Dar es Salaam — East African countries have dropped in the Economist Intelligence Unit's global survey on financial inclusion.
The 2018 Global Microscope provides a unique insight into the leading practices that governments and regulators are adopting to channel the digital revolution of financial services into greater levels of financial inclusion.
Tanzania has dropped from first in 2016 to second currently among East African Community (EAC) member states, with Rwanda climbing from third to first. Kenya, which was second in 2016, has dropped to third.
Globally, Uganda and Kenya have dropped sharply among the 55 surveyed countries, the report shows.
Uganda is now ranked 48th, down from 33rd position, while Kenya has plunged to 28th spot from eighth.
Uganda's latest score is 34/100 compared to 46/100 in 2016, while Kenya has dropped to 54/100 from 61/100.
Tanzania dropped to 14th position globally from sixth, while Rwanda is down to 11th from eighth.
Tanzania scored 60/100 in 2018 from 62/100 in 2016, while Rwanda rose slightly to 62/100 from 61/100.
East African countries' drop down the rankings is largely a result of higher growth in other countries such as Uruguay, Pakistan, Argentina, Brazil, China, Paraguay and South Africa.
It has been reported that Tanzania has made great strides in improving financial inclusion, whose promotion is among the government's priorities.
Legislation is said to be fair and proportionate, allowing the emergence of many fintech start-ups.
Tanzania is also among the first African countries to achieve complete interoperability in mobile money services. Along with the rest of East Africa, Tanzania has emerged as a hub for fintech and innovation.
However, more needs to be done on consumer protection despite significant strides having been made in the past few years.
The report says the Rwandan government has created a conducive environment in which to improve financial inclusion, as financial literacy is promoted by banks and schools.
"There is good cooperation between government agencies and the private sector as regulatory sandboxes combined with strong and supportive financial authorities have propelled the growth of a fintech start-up hub in the country," says the EIU report.
It suggests that as the digital financial ecosystem develops in Rwanda, it will be imperative for the country to strengthen consumer data protection laws.
A large portion of Rwanda's population remains unbanked, with only 36 and 31 per cent of adults having bank and mobile money accounts, respectively, in 2017, according to the World Bank.
According to the EIU, Kenya has made significant progress in financial inclusion, supported mainly by the extraordinary growth of mobile money service providers.
The Kenyan government has been proactive and amended financial regulation based on prevailing market conditions. It has also improved ease of doing business.
The key enabler for financial inclusion is the interoperability of mobile phone financial services whereby users can now send money from one operator to another in a cost-effective manner.
According to Global Findex 2017, 73 per cent of adults in Kenya have mobile money accounts, up from 58 per cent in 2014. Twenty per cent of adults were unbanked in 2017.
Uganda's enabling environment for financial inclusion has been strengthened by the introduction of regulations aimed at widening financial access and outlining a comprehensive strategy, says the EIU report.
The report shows that 58 per cent (10.8 million) of Ugandan adults engage with formal financial services. This rises to 78 per cent when informal financial services are taken into account.
However, the main barrier is the lack of an interoperability platform managed by regulators, and transfers among mobile service providers are subject only to agreements between operators.