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Cybersecurity Profile: Tanzania and Mobile Money Use

May 3, 2017


Carl Taylor

M-Pesa is an electronic mobile money system free of cards or banks that lets users transfer money between users and go to local agents to withdraw cash. M-Pesa[1] is named after the Swahili term for money (pesa) and the term mobile (m). It originated as a means of loan repayment in Kenya.

The original users in Kenya expanded M-Pesa’s use by transferring money directly to each other instead of micro lenders.[2] Due to the high cost of expanding brick and mortar banks in low resource environments such as Tanzania, M-Pesa has been able to fill the banking void in much of Tanzania’s and other African countries’ countrysides.[3] Within years M-Pesa became the development success story of Africa and today Tanzania is the number one mobile money country in the world.[4]

The introduction of mobile money into Africa has been a boon for economic development in unbanked and low resource environments. M-Pesa, in particular, has allowed for new actors to gain access to funds. It has also increased physical and financial security. However, due to its electronic nature, mobile money also introduces new cybersecurity concerns as well.

Success: Interoperability and Convenience

M-Pesa in Tanzania has surpassed all expectations due to a lack of banks outside major cities and Tanzania’s diversified telecommunications market’s interoperability. Interoperability is the ability for phone users to interact amongst various telecommunication providers without costs. Tanzania was the first country in the world to achieve full interoperability.[5]

Within Tanzania there are four mobile money providers, with the largest Vodacome (the original M-Pesa provider) leading the market at a 54% market share.[6] To keep consumers using M-Pesa the competing M-Pesa providers in Tanzania have been incentivizing costumers to keep money in their mobile wallets by accumulating slight amount of interest on their accounts.[7]

Before M-Pesa, access to banks was restricted to large cities. For a consumer to use a bank account from a small village the villager would have to negotiate a car to a larger village and from there catch a crowded bus to a regional capital. Combined with the ease at which customers can go to agents and deposit or withdraw money within or near their villages as opposed to day long treks to a large town, M-Pesa’s wild-fire spread makes sense.

M-Pesa Tackles Some Security Problems, Creates New Problems

The growing usage of M-Pesa in Tanzania stands to alter corruption and entrepreneurial practices. Despite M-Pesa’s marked and expected economic impacts, women and the un-informed but may still be left behind. Due to Tanzania’s cash based economy, theft and corruption are the norm. To send money to a relative individuals have to entrust a bus driver with an envelope of money who then has to pay numerous bribes along his route.

With M-Pesa the driver and those bribed are bypassed[8], and with less cash held there is less to be stolen by thieves on the road and at home.[9] In other words, transaction costs are reduced.[10] However, with the greater connectivity that comes with the expansion of mobile phones comes greater risks for cybercrime. The greater functionality phones have, the more at risk they are for malware and attack over messages, Bluetooth, and Wi-Fi. The complicated nature of these phones and typical Tanzanian users buying the cheapest versions on the market, leave undereducated users more vulnerable to cybercrime.[11]

M-Pesa’s reliance on agents in far flung villages opens up opportunities for the under-informed to be taken advantage of. For instance, it is easy for M-Pesa agents to skim a little off the top or steal user information from under informed costumers. Also, while bribes can still be achieved by transferring money by M-Pesa the use of M-Pesa makes such transactions traceable. When money transactions are traceable they become taxable.[12] Taxes can make or break the millions of poor Tanzanians that use M-Pesa as their main source of keeping and transferring money.

While the success of M-Pesa has been due to the ease with which M-Pesa agents can start in rural areas, access to M-Pesa agents can still be time intensive, which for time poor women is a challenge. Most women in Tanzania not only harvest cash crops, but also farm for food for the family while raising numerous children and handling house finances.[13] While 80% of mobile money use by women in Tanzania is for remittances, the remittance is little good if the women cannot pull out cash from their mobile money account because of the time cost of finding an agent . It also can be useless if an electricity-poor countryside leaves them with no electricity for weeks or months.[14] Characteristically of poverty, the literacy rate among women is lower than men, inhibiting their ability to access the benefits of M-Pesa further and putting them at risk of being taken advantage of by corrupt M-Pesa agents. The role of women in M-Pesa is but one of the many questions surrounding M-Pesa’s role in development.

Uneven Power Relations or Denial of African Ingenuity?

Although M-Pesa’s development in Tanzania and Africa have had marked economic impact, its role in the history of Africa’s development is seen by Pádraig Carmody as just another example of uneven power relations on the global scale. It all comes back to the phone. While M-Pesa use is convenient, the cost of owning a phone are high for the poor demanding about 22% of the average income.[15]

Furthermore, the phones being used are not typically made in Africa. Tanzania’s M-Pesa explosion has not changed its place in the world economy and it means Africans are still consuming and not producing.[16] Critics argue that this amounts to Tanzania’s “integration” into the world economy as being nothing more than “thintegration” and fails to develop Tanzania’s knowledge economy.[17] Additionally, the mobile phone is a technical fix to problems of power maldistribution.[18]

While these points are important to articulate, they ignore the very people that have made M-Pesa so successful – the Africans that use it. The use of M-Pesa as mobile money and not a micro-loan repayment was initiated not by the West but by the ingenuity of Africans. The major companies running mobile money plans are majority African owned and run. It is wrong to state that M-Pesa is not shaping the knowledge economy. M-Pesa’s very formation and usage is an example of the strong knowledge economy developing in Tanzania and Africa.


[1] Within this piece M-Pesa, will refer to all mobile money providers in Tanzania.

[2] Nick Hughes on mobile money.

[3] Masamila, Bossi. “State of Mobile Banking in Tanzania and Security Issues.” International Journal of Network Security & Its Applications (IJNSA). Vol. 6. No.4. July 2014

[4] Infographic: Tanzania’s Mobile Money Revolution; In CGAP: CGAP.

[5] Tanzania Mobile Money.2017.

[6] Infographic: Tanzania’s Mobile Money Revolution; In CGAP: CGAP.

[7] Zetterli, Peter. Tanzania: Africa’s Other Mobile Money Juggernaut.; In CGAP, 2015.

[8] Aglionby, John.;Tanzania’s Fintech and Mobile Money Transform Business Practice: Local Operators Are Competing to Deliver Innovative Financial Services (2016).

[9] Economides, Nicholas, and Przemyslaw Jeziorski.;Mobile Money in Tanzania.; NET Institute (2016).

[10] A Knowledge Economy or an Information Society in Africa? (32)

[11] Masamila, Bossi. “State of Mobile Banking in Tanzania and Security Issues

[12] Harford, Tim. 50 Things That Made the Modern Economy. Podcast audio. M-Pesa2016.

[13] Unlocking the Potential: Women and Mobile Financial Services in Emerging Markets.; GSMA, 2013.

[14] Electricity in Africa: Power Hungry; The Economist, 2016.

[15] A Knowledge Economy or an Information Society in Africa? Thintegration and the Mobile Phone Revolution; Information Technology for Development 19, no. 1 (2013):(28)

[16] Carmondy, Pádraig. The Informationalization of Poverty in Africa? Mobile Phones and Economic Structure; Information Technologies and international development 8, no. 3 (2012)

[17] A Knowledge Economy or an Information Society in Africa? Thintegration and the Mobile Phone Revolution; Information Technology for Development 19, no. 1 (2013): 24-39.

[18] Carmondy, 2012.

This publication was made possible in part by a grant from Carnegie Corporation of New York. The statements made and views expressed are solely the responsibility of the author.