How Tanzania has moved up startup funding ladder

Dar es Salaam. Tanzania was among Africa’s four leading destinations of startup financing in this year’s third quarter, according to funding database Africa The Big Deal.

It is the first time Tanzania has broken into the top four after raising $43 million, with the majority of the funding coming from fintech giant Nala, whose $40 million deal underscores the increasing interest in Tanzanian startups within the larger African tech space.

This shift places Tanzania ahead of other markets in the region, although it still trails behind powerhouses like Kenya ($201 million) and Egypt ($272 million), which accounted for more than 75 percent of Africa’s startup funding in the third quarter.

Nevertheless, the steady growth signals a positive trend for the East African nation, taking into account the fact that funding in Nigeria and South Africa dipped significantly.

Experts have attributed Tanzania’s success to multiple factors, including supportive government initiatives, investment-friendly policies and growing confidence among local entrepreneurs.

Speaking with The Citizen, Shikana Group research analyst Isai Mathias highlighted the role of the Bank of Tanzania’s Tanzania Instant Payment System (TIPS).

“This growth is a result of government efforts, including the BoT’s TIPS, which have boosted confidence among fintech founders and investors that their new solutions can integrate with existing ones,” he said.

Mr Mathias also noted that the Personal Data Protection Commission (PDPC) has been pivotal in enforcing laws that enhance consumer trust in digital platforms.

He pointed out that the National Identification Authority (Nida) has streamlined Know Your Customer (KYC) checks, saying, “This simplification allows startups to more easily acquire users necessary for their growth and investment attraction.”

Support from development partners has helped de-risk startups for follow-on investment from angel investors and international bodies, he added.

Mr Mathias observed that many founders currently raising capital have strong educational backgrounds, which has fostered the necessary mindset and connections to support the growth of their startups.

Founder and CEO of Horizon Digital Tanzania Furaha Mohamed noted that several key factors are driving the impressive growth and investment success in Tanzania's startup sector, especially in fintech.

“Increased mobile penetration and internet accessibility have been transformative. As mobile technology reaches remote areas, digital financial solutions become accessible to a broader population, driving innovations that target underbanked and unbanked communities. This trend aligns with the government’s objectives for a digital economy and greater financial inclusion,” he said.

He also pointed out that governmental support and regulatory improvements have made Tanzania an appealing destination for investors, citing initiatives like the National Financial Inclusion Framework and the Tanzania Startup Act.

Local talent and youth engagement are also critical to this growth and Mr Mohamed described Tanzania’s youthful population as “vibrant and ambitious”, noting their adaptability to technology.

“Many young Tanzanians are acquiring the skills to leverage technology in innovative ways, thus expanding the boundaries of traditional sectors such as finance, agriculture, and e-commerce.”

Mr Mohamed highlighted collaborative networks among startups, corporates, and investors, creating a dynamic ecosystem for resource and knowledge sharing.

“Platforms like innovation hubs and incubators facilitate faster scaling for startups by providing access to expertise, resources, and mentorship.”

Mr Mohamed acknowledged ongoing challenges but expressed optimism, saying, “These factors show there's hope for a brighter future.”

Smart EFD co-founder Prisca Magori identified a blend of three primary influences driving growth: the push from the government, the impact of development partners, and the educational background of emerging entrepreneurs.

“We’re seeing the first generation of well-educated or well-connected young entrepreneurs. This is essential for nurturing a vibrant startup environment,” she noted.

Kiasi app founder Emansi Kiula said the Bank of Tanzania’s initiatives, particularly the launch of the Fintech Sandbox, reflects the government’s commitment to supporting startup success.

“This shows the commitment put in by the bureau to see startups succeed, which in turn boosts investor confidence in Tanzanian startups,” he said.

Mr Kiula also pointed out the increasing number of users in telecommunications and mobile money services as a crucial factor in this growth.

Tanzania Startups Associations president Zahoro Muhaji spoke about advancements in the regulatory framework, highlighting initiatives such as the Fintech Sandbox.

“These developments are vital for fostering a more conducive atmosphere for startups,” he said.

Mr Muhaji added that the recent global recovery in investment plays a crucial role in enhancing the positive trajectory of Tanzania's startup ecosystem.