel reckless borrowing.

Digital marketing expert Justus Mwita linked the growth to data-driven marketing and personalized loan offers.

“Lenders analyse spending patterns to tailor loans, boosting trust and adoption,” he said and cautioned that “excessive loan promotions without financial education can lead to debt cycles”.

However, as digital credit continues to expand, economists agree that regulatory frameworks must be strengthened to protect consumers and ensure sustainability.

According to them, while the convenience of mobile lending has benefited millions, concerns over high-interest rates, debt accumulation and financial literacy gaps must be addressed.

Dr Lutengano stressed the need for responsible lending practices, saying, “Financial institutions and mobile credit providers should prioritise customer education and transparency in loan terms. Borrowers must be aware of repayment schedules, interest rates and penalties before taking out loans.”

Dr Mmari said innovation in the financial sector should be accompanied by strong consumer protection measures.

“Digital credit can be a powerful tool for economic empowerment, but it should not lead to financial distress. Regulators must ensure that lending practices are fair and that borrowers are protected from exploitation.”

For his part, Dr Ndaki said financial education should be integrated into Tanzania’s broader economic policies.