Factors Affecting Mobile Money Payment in Tanzania

ASSESSING FACTORS AFFECTING ADOPTION OF MOBILE
MONEY PAYMENT IN TANZANIA
Christopher John
MEM (Master of Engineering Management) Dissertation

University of Dar es Salaam
November, 2016
ASSESSING FACTORS AFFECTING ADOPTION OF MOBILE
MONEY PAYMENT IN TANZANIA
By
Christopher John
A Dissertation Submitted in Partial Fulfillment of the Requirements for the

Degree of Master of Engineering Management (Project Management) of the

November, 2016
i
CERTIFICATION
The undersigned certifies she has read and hereby recommends for acceptance by
The University of Dar es Salaam a dissertation titled: Assessing factors affecting
adoption of mobile money payment in Tanzania, in partial fulfillment of the
requirements for the degree of Master of Engineering Management of the University
of Dar es Salaam.
------------------------------------------
Dr. Victoria Mahabi
(Supervisor)
Date: ------------------------------
ii
DECLARATION
AND
COPYRIGHT
I, Christopher John, declare that this dissertation is my own original work and that
it has not been presented and will not be presented to any other University for a
similar or any other degree award.
Signature ------------------------------------------
This dissertation is copyright material protected under the Berne Convention, the
Copyright Act 1999 and other international and national enactments, in that behalf,
on intellectual property. It may not be reproduced by any means, in full or in part,
except for short extracts in fair dealings, for research or private study, critical
scholarly review or discourse with an acknowledgement, without the written
permission of the Director of Postgraduate Studies, on behalf of both the author and
the University of Dar es Salaam.

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ACKNOWLEDGEMENTS
I thank the Almighty God for courage and comfort through His Spirit. I am thankful
for the strength that kept me standing and for the hope that kept me believing that
everything was possible because of His grace.
I also sincerely thank Dr. Victoria Mahabi, my supervisor, for her enthusiastic
supervision during the entire period of this study. I owe her a great debt of gratitude
for her patience, encouragement, and guidance which she offered so unsparingly. Her
suggestions and comments were very valuable for this work.
I would also like to take this opportunity to express my gratitude to who have been
instrumental in the successful completion of this dissertation. Firstly, my sincere
appreciation should go to my employer for allowing me to attend the classes while
working. Secondly I also wish to acknowledge the help of various people from
different institutions because they provided me with great deal of knowledge and
ideas that were important for this study. Thirdly I would like to thank all those who
helped me in one way or another during the data collection.
Special appreciation also goes to my mother Margret M. Assenga, for moral and
material support, prayers and encouragement that were vital for accomplishing this
demanding and time consuming task.
Last but by no means not least; I thank my dear wife Anna Silvest Assenga for her
prayers and words of encouragement. She was always by my side during my studies.
I thank her for bearing with the loneliness and boredom for all the time of my study.
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DEDICATION
I dedicate this dissertation to my lovely late father, Mr. John C Assenga, though you
are not with us but your love and guidance has remained a true help to us. This work
is also dedicated to my wife Anna, without whose caring support, it would not have
been possible to finish it.
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LIST OF ABREVIATIONS
AFI Alliance for Financial Inclusion
ATM Automatic Teller Machine
BOT Bank of Tanzania
C2B Consumer to Business
EFT Electronic Funds Transfer
EPS Electronic Payment System
DoI Diffusion of Innovation
ITU International Telecommunication Union
MFS Mobile Financial Services
MMP Mobile Money Payment
MMS Mobile Money Services
MNOs Mobile Network Operators
MoU Memorandum of Understanding
NFC Near Field Communication
P2B Personal to Business
P2P Personal to Personal or Peer to Peer
PC Perceived Complexity
PEOU Perceived Ease of Use
PDA Personal Digital Assistance
POP Point of Presence
POS Point of Sales
PRA Perceived Relative Advantage

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PSQ Perceived Service Quality
PST Perceived Security and Trust
PTC Perceived Transaction Cost
PU Perceived Usefulness
SIM Subscriber Identity Module
STK SIM Tool Kit
TAM Technology Acceptance Model
TCRA Tanzania Communications Regulatory Authority
TPF Tanzania Police Force
TTMS Telecommunication Traffic Monitoring System
USSD Unstructured Supplementary Service Data

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ABSTRACT
This study aimed at assessing factors affecting adoption of mobile money payment in
Tanzania. The study intended to answer three research questions: (1) What is the
extent of adoption of mobile money payment in Tanzania? (2) What are the factors
affecting adoption of mobile money payment in Tanzania; and (3) What is the
relationship between adoption of mobile money payment and the identified factors.
The target population of this study comprised of the mobile phone subscribers in Dar
es Salaam.
The study found that only 15% of respondents used mobile money services to pay for
the purchased goods at the shops (P2B) while 75% used the service for paying for
remote services (such as LUKU, DAWASCO, etc.). Majority, which amount to 94.2
% of respondents use the mobile money services for sending or receiving money
(P2P). This shows that there is a revenue stream which is not well utilized.
The study also found that a significant relationship between mobile money payment
adoption and awareness, service availability, easier of use, service quality, network
reliability advantage over cash payment and more convenient. Security, transaction
cost has also an effect on adoption of mobile money payment though did not feature
in the Multiple regression model.
The study, therefore, recommends that MNOs replace the usage of USSD code with
simple means for customers to access the mobile money payment menu.
Technologies such as SIM Tool Kit (STK) and Near Field Communication (NFC)
and increase number of MMP merchants

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TABLE OF CONTENTS
Certification................................................................................................................... i
Declaration and Copyright ...........................................................................................ii
Acknowledgements .....................................................................................................iii
Dedication ................................................................................................................... iv
List of Abreviations...................................................................................................... v
Abstract.. ....................................................................................................................vii
Table of Contents ......................................................................................................viii
List of Tables............................................................................................................. xiv
List of Figures ............................................................................................................ xv
List of Equations ......................................................................................................xvii
CHAPTER ONE : INTRODUCTION ..................................................................... 1
1.1 General Introduction ..................................................................................... 1
1.2 Statement of Problem .................................................................................... 3
1.3 Research Objectives ...................................................................................... 4
1.3.1 Main Objective .............................................................................................. 4
1.3.2 Specific Objectives........................................................................................ 4
1.4 Research Questions ....................................................................................... 4
1.5 Significance of the study ............................................................................... 5
1.5.1 Government ................................................................................................... 5
1.5.2 Customers...................................................................................................... 5
1.5.3 Telecom operators. ........................................................................................ 6

ix
1.6 Scope of the study ......................................................................................... 6
CHAPTER TWO : LITERATURE REVIEW ........................................................ 7
2.1 Introduction ................................................................................................... 7
2.2 Payment and Payment Types ........................................................................ 7
2.3 Payment methods in Tanzania ...................................................................... 8
2.3.1 Cash Payment ................................................................................................ 9
2.3.2 Electronic Payment System......................................................................... 10
2.3.3 Disadvantages of Physical Cash Payment................................................... 11
2.3.4 Advantages of Physical Cash Payment ....................................................... 13
2.3.5 Implementation of Electronic Payment ....................................................... 13
2.4 Mobile Financial Services ........................................................................... 14
3.5 Mobile Financial Service Ecosystem .......................................................... 15
3.5.1 Mobile Network Operators (MNOs) ........................................................... 15
3.5.2 Legal and Regulatory Framework ............................................................... 16
3.5.3 Agents ......................................................................................................... 16
2.5.3 Users............................................................................................................ 17
2.5.4 Merchants .................................................................................................... 18
2.5.5 Banks ........................................................................................................... 18
2.6 Mobile Financial Service Model ................................................................. 19
2.7 Role of Mobile Financial Services in Financial Inclusion .......................... 21
2.8 Types of Mobile Financial Service ............................................................. 23
2.8.1 Mobile Money Transfer .............................................................................. 24
2.8.2 Mobile Banking........................................................................................... 25

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2.8.3 Mobile Money Payment .............................................................................. 25
2.8.3.1 Remote Mobile Money Payment ................................................................ 26
2.8.3.2 Proximity Mobile Money Payment ............................................................. 26
2.8.4 Adoption of Mobile Financial Services ...................................................... 29
2.9 Theory Review ............................................................................................ 31
2.9.1 Diffusion of Innovation (DoI) Theory ........................................................ 32
2.9.2 Technology Acceptance Model (TAM) ...................................................... 34
2.9.3 Other construct considered .......................................................................... 36
2.9.4 Theoretical framework for this research ..................................................... 36
CHAPTER THREE : RESEARCH METHODOLOGY ..................................... 38
3.1 Introduction ................................................................................................. 38
3.2 Adopted research type ................................................................................. 38
3.3 Adopted Research Design ........................................................................... 39
3.2 Methodology ............................................................................................... 39
3.4.1 Target population ........................................................................................ 40
3.4.2 Sample Design ............................................................................................ 40
3.4.2.1 Sampling ..................................................................................................... 41
3.4.2.2 Sample size.................................................................................................. 41
3.4.3 Data Collection............................................................................................ 42
3.4.4 Validity and Reliability test ........................................................................ 42
2.4.4.1 Reliability test ............................................................................................. 43
3.4.4.2 Validity test ................................................................................................. 43
3.4.5 Data analysis ............................................................................................... 43

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CHAPTER FOUR : STUDY FINDINGS, ANALYSIS AND
DISCUSSION ....................................................................... 46
4.1 Introduction ................................................................................................. 46
4.2 Demographic Information ........................................................................... 46
4.2.1 Respondents Location ................................................................................. 46
4.2.2 Respondent’s Occupation............................................................................ 47
4.2.3 Respondent’s Education Level .................................................................... 48
4.3 Availability of Mobile Money Payment Merchants.................................... 49
4.4 Mobile Money Service (MMS) subscription .............................................. 51
4.5 Extent of Mobile Money Payment .............................................................. 52
4.5.1 Proximity Mobile Money Payment ............................................................. 53
4.5.1.1 General Adoption ........................................................................................ 53
4.5.1.2 Adoption in terms of education ................................................................... 55
4.5.1.3 Adoption in terms of occupation ................................................................. 56
4.5.1.4 Adoption in terms of location ..................................................................... 57
4.5.2 Remote Mobile Money Payment ................................................................ 58
4.6 Factors affecting adoption ........................................................................... 60
4.6.1 Enabling factors for mobile money payment adoption ............................... 60
4.6.1.1 Quicker ........................................................................................................ 60
4.6.1.2 Easier to use ................................................................................................ 61
4.6.1.3 Safe.............................................................................................................. 62
4.6.1.4 Advantage over cash payment .................................................................... 63
4.6.1.5 More convenient.......................................................................................... 64
4.6.1.6 Did not have physical cash at the moment .................................................. 65

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4.6.1.7 Summary and discussion for adoption factors ............................................ 66
4.6.2 Factors for no adoption ............................................................................... 67
4.6.2.1 Awareness ................................................................................................... 67
4.6.2.2 Service availability ...................................................................................... 68
4.6.2.3 Transaction cost .......................................................................................... 69
4.6.2.4 Complex in use............................................................................................ 70
4.6.2.5 Service quality............................................................................................. 71
4.6.2.6 No trust on security ..................................................................................... 72
4.6.2.7 Mobile Network reliability.......................................................................... 73
4.6.2.8 Summary of results for not using mobile phone to pay for the
purchased goods .......................................................................................... 74
4.7 Relationship between Dependent Variable and Independent Variable ....... 75
4.7.1 Model Summary .......................................................................................... 76
4.7.2 Statistical significance of the independent variables .................................. 77
CHAPTER FIVE : CONCLUSION AND RECOMMENDATION .................... 80
5.1 Introduction ................................................................................................. 80
5.2 Summary of Findings and Conclusion ........................................................ 80
5.3 Recommendations ....................................................................................... 82
5.3.1 Employment of contactless technology rather than USSD code ................ 82
5.3.2 Increasing number of mobile money merchants countrywide .................... 83
5.3.3 Increase awareness of mobile money payment ........................................... 83
5.4 Limitations of the Study .............................................................................. 83
5.5 Suggestions for Further Research ............................................................... 84

xiii
REFERENCES…………. ........................................................................................ 85
APPENDICES ………….. ....................................................................................... 95

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LIST OF TABLES
Table 3.1: Reliability test result ................................................................................. 43
Table 4.1: Summary of respondent’s location ........................................................... 47
Table 4.2: Summary of respondent's occupation ....................................................... 47
Table 4.3: Summary of respondents in terms of location and employment............... 48
Table 4.4: Summary of respondent's education ......................................................... 48
Table 4.5: Summary of respondents in terms of education and location ................... 49
Table 4.6: Availability of Mobile Money Payment Merchants in Dar es Salaam ..... 49
Table 4.7: Summary of mobile financial service subscription in terms of MNO’s ... 52
Table 4.7: Multiple Regression Model Summary ...................................................... 76
Table 4.8: ANOVA Table .......................................................................................... 77
Table 4.9: Summary of statistical significance of the independent variable .............. 78

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LIST OF FIGURES
Figure 2.1: Cash Payment System ............................................................................. 10
Figure 2.2: Electronic Payment System ..................................................................... 11
Figure 2.3: Mobile Financial Ecosystem ................................................................... 15
Figure 2.4: Typical Mobile Money Agent ................................................................. 17
Figure 2.5: Mobile-Led MFS Model.......................................................................... 20
Figure 2.6: Bank-Led MFS model ............................................................................. 20
Figure 2.7: Uptake of Mobile Communication .......................................................... 22
Figure 2.8: Types of mobile financial services .......................................................... 24
Figure 2.9: Types of mobile money payment ............................................................ 26
Figure 2.10: Mpesa Mobile Money Merchant Sign Board ........................................ 28
Figure 2.11: Tigo Pesa Mobile Money Payment Merchant Sign Board .................... 28
Figure 2.12: Airtel Money Mobile Money Payment Merchant Sign Board .............. 29
Figure 2.13: Global product index mix by volume .................................................... 30
Figure 2.14: The Theory of Reasoned Action ............................................................ 34
Figure 2.15: The Technological Acceptance Model .................................................. 35
Figure 2.16: Theoretical research framework ............................................................ 37
Figure 4.1: Summary of mobile money service subscription .................................... 51
Figure 4.2: Summary of Proximity Mobile Money Payment Adoption .................... 53
Figure 4.3: Summary of extent of proximity mobile money payment ....................... 54
Figure 4.4: Extent of proximity mobile money payment ........................................... 55
Figure 4.5: Proximity Mobile Money payment adoptions in terms of education ...... 56
Figure 4.6: Proximity Mobile Money payment adoptions in terms of occupation .... 57
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Figure 4.7: Proximity Mobile Money payment adoptions in terms of location ......... 58
Figure 4.8: Summary of Remote Mobile Money payment adoptions ........................ 59
Figure 4.9: Distribution Remote Mobile Money Payment Service Usage................. 59
Figure 4.10: Summary of responses on quicker ......................................................... 61
Figure 4.11: Summary of easier to use....................................................................... 62
Figure 4.12: Summary of safe to use mobile money payment ................................... 63
Figure 4.13: Summary of advantages of mobile money payment over cash
payment ................................................................................................. 64
Figure 4.14: Summary of response on more convenience ......................................... 65
Figure 4.15: Summary of adoption because of not have cash at hand ....................... 66
Figure 4.16: Summary of mean on each factor for adoption ..................................... 67
Figure 4.18: Summary response on service availability ............................................ 69
Figure 4.19: Summary of transaction cost ................................................................. 70
Figure 4.20: Summary of complex in use .................................................................. 71
Figure 4.21: Summary of service quality ................................................................... 72
Figure 4.22: Summary of no trust on security............................................................ 73
Figure 4.23: Summary response on Mobile Network Reliability .............................. 74
Figure 4.24: Summary of inhibiting factor ................................................................ 75

xvii
LIST OF EQUATIONS
Equation 3.1: Sample Size Calculation ...................................................................... 41
Equation 3.2 General Multiple Regression Equation ................................................. 44
Equation 4.1 : General Multiple Regression Equation............................................... 79

1
CHAPTER ONE
INTRODUCTION
1.1 General Introduction
As many African countries, the common and dominant payment system used by the
majority of people in Tanzania is a cash payment system, whereby physical cash is
used for purchase of goods in shops and to pay for various services (Bank of
Tanzania, 2015). Although it seems convenient and easy, cash payment has some
disadvantages as compared to non-cash payment such as revenue leakage for the
government and business companies due to its anonymity, cash related crime,
robberies, cost of handling cash, easily lost, difficulty in tracking and thus somehow
facilitate money laundering.
Many developed countries are getting away with cash payment due to proliferation
of banks and thus many of the citizens are well included in financially services.
According to Credit Suisse, (2015) Nordics are in the lead and it is predicted that
they will get rid of cash by 2030. Most of non-cash payments are done through cards
credit cards, debit cards. In Tanzania electronic payment such as credit cards and
debit cards have not gained a wide acceptance due to low penetration of formal
banking services, thus excluding majority from financial services (National Council
for Financial Inclusion, 2016).

2
Tanzania has put several efforts (such as allowing more private banks, microfinance
institute etc.) to ensure that many people are getting access to financial services.
Though a formal financial service providers (i.e banks) have not succeeded in
reaching many people, mobile communication service which reaches majority is
complimenting by providing Mobile Financial Services (MFS) (Bank of Tanzania,
2012). MFS provides range of services such as mobile money transfer or personal to
personal (P2P), mobile banking (M-Banking) and mobile money payment or
personal to business (P2B). Despite of the fact that many people are now getting
access to financial services through mobile communication services (InterMedia,
2014), physical cash is still dominating business transaction in Tanzania (Bank of
Tanzania, 2015).
Since its first introduction in 2008 MFS has been widely used for peer to peer (P2P)
or personal to personal services (such as money transfer), savings and facilitating
banking transaction. In attempting to add more services over the MMS and new
revenue stream, Mobile Network Operators (MNOs) started to introduce mobile
money payment (P2B) functionalities that would enable a customer to pay for his/her
goods in a same way as those using credit and debit cards.
Mobile money payments refer to personal to personal (P2P) and consumer-to-
business (C2B) or Personal to Business (P2B) transactions for physical goods and
services that are made using a mobile phone. Mobile payments are now present in
every sphere of our life in developed economies, in the retail industry, transport
sector, and entertainment and leisure activities(International Telecommunication
Union, 2013).
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According to the report and various studies the personal to business (P2B) capability
of the mobile financial services has not been widely used (InterMedia, 2014) as
compared to other services such as P2P (GMSA, 2014).
With 79% of mobile communication penetration (Tanzania Communications
Regulatory Authority, 2016), means that 79% of the population have the potential of
purchasing goods through mobile money payment and get away with cash based
transaction.
1.2 Statement of Problem
Mobile Financial Service is becoming increasingly significant, especially in the
context of developing economies, where many low income households and
microenterprises do not have access to financial services through formal banking
sector. Mobile payment facilitates financial inclusion and offers potential for
financial integration (Africa Development Bank, 2012). Despite a big role played by
Communication Services in bringing the financial services close to majority of the
people, P2B mobile money payment method has not been utilized to its full potential
as compared to other mobile financial services such as Mobile Money transfer (P2P)
and Mobile Banking. Little or less is known on factors affecting adoption of mobile
money payment (P2B) in Tanzania. The aim of this study is to assess factors that
affect the adoption of mobile money payment in Tanzania.

4
1.3 Research Objectives
1.3.1 Main Objective
The main objective of this research was to assess factors affecting adoption of mobile
money payment in Tanzania.
1.3.2 Specific Objectives
The specific objectives of this research were:
1. To establish the extent of mobile money payment adoption in Tanzania;
2. To identify factors affecting adoption of mobile money payment in Tanzania; and
3. To determine relationship between adoption of mobile money payment and the
identified factors.
1.4 Research Questions
1. What is the extent of adoption of mobile money payment in Tanzania?
2. What are factors affecting adoption of mobile money payment in Tanzania?
3. What is the relationship between adoption of mobile money payment and the
identified factors?
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1.5 Significance of the study
The findings of this research will help various stakeholders (government, companies
and customers) to make informed decisions on pursuing people to adopt the mobile
money payment when purchasing goods and paying for various services.
1.5.1 Government
Due to anonymity of cash payment system, the government loses a lot of money as
many transactions go unnoticed. It is very difficult to track cash based payment. The
government through the Tanzania Communications Regulatory Authority (TCRA)
via the Telecommunication Traffic Monitoring System (TTMS) is now able to
monitor mobile money transaction. Huge amount of mobile money transaction is
done monthly, mainly through P2P. If the government succeeds in pursuing many
people to abandon cash and adopt mobile money payment it has the potential of
increasing its revenue from the money that is currently losing. The use of mobile
money payment will reduce money laundering as it is easy to track the electronic
money. With the recently introduced excise duty on money transfer transaction fees,
if number of mobile money payment increases more revenue will be realized by the
government.
1.5.2 Customers
Several cases related to robbery have been reported to happen to people who have
been moving with hard cash. Some people have been injured and others lost their life
6
just because they were suspected having cash with them. Knowing the factors for
adoption of mobile money will help sensitize the use of it. The use of mobile money
payment will reduce the high risk associated with moving with cash such as robbery
and also increases flexibility for consumers.
1.5.3 Telecom operators.
Although many people are using Mobile Money Service much on P2P (Mobile
Money Transfers) transaction, there is still a potential for telecom companies to
expand the use P2B (Mobile Money Payment) transaction. The outcome of this
research will open the eyes of the operators on what are people perceiving their
services, whether they are easy to use, useful, complicated?, etc. The output of this
research will help mobile companies to make research base decisions on whether to
simplify the service, put more money of marketing and publicity etc.
1.6 Scope of the study
The Scope of this study was on P2B, Proximity (Close) Mobile Money Payment
Services. The study was conducted in all districts of Dar es Salaam.

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CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This chapter presents overview of types of payment i.e. hard cash payment and non-
cash payment. It also explains electronic payment and its advantages over hard cash
payment. It also gives overview of electronic payment in Tanzania and its
challenges. It further explain Mobile Financial Services (MFS) (mobile money
payment, mobile money transfer and mobile banking) ecosystem. Finally it gives the
theoretical view of adoption on any technology.
2.2 Payment and Payment Types
Payment can be defined as the transfer of one form of good, service or financial asset
in exchange for another form of good, service or financial asset in proportions that
have been previously agreed upon by all parties involved (Investopedia, 2015).
According to Bloxham (2010), money and payment system have developed from
cowry shells to contactless payment. Today, money can be in the form of coins,
notes, paper or electronic (e-money). Regardless of the form it takes, money is the
heart of many business transactions.
Money can be paid either as physical cash or non-cash. According to the bank of
Tanzania non-cash payment includes paper-based instruments (payment orders, bills
of exchange, promissory notes, cheques, etc), plastic cards (credit cards, debit cards /
8
automated teller machine (ATM) cards and prepaid cards), electronic (Electronic
Funds Transfers (EFTs) and mobile money (Bank of Tanzania, 2015).
Over the past several decades, the payments industry has undergone significant
changes. Payment can be executed either in hard cash (money) or electronic money.
New electronic payment instruments have been introduced, and the means for
making electronic payments have become increasingly available for use in everyday
commerce (Gerdes & Walton II, 2002).
Despite the development in payment system as many of African countries, the
common and dominant payment system used by the majority of people in Tanzania is
a cash payment system whereby physical cash is used for purchase of goods and to
pay for various services. Cash payment has some disadvantages such as revenue
leakage, cash related crime, robberies, cost of handling cash etc.
The reason why most of African countries are still trading in physical cash is
because of low level of unbanked community as compared to developed country.
About 2.5 billion people in developing countries are unbanked (GMSA, 2014) and
rely on cash for their transaction.
2.3 Payment methods in Tanzania
In Tanzania, payment is controlled by the Bank of Tanzania through the National
Payment System (NPS), which is defined as a group of institutions and a set of
instruments and procedures used to ensure the circulation of money within a country.
9
The NPS supports the full spectrum of financial activities from Tanzanian businesses
transacting globally in the international markets to servicing the individual payment
requirements of the Tanzanian populace (Bank of Tanzania, 2015a). Payment can be
made either in cash or non-cash. The NPS supports both cash and non-cash payment
systems.
Business Dictionary (2016) defines cash payment as a form of liquid funds (physical
fund) given by a consumer to a provider of goods or services as compensation for
receiving those products. It further explains that “in most domestic business
transactions, a cash payment will typically be made in the currency of the country
where the transaction takes place, either in paper currency, in coins, or in an
appropriate combination.”
Non cash payment is a method of paying for goods or services without involvement
of liquid funds (physical funds). According to the Bank of Tanzania, non-cash
payment includes Paper-Based Instruments (payment orders, bills of exchange,
promissory notes, cheques etc), Plastic Cards (credit cards, debit cards / ATM cards
and prepaid cards), Electronic Payment Systems (Mobile Money Payment, Electronic
Funds Transfers (EFTs) (Bank of Tanzania, 2015a).
2.3.1 Cash Payment
Cash is the simplest and easiest type of a payment. Transactions are paid in a cash
from a buyer to a seller. Cash payment is depicted in Figure 2.1.

10
Source (Gao, 2000)
Figure 2.1: Cash Payment System
2.3.2 Electronic Payment System
Nweke (2015) referred electronic payment system as a system that uses integrated
hardware and software to allow for the payment of goods and services by electronic
means rather than by the use of physical cash or paper checks. These may include
cards (credit cards, debit cards, electronic fund transfer, electronic cheque, paypal,
mobile phone such (as Mpesa, Tigo Pesa, Airtel money) and Google Wallet.
The Bank of Tanzania (BoT) in its guidelines for electronic payment system (Bank
of Tanzania, 2007) has defined Electronic Payment System (EPS) as “any electronic
instrument, device or system used for the purposes of facilitating payment transfers,
through internet and/or wireless communication networks, and by use of service
delivery products such as electronic cards, electronic payment transfers systems,
mobile banking, internet banking, automated teller machines, point of sales

11
terminals, payment switches and any other type of electronic payment transfer
system”. Figure 2.2 shows electronic payment system simplified architecture.
Figure 2.2: Electronic Payment System
In figure 2.2 financial networks consist of Banks and MNOs (Eg MPESA, tiGO
Pesa, Airtel Money, and Eazy Pesa). The buyer does not pay cash directly to the
seller. The transaction involves withdrawal of electronic money from buyers account
and the same electronic money is deposited into seller’s account. In this case the
government has a full control in all transaction.
2.3.3 Disadvantages of Physical Cash Payment
High labor costs in managing– cash management involving counting,
reconciliation, transporting to bank. This requires time and labor. If someone
receives lots of cash he/she will require a lot of time and labor to handle the same
and at the end of the time find it costly to handle physical cash than electronic
money. The Central Bank of Nigeria (CBN) ( as cited in Yaqub, et al, 2013) revealed
12
that that the direct cost of handling cash was fifty naira in 2008 and was expecting to
reach a staggering sum of one hundred and ninety two billion naira in 2012. In
United States of America the cost handling cash is 200USD billion per year
(Benjamin, 2013)
High risk of theft: Cash sales attract thieves who are either employees or non-
employees. Many people have been reported injured and some of them killed
because of carrying physical cash. On 28th December, 2015 a case was reported of a
person been killed when he was at Nabaki Africa while carrying a huge amount of
physical cash (ITV, 2015). When you deal with physical cash there is a high risk of
theft and loss of life or injury.
Revenue leakage: Cash payment cannot easily be traced and proved. The
government loses a lot of revenue through tax when people transact using cash. No
automatic proof of payment. In a move to fight corruption, the Tanzania Police Force
(TPF) in 2014 established a mobile money payment system for all traffic offences.
This was done to remove a possibility of corruption. On addressing the system traffic
police commander Commissioner Mohamed Mpinga said that TPF has established
the system because there is a loop hole for corruption in the manual way of writing
penalties for traffic offences (Edward, 2014). Now police force is collecting a good
amount of money. Speaking with press the Dar es Salaam special RPC, Simon Siro
said that they collected a total of 1.3 billion shillings from 25th April, 2016 to May,
2016 (Ayo TV, 2016).

13
2.3.4 Advantages of Physical Cash Payment
Physical cash payment system has some advantages to users such as
Anonymity : For users who do not want their transaction to be known due to some
reasons such as fraud, tax avoidance would prefer physical cash payment as it
cannot be easily traced or proven. When introducing Electronic Fiscal Device (EFD),
the Tanzania Revenue Authority (TRA) faced opposition from business owners who
were against the payment system (Fiscal Blackbox, 2010). So physical cash payment
benefit business men than the government.
Unlimited transaction amount : Financial service providers may impose limits on
the amount or the number of daily transactions, whereby a transaction exceeding a
certain figure cannot be conducted at once, or only a certain number of transactions
are allowed per day. This is not the case with physical cash payment. People can
make unlimited transaction as long he/she has cash in hand
No processing or transaction : Unlike Electronic payment system, physical cash
payment system has not transaction or processing fee added. Users would prefer to
the actual product amount and this can only be achieved when the pay using hard
cash.
2.3.5 Implementation of Electronic Payment
Electronic payment can be implemented in a number of ways. One can pay
electronically by using cards (Debit or Credit cards). This means that it requires a
14
user to have a bank account. The other type of electronic payment is whereby a
person uses his/her mobile phone to make payment. This requires a person or a user
to have normal phone and be subscribed to mobile financial service through Mobile
Network Operators (MNOs).
2.4 Mobile Financial Services
MFS have been defined by various scholars in various ways. According to the
International Telecommunication Union (2013), mobile financial services (MFS)
refers to financial transactions and services that can be carried out using a mobile
device such as a mobile phone or tablet. These financial transactions and services are
sometimes referred to as mobile money services (MMS) and may or may not be
linked directly to a bank account. When linked to bank accounts are known as mobile
banking.
MFS was first launched in Tanzania in 2008 by Vodacom (T) Limited and Zantel
relaunched in 2012 as Eazy pesa (Gidvani et al, 2014), one year after the same
service was launched in Kenya by SafariCom (GSMA, 2009). Zain (Now Airtel)
launched the same service as Zap (Now Airtel Money) in 2009 while Tigo launched
its mobile financial service in 2010 as Tigo Pesa (Gidvani, et al, 2014). Introduction
of MFS is a new revenue stream for MNOs who were previous depending on voice
and data. In Kenya Mpesa contributes 20% of Safaricom’s revenues while Tigo pesa
contributes 30.4% of MIC (T) limited revenue (GSMA, 2015).

15
3.5 Mobile Financial Service Ecosystem
According to Jenkins (2008), a typical mobile financial ecosystem comprised of
Mobile Network Operators (MNOs), Regulators, Merchants, Network of Agents,
Banks and Users. The MFS is illustrated in Figure. 2.3.
Figure 2.3: Mobile Financial Ecosystem
3.5.1 Mobile Network Operators (MNOs)
An MNO provides infrastructure and customer base that are already using
telecommunication services (voice and data) and ensures compliance with
telecommunication regulations and policy within the country (Masamila, 2014). To
provide mobile financial service a MNO needs to have a licence to provide value
added services (Application Service Licence and Number resource licence) from the
16
TCRA (Gidvani, Lara & CaSTri, 2014) and a licence to provide financial service
from the Bank of Tanzania (BOT) . Currently MNOs who provide MFS are
Vodacom, Tigo, Airtel, Halotel and Zantel.
3.5.2 Legal and Regulatory Framework
The function of government regulators is to lay down legal framework for operation
of mobile financial services. The nature of MFS is both communication and finance
i.e the financial service provided over the communication infrastructure. It is due to
its nature, the mobile financial service is governed by two bodies, the Tanzania
Communications Regulatory Authority (TCRA) and the Bank of Tanzania (BoT)
through a memorandum of understanding (MoU) signed in 2010 (Bank of Tanzania,
2010). According to the MoU TCRA regulates issues pertain to communication
infrastructure and ensure quality of service while BoT ensure compliance with
financial regulations.
3.5.3 Agents
Agents are physical points of presence (POP). They are mainly people or company or
business that facilitate cash-in (process by which a customer credits his account with
cash through an agent who takes the cash and credits the customer’s mobile money
account with the same amount of e-money) and cash-out (process by which a
customer deducts cash from his mobile money account via an agent who gives the
customer cash in exchange for a transfer of e-money from the customer’s mobile
money account). According to the BoT there are 119,719 mobile money agents in
17
Tanzania (Bank of Tanzania, 2015b). Figure 2.4 shows a typical mobile money
agent.
Figure 2.4: Typical Mobile Money Agent
2.5.3 Users
Users are mobile money communication users subscribed to Mobile Network
Operators. These can be user with account in formal financial institutions (Banks) or
without bank account. To be able to use mobile financial services one needs to be
subscribed to mobile financial service and have a mobile money account. By 2012,
90 % of Tanzanians with mobile phones were subscribed to mobile money services
(Gidvani et al, 2014).

18
2.5.4 Merchants
These are retailers or wholesalers who are registered as point of sales (PoS) to accept
mobile money payments in exchange for different products such as sugar, rice,
kerosene, building materials etc and services such as Luku, Dawasco, TV
subscription etc. They help increase demand for mobile money by offering more
avenues through which users can spend their mobile money. In return, they can
minimize the need to handle cash (United Nations Conference on Trade and
Development, 2012).
Merchants are categorized into remote merchants and proximity (close) merchants.
Remote merchants accept remote payment without a need for a physical interaction
with a user. Example of remote merchants are TANESCO, DAWASCO, DSTV,
SCHOOLS,. These accept remote payments (such as utility bill, school fee etc).
Proximity (close) payment requires a user to physically interact or to be physically
present with/at a service provider (proximity merchant). Examples of these are
retailer or wholesale shops and supermarkets.
2.5.5 Banks
Banks use the telecommunication infrastructure as a strategy to provide flexibility to
their customer in performing various transactions. In mobile-led MFS their impact in
ecosystem is not very significant as MNOs are also licenced to provide financial
services. Apart from ensuring compliance to financial regulations, Banks also
benefits by offering number of services in collaboration with MNOs (mobile

19
banking) as well as extending their services in place where they are not able to reach.
Services offered through mobile banking are balance enquiry, salary notification,
statement enquiry, transaction details; transact money from bank account to mobile
money accounts (MPESA, Tigo Pesa, Airtel Money and Z-pesa) and bill payment.
2.6 Mobile Financial Service Model
Mobile financial services are divided into two models; namely, bank-led model (or
bank centric) and mobile-led model (or mobile centric) (Lakshmi, 2015). A mobile-
led model (See Figure 2.5) is a mobile financial services business model in which the
Mobile Network Operators (MNOs) are the primary driver of the product or service,
typically taking the lead in marketing, branding, and managing the customer
relationship while a bank-led model (See Figure. 2.6) is a mobile financial services
business model in which the bank is the primary driver of the product or service,
typically taking the lead in marketing, branding, and managing the customer
relationship (Alliance for financial Inclusion, 2012).

20
Source (Lakshmi, 2015)
Figure 2.5: Mobile-Led MFS Model
Source (Lakshmi, 2015)
Figure 2.6: Bank-Led MFS model

21
Of the two, mobile-led model are leading players because of their highly connected
and far reaching to customers. Most of developed countries have opted for bank-led
model because of higher penetration of formal financial service while most of
developing countries have opted for mobile-led model.
2.7 Role of Mobile Financial Services in Financial Inclusion
In any country, financial inclusion is very important in terms of economic growth
and development. It helps to channel money-flow to the economy; it ensures that
people contribute to the economic growth through various transactions they make. It
also increases the tax base for the government as it reduces cash base transaction in
which it has very little control over it. The more the inclusion of the people to
financial services, the more is the benefit to the government and to the people.
Many countries have put several efforts to ensure that many people are getting access
to financial services. In effort to achieve the financial inclusion, Tanzania through
the central Bank, made a commitment under the Alliance for Financial Inclusion
(AFI) (the Maya Declaration) to increase formal access to financial services to 50%
by 2015 (Bank of Tanzania, 2013).
According to the National Council for Financial Inclusion (2016), the banking sector
in Tanzania has grown from 4 banks in 1991 to just 52 banks in 2016 and an overall
609 branch networks. The level of penetration is 8.5% for rural and 23% for urban.
In rural areas only 40% have access to bank services and in urban only 45% have
access to the bank services. It is only 12% of Tanzania population had bank account
22
in 2012 (Bank of Tanzania, 2012). BoT’s report agrees with Weber and Darbellay (as
cited in Etim, 2014) that Sub Saharan Africa (SSA) has one of the largest unbanked
populations in the world, with more than 80% of population are unbanked.
While the banking sector seems to be almost stagnant for the past fifteen years, on
other hand the communication technology has witnessed an exponential growth in
the past five years reaching majority of the population. In Tanzania the mobile
penetration has increased from 20.8 million mobile subscribers in 2010 to 39.6
million mobile subscribers in December, 2015 (Tanzania Communications
Regulatory Authority, 2016) (See Figure. 2.7). This is equivalent to teledensity of
79%). This means that more than 50% of Tanzania population has access to
communication services.
Source: (TCRA, 2015)
Figure 2.7: Uptake of Mobile Communication

23
Over the past six years communication technology has transformed from just the
platform for providing communication services such as voice, data and video to a
platform for provision of financial services. These services are called Mobile
Financial Services (MFS). The growth of telecommunication sector has come as a
rescuer to the achievement of Maya Declaration due its penetration and its capability
of providing services beyond voice. With a 79% penetration it means 79% have
access to financial service through telecommunication.
According the Bank of Tanzania the number of people registered with Mobile
Money Services (MMS) are 29,126,517 (Bank of Tanzania, 2015b). This means that
more than 50% have access to financial services through MMS, this surpass the
Maya declaration.
The survey done by Intermedia in 2014 confirm the above information, more than 50
% of Tanzanian adults have access to financial services through either a bank
account or mobile money account, out of which 48% use mobile money account
only, and 10% use bank accounts only (InterMedia, 2014).
2.8 Types of Mobile Financial Service
Boyd and Jacob(2007) divided the MFS into two distinct categories; namely, mobile
banking (m-banking) and mobile payments (m-payments) whilst the Smart Card
Alliance, (2011) categorized MFS into mobile banking, mobile commerce, mobile
point-of-sale (PoS), and mobile payments (including person-to-person payment,
remote payment, and mobile proximity payment).

24
A recent International Telecommunication Union (ITU) publication categorized MFS
into three services; namely, Mobile Money Payment, Mobile Money Transfer and
Mobile Banking (International Telecommunication Union, 2013). This research has
adopted the categorization by ITU as is the organization which deals with
Telecommunication Standardization on which MFS is hosted.
Source: ( International Telecommunication Union, 2013)
Figure 2.8: Types of mobile financial services
2.8.1 Mobile Money Transfer
In this report mobile money refers to transfer of money from one individual to
another. The transfer can be domestic or international, and can also be called a “peer
to peer” or “personal to personal” (P2P) payment. When the transfer is international,
it is referred to as an international remittance.

25
2.8.2 Mobile Banking
Smart Card Alliance, (2011) defines mobile banking as the use of a mobile device
(Phone or Personal Digital Assistance (PDA)) by a consumer to access and manage
financial services provided by a bank, credit union, brokerage, or other financial
service providers. Mobile banking allows users to manage their bank accounts
remotely from their mobile devices.
2.8.3 Mobile Money Payment
Mallat, (2007) defines mobile money payment as the use of a mobile device to
conduct a payment transaction in which money or funds are transferred from a payer
to a receiver via an intermediary, or directly without an intermediary. Mobile money
payment includes purchase of ringtone, utility payment, and airtime top up, salary
payment and purchase of goods.
The International Telecommunication Union, (2013) defines mobile money
payments (MMP) as a personal to personal (P2P) and consumer-to-business (C2B),
or personal to business (P2B) transactions for physical goods and services that are
made using a mobile phone. C2B and P2B are used interchangeably. According to
ITU, mobile payments are used mainly for P2P payments and remittances.
The P2B can be further put into two categories depending on the location of the
merchant (seller). The Federal Reserve Bank of Boston ( as cited in Smart Card
Alliance, 2007) and the International Telecommunication Union, (2013) agree on the
categories of mobile money payment. Both have categorized mobile payment into
26
two types; namely, Proximity Mobile Payment and Remote Mobile Payment (See
Figure.2.9).
2.8.3.1 Remote Mobile Money Payment
Remote mobile payment and Proximity mobile payment differ according to the
location of the mobile device and merchant. A remote mobile payment is one in
which the payer does not interact directly with the merchant. Example of remote
mobile money payment is subscription TV payment, utility bill payment, school fees
payment etc.
2.8.3.2 Proximity Mobile Money Payment
In a proximity payment, on the other hand, the mobile device interacts in some way
with a physical PoS device to obtain the consumer’s payment information and
complete the transaction.
Source: (International Telecommunication Union, 2013)
Figure 2.9: Types of mobile money payment

27
Mobile Money Payment has been introduced by MNOs in Tanzania to facilitate
customers who want to pay for the goods in a same way as those using credit and
debit cards. Vodacom launched its Mobile Money Payment services branding “LIPA
KWA MPESA” in September, 2014. According to Vodacom, “Lipa kwa Mpesa is an
integrated payment system for the business community that allows merchants,
retailers and distributors, in a far more secure way, to settle payments by using M-
PESA” (Vodacom Tanzania Limited, 2014).
Speaking during the launch of the service, Kelvin Twissa, Vodacom Tanzania Head
of Marketing and Communication said, “Vodacom has been adding value to help
streamline and improve the operations of the business community in Tanzania by
introducing new products and services that will revolutionize the business
community, and moving away from the old traditions of doing business. The new
LIPA KWA M-PESA service is quick, secured, integrated, convenient and cashless”
(Vodacom Tanzania Limited, 2014). Other MNOs have their versions of Proximity
Mobile Money Payment.
Tigo has “LIPA HAPA KWA TIGO PESA”. Speaking during the GSMA
Conference , Tigo’s Head of Financial Services, Ruan Swanepoel said that
“customers from across all networks can now pay for services or products at any of
our widest network of merchant shops across the country that have the banner ‘Lipa
hapa kwa Tigo Pesa’ “ (Athumani, 2016). Airtel has “Airtel Tap Tap” which use a
card integrated with airtel money account

28
Figure 2.10: Mpesa Mobile Money Merchant Sign Board
Figure 2.11: Tigo Pesa Mobile Money Payment Merchant Sign Board
29
Figure 2.12: Airtel Money Mobile Money Payment Merchant Sign Board
2.8.4 Adoption of Mobile Financial Services
Since its first introduction in 2008 Mobile Financial Service (MFS) has been widely
used for peer to peer (P2P) or personal to personal services (such as money transfer),
savings and facilitating banking transaction (M-Banking).
According to (GMSA, 2014), of the above types of MFS, mobile money transfer
(P2P transfer) has continue to dominate the global product mix in terms of volume
and value, accounting for about 72.8 % of the transaction while mobile money
payment (bill payment, merchant payment, bulk disbursement) contributed only 19.1
% (See Figure. 2.13).

30
Source (GMSA, 2014)
Figure 2.13: Global product index mix by volume
A study conducted in 2013 shows that most of people use MFS for P2P services (i.e
send/receive), the study showed that 88% of people were using mobile phone to
receive while 69% used it to send money. Bill payment was 6% only (Intermedia,
2013). The Proximity mobile payment has not reached wider acceptance as
compared to other MFS such mobile money transfer. According to the report, the
personal to business (P2B) or proximity capability of the mobile financial has not
been widely used (InterMedia, 2014)

31
2.9 Theory Review
In the field of Information Systems and Technology, many researchers have found
that information technology is underutilized in many organizations, causing huge
economic loss to their businesses. As a result, many technology acceptance theories
and models have been developed or used to study information technology acceptance
(Li, 2010).
These models include the Theory of Reasoned Action (Fishbein et al, 1975), the
Technology Acceptance Model (Davis, 1989), and extended TAM (Venkatesh and
Davis, 2000), the Unified Theory of Acceptance and Use of Technology (UTAUT)
(Venkatesh et al, 2003), the Motivational Model (Davis, et al,1992), the Theory of
Planned Behavior (Ajzen, 1991), the model combining TAM and the Theory of
Planned Behavior (Taylor and Todd, 1995), the Model of PC Utilization (Thompson,
et al, 1991), the Innovation Diffusion Theory (Rogers, 1995) and the Social
Cognitive Theory (Bandura, 1986).
According to Shi (2011), the most well-known theory and models in technology
adoption are the theory of Diffusion of Innovation (DoI), Technology Acceptance
Model (TAM) and Unified Theory of Acceptance and Use of Technology (UTAUT).
These models have been widely used and tested by various researchers and studies
concerning adoption of service related to mobile communication technology.
Each model has its limitations and in some cases they complement each other.
Various models related to information system and new technology has been reviewed
32
in order to arrive to have theatrical model that will explain the adoption of mobile
money payment. Theories stated are diffusion of innovation and technology
acceptance model (TAM).
2.9.1 Diffusion of Innovation (DoI) Theory
Rogers (1995) defined Diffusion of Innovations as ”the process by which an
innovation is communicated through certain channels over time among the members
of a social system”. The DoI has been used to study various innovations. Rogers
identifies five attributes of an innovation that influence its adoption and acceptance.
These attributes are relative advantage, complexity, compatibility, trialability and
observability. In this study, complexity can be problem for people especially those
with low level of education.
Relative advantage is the degree to which an innovation is perceived as better than
the idea it replaces (Rogers, 1995). Shi (2011) pointed out that relative advantage of
an innovation is closely associated with an individual perception of it. Whether a
user believes the innovation as advantageous is more important than whether an
innovation has objective advantage over the precedent idea. The DoI theory suggests
that the better the perceived relative advantage of an innovation, the more rapid its
rate of adoption will be. Increased performance, cheaper costs, increased social
standing, or even a wow factor may all contribute to the sense of relative advantage.
The same as in this study, If people sees that there is advantage of using mobile
phone to pay for their service the chance of adoption will increase.
33
Compatibility is the degree to which an innovation is perceived as being consistent
with the existing values, past experiences, and needs of potential adopters (Rogers,
1995). Technical compatibility refers to the level of compatibility between the task
being conducted and the technology being used (Shi, 2011).
Complexity is the degree to which an innovation is perceived as difficult to
understand and to use (Rogers, 1995). New ideas and services that are simpler to
understand are adopted more rapidly than innovations that require the adopter to
develop new skills and understandings. According to (Cooper, & Zmud, 1990) there
is a negative relationship between the complexity of a technology and its successful
implementation. In the case of mobile money payment, a higher level of task
complexity in service application would be inhibitors in success of the
implementation process.
There are technical issues in mobile money payment that can bring about complexity
in using the service. They can be categorized as network related issues such as time
out (session time out), handset related issue such as size of mobile phone screen and
phone keyboard as some phone has large screen with soft keys others have small
screen with hard key and technological related issues such as how you access the
payment menu (using USSD, SMS,STK or NFC ).
Trialability is the degree to which an innovation may be experimented with on a
limited basis (Rogers, 1995). The theory suggests that innovations that can be
experimented will, in general, be adopted more quickly than innovations that are not
trialable. This is due to the decreased uncertainty gained by experimenting.

34
Observability is the degree to which the results of an innovation are visible to others
(Rogers, 1995). The theory suggests that the easier it is for individuals to see the
results of an innovation, the more likely they are to adopt it.
2.9.2 Technology Acceptance Model (TAM)
TAM was developed based on theory of Reasoned Action (See Figure.214)
developed by Fishbein and Ajzen (1975) which states that an individual’s behavior
intentions determine his or her actual behavior. Behavior intention is in turn
determined by the individual’s attitude toward this behavior and subjective norms
with regard to the performance of this behavior (Fishbein & Ajzen, 1975).
(Source: Li, 2010)
Figure 2.14: The Theory of Reasoned Action
TAM was developed by Davis in 1989 and is known as TAM (1989). It was
developed to find what factors cause people to accept or reject the information
35
technology. In many technological adoption studies and researches, TAM has been
used as foundation block to develop further models (extended TAMs) to suite
different needs and situations but the structure and main assumptions of these models
remain the same as those of the original TAM.
The original TAM by Davis (1989) has two constructs: perceived usefulness (PU)
and perceived ease of use (PEOU). Davis (1989) defined perceived usefulness as
“the degree to which a person believes that using a particular system would enhance
his or her job performance”, this follows from the definition of the word useful:
"capable of being used advantageously." Davis explained further that a system high
in perceived use-fullness, in turn, is one for which a user believes in the existence of
a positive use-performance relationship. Perceived ease of use, in contrast, refers to
"the degree to which a person believes that using a particular system would be free of
effort. “This follows from the definition of "ease": "freedom from difficulty or great
effort.” (Davis, 1989).
(Source: Li, 2010)
Figure 2.15: The Technological Acceptance Model

36
In the Information Systems field, researchers have widely used the Technology
Acceptance Model to study the adoption of various technologies and TAM has
arguably become the most influential theory in the information and technology field.
Mallat, (2007) and other authors suggested other possible factors that may affect
adoption of mobile payment service such as transaction cost, network externalities,
security and trust (Mallat, 2007), Self-efficacy (Taylor & Todd, 1995).
2.9.3 Other construct considered
There are other variables which could influence mobile money payment adoption
that are not present in the TAM or any other model mentioned above and should be
considered. For example users incur a cost when effecting payment using mobile
phone, a parameter that could significantly influence usage. The transaction cost was
used to modify TAM by Lule et al (2012). This study will also take into account the
transaction cost. People may also be driven or forced to pay using mobile phone
because they did not have physical cash at the moment. Having no cash at the
moment of purchasing, convenience, awareness, service availability, network
reliability and quickness were included following a pilot survey where some
respondent said that they choose to pay using mobile money based on these factors.
2.9.4 Theoretical framework for this research
This study has extended TAM which has perceived usefulness (PU) and ease of use
(PEOU) and included construct used in other literatures to assess the adoption of
37
mobile money payment in Tanzania. Construct that were included are perceived
transaction cost (PTC), perceived security and trust (PST), perceived complexity
(PC), perceived relative advantage (PRA) and Perceived Service Quality (PSQ).
Convenience, awareness, service availability, network reliability and quickness were
also included and came with the following framework. Theoretical framework is
shown in Figure 2.16. Adoption of Mobile Money Payment a dependent variable
while constraint on the lest are independent variables
Perceive Ease of Use
Transaction Cost
Service Quality
Security and Trust
Relative Advantage
over cash
Adoption of Mobile Money Payment
Complexity
Convenience
Awareness
Service Availabilty
Network Reliabilty
Quicker
Safer
No cash at hand
Figure 2.16: Theoretical research framework

38
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This chapter discusses the research design and methodology used to accomplish the
study. It also discusses types of research design and which one is adopted in this
study and why adopted, it also explains the area of study, target population, sampling
and sampling techniques. It further discusses data collection method by exploring
general concepts and techniques before describing adopted data collection techniques
and tools.
The specific objectives of this study were to:-
1. To establish the extent of mobile money payment adoption in Tanzania;
2. To identify factors affecting adoption of mobile money payment in Tanzania;
3. To determine relationship between adoption of mobile money payment and the
identified factors.
3.2 Adopted research type
This study took a descriptive type of research. The selection of research type is due
to the nature of the research questions that were to be answered at the end of the
study. The study aimed at describing the state of mobile money payment adoption as
39
it exists at present. The other reason for this approach is that the study aimed at
determining the relationship between factors affecting mobile money payment
adoption [independent variables] and adoption of mobile money payment [a
dependent or outcome variable]. Some features of quantitative research had been
adopted to complement the descriptive research.
3.3 Adopted Research Design
As the name suggests, descriptive research design involves observing and describing
the behavior of a subject. When conducting a research descriptively designed,
researchers do not have control of variables they are describing rather they report as
they are. Descriptive type of research answers questions such as ‘what’, ‘who’,
‘when’ and ‘where’ and how associated with a particular research problem. It can be
conducted by interacting with participants (target population) through survey and
interviews in order to collect necessary information for the study or without
interacting with participants through data collection using existing records
(documentary review).
3.2 Methodology
This section of the dissertation answers two main questions, how were the data
collected or generated and how were then analyzed. This explains the target
population, sample design, data collection method and analysis.

40
3.4.1 Target population
The target population is the group of elements/individuals to which the researcher
wants to make inference (Fricker, 2009). The choice of study area has great influence
on the end results of any research. There must be a true representative sample of the
whole population in the study, that is, the results must be a true representation of
whole population.
In this study, Dar es Salaam was chosen as a study area. To ensure a good
representation of the people of Dar es Salaam, the area was divided into three
clusters in terms of three districts; namely, Temeke, Ilala and Kinondoni. The reason
for this choice was due to easiness in collecting the data required. Second, Dar es
Salaam was selected due to limited time and fund, which restricted the researcher not
to collect the data countrywide.
3.4.2 Sample Design
Sample design was done before the data collection. Kothari (2004) defines sample
design as a definite plan for obtaining a sample from a given population. It refers to
the technique or the procedure the researcher would adopt in selecting items for the
sample. This involve identification of target population, determining the size of the
sample and choosing a sampling method used for data collection based on the
adopted research design.

41
3.4.2.1 Sampling
Populations refers to all items in any field of inquiry. Due to time limitation and
other factors it is not practical to conduct a research using all items i.e the entire
population, instead, a researcher guided by scientific techniques (sampling) selects
few cases from a population known as sample to do his research. This research
utilized probability sampling technique (Simple Random). The technique was
adopted to ensure that every mobile phone user has equal chance in participating in
the study.
3.4.2.2 Sample size
Equation no. 3.1 was used to calculate the sample size. The sample size was
calculated with 95% degree of confidence.
(Source: Kothari ,2004)
Equation 3.1: Sample Size Calculation
Where
n: sample size
e: acceptable error (the precision) = 5% = 0.05
p: probability of success (0.5)

42
q : probability of failure (0.5)
z : standard variate at a given confidence level (1.96)
N= size of the targeted population
From the above equation the minimum sample required was 385.
3.4.3 Data Collection
Generally data can be collected from two sources which are primary sources and
secondary sources. Both primary and secondary data were collected and used in this
study. The primary data were randomly collected from mobile phone users residing
in Kinondoni, Ilala and Temeke districts through questionnaire. Data from MNOs
were collected using interview guided with a questionnaire. The questionnaires were
tested for their reliability and validity before being used. Secondary data were
collected or obtained through documentary review.
3.4.4 Validity and Reliability test
Before starting data collection and analysis, evaluation and testing of data collection
or measurement instrument is very important. Instruments can be questionnaire,
clinical testing tool etc. Validity and reliability are two fundamental elements in the
evaluation of a measurement instrument (Tavakol & Dennick, 2011).

43
2.4.4.1 Reliability test
Reliability is the degree of consistency with which an instrument measures the
attribute that is designed to measure. The most popular internal consistency
reliability estimate is given by Cronbach’s alpha. Cronbach's alpha reliability
coefficient normally ranges between 0 and 1. The closer the value of alpha is to 1 the
greater is the internal consistency. The value of 0.7 and above is acceptable. The
questionnaire was tested for reliability and the result is in Table 3.1
Table 3.1: Reliability test result
Reliability Statistics
Cronbach's N of Items
Alpha
.776 42
3.4.4.2 Validity test
Validity is concerned with the extent to which an instrument measures what is
intended to measure. To measure validity, the questionnaire was given to a number
of people/experts whom agreed that it measured the attributes it intended to measure.
3.4.5 Data analysis
The presentation, analysis and interpretation of the collected data were done with the
help of Statistical Package for Social Sciences (SPSS) and Microsoft Excel.
44
The first study objective sought to establish extent/level of mobile money payment
adoption in Tanzania. Descriptive statistics were used to establish the extent of
adoption of mobile money payment. The analysis established general adoption and
then went further on describing the adoption in terms of location, education and
occupation. The aim was to see whether education, occupation and location of
respondent had any effect on mobile money payment adoption.
The second study objective was to identify factors affecting adoption of mobile
money payment adoption in Tanzania. This objective was accomplished through
documentary review. The review of related research was done to find which
variables affected the adoption of mobile money payment. The variables were tested
against respondents to see which factors had more influence positively and
negatively. These factors were treated as independent variables and adoption as
dependent variable. Descriptive statistics were used to assess each factor against the
adoption of mobile money payment adoption
Multiple Regression analysis was used for objective number three in establishing the
relationship between the identified factors (independent variables) and mobile money
payment adoption (dependent variable). The following general multiple regression
equation no 3.2 was used.
(Source: Kothari ,2004)

Equation 3.2 General Multiple Regression Equation
45
Where:
= Dependent variable. In this case the adoption of mobile money payment
= Constant value or intercept
= Independent variable. In this case, factors affecting adoption of

mobile money payment.
= Regression coefficient: This represented independent contribution of
each independent variable to the prediction of the dependent
variable.
= Error term
46
CHAPTER FOUR
STUDY FINDINGS, ANALYSIS AND DISCUSSION
4.1 Introduction
This chapter is about the presentation, analysis and interpretations of the data using
Statistical Package for Social Science (SPSS) version 20 and MS Excel basing on the
stated objectives. Descriptive analysis that presents simple statistical results obtained
from the study using an instrument known as questionnaire is presented.
4.2 Demographic Information
Wyse ( 2012) defined Demographics as “characteristics of a population.
Characteristics such as race, ethnicity, gender, age, education, profession,
occupation, income level, and marital status, are all typical examples of
demographics that are used in surveys.” In this study gender, age, occupation and
education data were requested from respondents. The aim was to determine how the
above characteristics can in one way or another affect the adoption of mobile money
payment. Demographic data are summarized as follows.
4.2.1 Respondents Location
The study was conducted targeting the Dar es Salaam population. Majority of
respondents were from Temeke district [37.5%], Ilala [32.3%] and Kinondoni
[30.1%]. The summary is shown in Table 4.1.

47
Table 4.1: Summary of respondent’s location
N Percent
Temeke 202 37.5 %
Ilala 174 32.3 %
Kinondoni 162 30.1 %
Total 538 100.0 %
4.2.2 Respondent’s Occupation
With respect to occupation Table 4.2 indicates that a total of 60.8% of respondents
had a job (employment contributed 30 % followed by self-employment 19.9% and
entrepreneurship 10.8%). Student contributed 22.9% and unemployment 16.4%.
Table 4.3 indicates that majority of unemployed respondents were from Temeke
district (55.7%).
Table 4.2: Summary of respondent's occupation
Frequency Percent
Self Employed 107 19.9 %
Employed 162 30.1 %
Student 123 22.9%
Entrepreneur 58 10.8%
Unemployed 88 16.4%
Total 538 100.0%
48
Table 4.3: Summary of respondents in terms of location and employment
Occupation
Self Employed Student Entrepreneur Unemployed
Employed
Temeke 46.7% 29.0% 30.9% 31.0% 55.7%
Location Ilala 30.8% 36.4% 28.5% 39.7% 27.3%
Kinondoni 22.4% 34.6% 40.7% 29.3% 17.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
4.2.3 Respondent’s Education Level
The results show that 95.9% of all respondents had attended school at least standard
seven. See Table 4.4. The results of the survey also show that Temeke district
constitutes of 59.1 % of respondents who have not attended any school. See Table
4.5.
Table 4.4: Summary of respondent's education
N Percent
University Level 108 20.3 %
College Level 153 28.8 %
Secondary School 150 28.2 %
Primary School 98 18.5 %
Not Attended School 22 4.1 %
Total 531 100.0 %
49
Table 4.5: Summary of respondents in terms of education and location
University College Secondary Primary Not

Level Level School School Attended
School
Temeke 19.4% 26.1% 39.3% 67.3% 59.1%
Ilala 34.3% 40.5% 34.7% 17.3% 13.6%
Kinondoni 46.3% 33.3% 26.0% 15.3% 27.3%
100.0% 100.0% 100.0% 100.0% 100.0%
4.3 Availability of Mobile Money Payment Merchants
Different Mobile Network Operators (MNOs) were interviewed in guidance of a
questionnaire to provide information about availability and distribution of mobile
money payment merchants (Sellers that are registered to receive payment trough
mobile money) and also to know challenges facing the adoption of mobile money
payment. Only three MNOs responded. The Data are summarized in Table 4.6.
Table 4.6: Availability of Mobile Money Payment Merchants in Dar es Salaam
District
Temeke Ilala Kinondoni
MNO1 1799 1032 544
MNO2 3528 5358 5867
MNO3 152 152 152
Total Merchants 5477 6542 6563
Through interview with MNOs, the study has found out that some of them do not
have separate systems (platforms) that differentiate number assigned to a normal

50
mobile phone user and a mobile money merchant. For instance a merchant is
assigned normal number like (0754xxxxx…. Or 0652xxxxx). Lack of a separate
platform or system to differentiate a number for making calls and merchant number
for receiving payment has led to the following:
Reverse transaction: A case whereby some users after having paid the merchant for
the purchased goods they call to the customer care and claimed back the money
stating that they had send to wrong numbers. This demoralized some merchants and
makes most of them deny accepting payment through mobile money service.
Transaction charges as to normal P2P: The aim of P2B is to pursue people to use
electronic means of transaction and get rid of cash payment; therefore, there must be
some incentives to do so. Having using the same system or platform means the same
transaction cost for P2P applies also to P2B.
Balance/Float Limitation: As a result of using the same platform for normal mobile
money users and merchants there is a limit of which a merchant can receive mobile
money. Vodacom limits merchant up to Tsh 50millions (Vodacom Tanzania
Limited, 2014). This means that a merchant is restricted to receive a certain amount
of money per day. For merchant with large amount of sales per day is a challenge.
Blocking dormant number: Merchant numbers are for receiving payment and not
making calls and therefore they need not to be recharged. TCRA requires MNOs to
automatically block numbers that is not recharged for 90 days. The implementation
51
of this legal requirement has affected some merchants whose numbers have been
blocked.
Some MNOs have special “Lipa Namba” for merchants and are operating under
separate mobile money paying system and thus the above challenges.
4.4 Mobile Money Service (MMS) subscription
With respect to subscription to the Mobile Money Services, 96% of the respondents
are subscribed to one of the existing Mobile Network Operators (Vodacom, tiGO,
Airtel and Halotel with Vodacom and tiGO share the first place being subscribed by
38.7 % of the respondents. Airtel is the second with (21.9%), Zantel and Halotel
0.5% and 0.2% respectively. See Figure 4.1 and Table 4.7.
Figure 4.1: Summary of mobile money service subscription

52
Table 4.7: Summary of mobile financial service subscription in terms of MNO’s
Responses
N Percent
Mpesa 328 38.7%
Tigo Pesa 328 38.7%
Service Airtel
186 21.9%
Subscription Money
Eazy-Pesa 4 0.5%
Halopesa 2 0.2%
Total 848 100.0%
4.5 Extent of Mobile Money Payment
The first study objective was to determine the extent of mobile money payment. This
was accomplished by asking respondents if they were using their mobile phones to
pay for purchased goods in shops or market (Proximity or Close Payment).
Respondents were further asked on the extent of using the service. The results were
further analyzed based on location, education and occupation. The objective was to
see whether education, location and occupation have any contribution in the usage of
mobile phone to pay for the purchased goods.
The study also went further on asking respondents on the usage of mobile phone for
paying the remote services. Remote service that were asked were payment of utility
(water, electricity and gas), subscription payment for television programmes,
purchasing of airtime, purchasing of ringtone, payment of school fee, payment of
road licence and payment of tickets (for bus, airline or train) The comparison was
also made on the adoption in both proximity (close payment) and remote payment.
53
4.5.1 Proximity Mobile Money Payment
Proximity mobile money payment is the usage of mobile phone to pay for the
purchased goods at shops, supermarkets or markets. The buyer has to be at
merchant/seller physically. Analysis was done for general adoption and adoption in
terms of demographical information.
4.5.1.1 General Adoption
Figure 4.2 shows that only 15% of the respondents have used their mobile phone
(mobile money services) to pay for the purchased goods at shops or markets. This
15% is out of 96% who have subscribed to mobile money services (Refer Figure.
4.1).
Figure 4.2: Summary of Proximity Mobile Money Payment Adoption

54
Figure 4.3 shows the extent of usage of mobile money services to pay for the
purchased goods. Majority of respondents said that they sometimes used it. None of
them said they were always using the service. This also is well explained by Figure
4.4 which shows majority of respondents is at mean, which is three (3) i. e above the
average.
Figure 4.3: Summary of extent of proximity mobile money payment

55
Figure 4.4: Extent of proximity mobile money payment
4.5.1.2 Adoption in terms of education
Figure 4.5 shows that majority of respondents who had used their phones to do
proximity payment are elite people. Majority being people with university degree
(41%) (i.e. PhD, Masters, Postgraduates and First Degree) and lastly, people who
have never attended a school (1%).

56
Figure 4.5: Proximity Mobile Money payment adoptions in terms of education
4.5.1.3 Adoption in terms of occupation
Respondents who were found to be using their mobile phones to pay for the
purchased goods were analyzed against their occupation. The aim was to see how
occupation can affect the adoption of mobile money payment service. Figure 4.6
shows that majority of respondents were having employment (33% formal
employment, 24% entrepreneur and 23% self-employed); 4% were found to be
unemployed.
57
Figure 4.6: Proximity Mobile Money payment adoptions in terms of occupation
4.5.1.4 Adoption in terms of location
Figure 4.7 shows that 40% of all respondents who had used their mobile phones to
pay for purchased goods (Proximity payment) are from Kinondoni, 34% from Ilala
and 26 % from Temeke. Despite having higher number of respondents as compared
to other districts (Refer Figure. 4.1), results show that Temeke has the lowest number
of proximity mobile payment users. This result may suggest that education and
occupation level has an impact to the adoption of mobile money payment because the
result of this study has shown low level education and employment in Temeke as
compared to other district though other factors like availability of service may have
contributed (See Table 4.6). However, it is early to conclude the reason for low
58
adoption in Temeke is due to low education level because it has lower number of
merchants compared to other districts.
Figure 4.7: Proximity Mobile Money payment adoptions in terms of location
4.5.2 Remote Mobile Money Payment
Remote mobile money payment refers to payment to a remote merchant. A user
needs not to be physically present at the merchant. This can be done at any time.
Examples of such services are LUKU, DAWASCO etc.
As opposed to proximity mobile money payment, remote mobile money payment has
more customers. Figure 4.8 shows that 77% of respondents were using their mobile
phone to pay for remote services such as LUKU, School fees, Water payment etc.
Figure 4.9 show the distribution of the 77%..

59
Figure 4.8: Summary of Remote Mobile Money payment adoptions
Figure 4.9: Distribution Remote Mobile Money Payment Service Usage

60
4.6 Factors affecting adoption
The second objective was to determine factors affecting the adoption of mobile
money payment in Tanzania. Various related document (researches, journals and
publications) were reviewed to determine factors for adoption of any technology.
The factors were grouped into enabling and inhibiting factors. The factors formed the
research framework and were used to develop the data collection tool for testing. The
factors are independent variable while the adoption of mobile money payment
(proximity or close payment) is a dependent variable.
4.6.1 Enabling factors for mobile money payment adoption
According to the study, 15% of respondents had used their mobile phones to pay for
the purchased goods at shops or market (Refer Figure 4.2). These respondents were
asked for the reasons /factors that influenced or made them to use the service to pay
for the purchased goods at shops or markets. Different constructs /factors were used
to test against. The result for each of the factor is summarized below.
4.6.1.1 Quicker
In this work quicker means the time taken for the user to complete his/her payment
when using mobile phone as compared cash payment. When respondents were asked
if quicker was the factor that influenced or made them to use their mobile phones to
pay for the purchased goods at shops, majority agreed (See Figure 4.10). A total of
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65.2% (44.4% strongly agreed and 20.8% Agree) had agreed on the factor. Only
1.4% strongly disagreed, 22.2% disagreed and 11.1 % were neutral.
Figure 4.10: Summary of responses on quicker
4.6.1.2 Easier to use
According to Technology Acceptance Model (TAM), one of the factors that may
influence users to adopt a certain technology such as paying for the purchased goods
or service is how easy the technology or service is in this regard. In this work means
the easiness to use a mobile phone to pay for the purchased goods/service. Mobile
money payment is new as compared to physical cash payment and it requires some
skills to use it. This variable aimed at testing if easiness of use was the reason for
them to use the service.
Respondents were asked whether the “easier of use” of mobile money payment
could the factor that lured them into using it to pay for the purchased goods; 67.6%
62
agreed (28.2% strongly agreed and 39.4% agreed) and 21.1% disagreed (Figure
4.11).
Figure 4.11: Summary of easier to use
4.6.1.3 Safe
In this work, it means safe from robberies which could result of trading with physical
cash. Some case has been reported of people being killed or injured by robberies
because of walking with cash. 70.9% of the respondents reported that they used their
mobile phones to pay for the purchased goods because it was safe. Only 11.3%
disagreed (9.7% disagree and 1.4% strongly disagreed) that safety was not a factor
that influenced them to use mobile phone to pay for the purchased goods. Majority of
the respondents agreed (Figure 4.12).

63
Figure 4.12: Summary of safe to use mobile money payment
4.6.1.4 Advantage over cash payment
People are free to choose either paying using physical cash or mobile money. This
variable aimed at testing whether the decision to pay using mobile money payment
rather than physical cash was due to its advantages over physical cash.
Respondents were tested whether they preferred cash over cashless payment (in this
case mobile money payment). Result in figure 4.13 shows that 36.1% agreed that
there were advantages of mobile money payment over cash and that was a reason
that influenced them to opt to use mobile phone to pay for the purchased goods. Of
all the parameters this was the only one that scores less than 50%. In this regard,
majority of respondents either disagreed or did not have any comment.

64
Figure 4.13: Summary of advantages of mobile money payment over cash
payment
4.6.1.5 More convenient
In this question, majority agreed that it was more convenient to pay through mobile
phones. Figure 4.14 shows that 77.5 % (26.8 % strongly agreed and 50.7 % agreed)
of respondents agreed that it was more convenient to use mobile phones to pay for
the purchased goods. Only 12.7 % disagreed and 9.9 % were neutral.
65
Figure 4.14: Summary of response on more convenience
4.6.1.6 Did not have physical cash at the moment
Some people may opt to pay by using mobile money just because at that moment
they didn’t have cash at. This variable measures the preference between physical
cash or mobile money payment method.
This question aimed at testing whether the respondents had used mobile phones to
pay for the purchased goods because they had no cash at hand. The respondents were
divided on this case. Figure 4.15 show that, out of all respondents who had used
mobile phone to make payment, 48.3% agreed (25.0% strongly agreed and 23.3%
agreed) they did so because they did not have cash at hand. This is the same to those
respondents that disagreed, 48.3% (30.0% disagreed and 18.3% strongly disagreed)
66
that they used mobile phones to pay for the purchased goods, for them whether they
had or not had cash at hand they would still prefer paying using mobile phones.
Figure 4.15: Summary of adoption because of not have cash at hand
4.6.1.7 Summary and discussion for adoption factors
Respondents were asked why they opted to pay for the purchased goods using mobile
money payment. The summary of descriptive statistical analysis of their responses is
shown in Figure 4.16. The result shows that majority of respondents used their
mobile phone to pay for the purchased goods because it is more convenience, safer,
easier of use and quicker. Advantage over cash and not having cash at the moment of
purchasing did not show big effect as compared to other variables.

67
Figure 4.16: Summary of mean on each factor for adoption
4.6.2 Factors for no adoption
According to the study, 85% of respondents had not used their mobile phones to pay
for the purchased goods at shops or market (Refer figure 4.2). These respondents
were asked for the reasons /factors that inhibited or made them not using the service
to pay for the purchased goods at shops or markets. Different constructs /factors were
used test against the no using respondents. The result for each of the factor is
summarized below.
4.6.2.1 Awareness
A service may be available but people not aware of it. Awareness of the availability
of service is very important in its usage. This variable test whether awareness
contributes to non-usage of the service.

68
The result in Figure 4.17 shows that 30% (19.7% + 10.3%) of the respondents said
that they did not use their mobile phones to pay for the purchased goods because they
were not aware of the service. The 40.4% (29.4% + 11.0 %) of the respondents
disagreed that unawareness was not the major reason for them not choosing that
method of payment method.
Figure 4.17: Summary of response on unawareness
4.6.2.2 Service availability
Availability of service in this case refers to the availability of mobile money payment
merchants or shops that receive payment through mobile phone. People may have
information about the service but it could not be available in the area. This may be
the reason for not using the service.

69
When asked about whether the service availability was the reason for them not using
their mobile phones to pay for the purchased goods, majority of respondents agreed.
As per Figure 4.18, 58.4% of the respondents agreed, while 26.3% disagreed and
only 15.5% of the respondents were neutral. This means that 58.4% of the
respondents were not confident on the availability of service.
Figure 4.18: Summary response on service availability
4.6.2.3 Transaction cost
In MFS, transaction cost or fee is the amount of money charged to the user of the
service when performing a transaction. Different MNO charges different amount.
When asked whether the transaction cost incurred when they used their mobile
phones to pay for the purchased goods had caused them not to use the services,
57.9% agreed (Strongly agreed + Agreed) i.e the transaction was a concern for them.
31.2% disagreed while 10.9% were neutral. The result is shown in Figure 4.19.
70
Figure 4.19: Summary of transaction cost
4.6.2.4 Complex in use
Unlike credit card, where the user just swipe his card and enters his password,
payment through mobile phone use Unstructured Supplementary Service Data
(USSD), whereby the user type a number (such as *150*00# or *150*01#) and
receives a menu where he/she chooses to pay and enter the amount. Some phone
screens are small, some keypads are hard to press and this may in one way or another
hinder the adoption. When asked whether the complexity in using the mobile service
is the reason for them not to opt to pay for purchased goods using mobile phones,
58% of them agreed, 23% disagree and 18.9% were neutral (see figure 4.20).
71
Figure 4.20: Summary of complex in use
4.6.2.5 Service quality
Quality of service (QoS) is the overall performance of mobile money payment
service as viewed by user. QoS can be contributed by how long it takes complete a
transaction, completed transaction success rate, number of unsuccessful transaction.
When asked whether, service quality was the factor that makes them not to choose to
pay the purchased goods using, majority of the respondents were neutral (43.2 %),
followed by 32.9 % who disagreed and 23.9 % who agreed. The result shows that,
users don’t see service quality as an inhibiting factor for adoption of the service. The
summary is as shown in Figure 4.21.

72
Figure 4.21: Summary of service quality
4.6.2.6 No trust on security
This refers to security or fraud in mobile money service. It may hinder people from
exposing their money in to the mobile money ecosystem. This issue concern both
merchant and users. Cases have been reported of some being deceived and their
money stolen through a mobile money service. People have been questioning the
security in mobile money service. The study wanted to know to what extent this has
affected the adoption of mobile money. Figure 4.22 shows that 37.2 % of
respondents agreed that they did not use their phone to pay for the purchased goods
because they did not trust security mobile money service and 32.6 % disagreed.
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Figure 4.22: Summary of no trust on security
4.6.2.7 Mobile Network reliability
The mobile money payment is the service provided by the Mobile Network
Operators (MNO). The reliability of the mobile service depends on the reliability of
mobile communication service, if the mobile communication services are off, so are
the mobile money services. Respondents were asked if the network reliability is the
reason for them not to choose paying their purchased goods using the mobile phone.
The figure 4.23 shows that 28.2% of the respondents agreed and 26.3% disagreed.
Majority of respondents were neutral on this factor.

74
Figure 4.23: Summary response on Mobile Network Reliability
4.6.2.8 Summary of results for not using mobile phone to pay for the purchased
goods
Respondents were asked why they did not use their mobile phones to pay for the
purchased goods. The summary of descriptive statistical analysis of their responses is
shown in Figure 4.24. The result shows that majority of respondents did not use their
mobile phones to pay for the purchased goods because the service was not available
in their areas, transaction cost and complex in use.

75
Figure 4.24: Summary of inhibiting factor
4.7 Relationship between Dependent Variable and Independent Variable
The third study objective was to establish a relationship between adoption of mobile
money payment and the identified factors. Adoption of mobile money payment was a
dependent variable i.e depending on quickness, easier of use, safety, advantage over
cash, convenience, having or not having cash at hand, awareness, service availability,
transaction cost, complexity in use, service quality, trust and security and mobile
network reliability. The objective was to establish the contribution of each factor to
the adoption of mobile money payment.
The relationship of these factors and the adoption was analyzed using Multiple
Regression to establish how each factor significantly contributes to the adoption of
the mobile money payment method.

76
4.7.1 Model Summary
The model summary is presented in Table 4.7. This table provides the multiple
correlation coefficient R, R2, adjusted R2, and the standard error of the estimate,
which can be used to determine how well a regression model fits the data: R is a
measure of the quality of the prediction of the dependent variable; in this case,
mobile money payment adoption. A value of 0.999 indicates a good level of
prediction.
Table 4.7: Multiple Regression Model Summary
Model Summary
Model R R Square Adjusted R Std. Error of
Square the Estimate
1 .999a .998 .998 .788

a. Predictors: (Constant), I did not have cash, No such a
service in our area, Quicker, Service/Network Reliability,
Complex in use, Not aware if it possible, No trust on security,
Transaction cost, Service quality, It has advantage over cash
payment, More convenient, Easier to use
The F-ratio in the ANOVA table (Table 4.8) tests whether the overall regression
model is a good fit for the data. The table shows that the independent variables were
statistically significantly to predict the dependent variable, F (11, 496) = 0.621, p <
.0005 (i.e., the regression model is a good fit of the data).

77
Table 4.8: ANOVA Table
Model Sum of df Mean F Sig.

Squares Square
Regression 177113.781 11 16101.253 25935.507 .000b
1 Residual 307.926 496 .621
Total 177421.707 507
a. Dependent Variable: Have ever used your phone to pay for the purchased
Goods?
b. Predictors: (Constant), I did not have cash, No such a service in our area,
Quicker, Service/Network Reliability, Complex in use, Not aware if it possible,
No trust on security, Transaction cost, Service quality, It has advantage over cash
payment, More convenient
4.7.2 Statistical significance of the independent variables
Statistical significance of each of the independent variables can be tested by looking
at the Sig column. This tests whether the unstandardized (or standardized)
coefficients are equal to 0 (zero) in the population. If p < .05, it can be concluded that
the coefficients are statistically significantly different to 0 (zero). The t-value and
corresponding p-value are located in the "t" and "Sig." columns, respectively, as
highlighted below:
78
Table 4.9: Summary of statistical significance of the independent variable
Coefficients
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
-
(Constant) -94.020 .227 .000
414.462
Awareness .185 .036 .318 5.138 .000
Service Availability .170 .035 .293 4.824 .000
Transaction cost .077 .049 .133 1.592 .112
Easier to use .084 .042 .143 1.969 .050
Service quality .238 .054 .408 4.379 .000
1
No trust on security -.040 .044 -.069 -.921 .357
Network Reliability .318 .043 .544 7.440 .000
Quicker -.047 .111 -.071 -.425 .671
advantage over cash
.272 .109 .406 2.493 .013
payment
More convenient .784 .115 1.184 6.828 .000
Not have cash at hand .003 .009 .004 .323 .747
a. Dependent Variable: Have ever used your phone to pay for the purchased Goods?
From the Table 4.9, predictor variables transaction cost (p-value of (0.112), no trust
in security (p-value of 0.357), quicker (0.671) and no cash at hand (p-value of 0.747)
are not statistically significant (p>0.05) and their contribution to the prediction of
adoption of mobile money payment is not significant and therefore cannot be
included in the regression. The model suggest that Awareness, Service Availability,
Complex in use, Service Quality, Network reliability, Advantage over Cash, Easier
to use and Convenience are statistically significant and their contribution to the
adoption of mobile money payment cannot be ignored.

79
Equation 4.1 : General Multiple Regression Equation
Awareness X1
Service Availability X2
Easier to use X3
Service quality X4
Network Reliability X5
Advantage over cash payment X6
More convenient X7
Y = -94.02 + 0.185 (X1) + 0.17(X2) + 0.084(x3) +0.238(X4) + 0.318

(X5) +0.272 (X6) + 0.784(X7) + 0.788
What the Multiple Regression results tells is that mobile money payment adoption
increase as awareness increase, as services becomes more available, as the services
becomes more easier to use, as the service quality is ensured, as network becomes
more reliable, as customers see the advantage of cashless over cash payment and as
customer feel convenience.

80
CHAPTER FIVE
CONCLUSION AND RECOMMENDATION
5.1 Introduction
The purpose of the study was to assess factors affecting adoption of mobile money
payment in Tanzania. A sample of 539 people from Temeke (202), Kinondoni (162)
and Ilala (172) was used. The study was successful and has met its set objectives.
This chapter provides a summary of the study findings, conclusions and
recommendations. It further points out what were the limitations to the study and
through them suggests areas for further research.
5.2 Summary of Findings and Conclusion
The first objective of the study was to establish the extent of mobile money payment
adoption in Tanzania. The study found that though many people (96%) had
subscribed to mobile money services and were using it for various transactions such
as to send and to receive money, paying bills, schools fees, purchasing ringtone,
paying television subscription service, buying ticket and purchasing airtime. The
study found that the usage of mobile phones to pay for the purchased goods
(proximity P2B) is very low as compared to P2P (mobile money transfer) and remote
mobile money payment (which is 77%). Only 15% were found using their mobile
phone to pay for the purchased goods. This shows that there is a room for new
81
revenue stream for mobile operators and government if necessary action to address
the issues unveiled in this study are taken as recommended.
The second objective of the study was to identify factors affecting adoption of
mobile money payment. The factors were identified through documentary review and
formed variables for the research. Identified factors were tested by asking users and
MNO’s so as to establish the main factors. The study shows that though there are
many factors but complexity in use, service availability, complex in use, transaction
cost, easier of use, safer, convenience and quicker are main factors affecting adoption
of mobile money payment.
The third objective was to establish relationship between identified factors and
adoption. The study has found that service availability (merchants), easier to use of
the service, network reliability, service quality, convenience and advantage over cash
payment had a relationship and are significantly contribute to the mobile money
payment adoption. The issue of security though seems not to qualify to the Multiple
Regression model, its impact to the adoption of mobile money payment cannot be
undermined as many studies have indicated that it has impact to the adoption. Sayid,
et al,( 2012) in their study to on investigating Mobile Money Acceptance in Somalia
found that security has a positive impact to the adoption of mobile money in
Somalia.
The study has also found that mobile money payment is not well structured to give
confidence to merchant to use to it in the business transaction. Issues such as
transaction cost, possibilities for reverse transaction and limitation transaction

82
amount as reported by MNOs discourages shoppers (merchants) and opt to receive
cash rather than mobile money.
Due to time limitation, the study was conducted in Dar es Salaam only, therefore the
conclusion of this study may not apply to the whole country because Dar es Salaam
does not necessarily represent mobile communication users in Tanzania; however,
the study can be extended to the entire country by other researchers by utilizing
methodology and tools used in this study.
5.3 Recommendations
Based on the study findings, the following are recommended for improvement:
5.3.1 Employment of contactless technology rather than USSD code
Currently, people use the Unstructured Supplementary Service Data (USSD) to
access the payment menu in their mobile phone which is a cumbersome. This brings
complexity in using the service. I recommend to operators start to utilizing the Near
Field Communication. Though most of phones do not have NFC capability
(International Telecommunication Union, 2013) but this can be overcome by the use
of NFC stickers (Jussila, 2014) which can be glued at the back of any mobile phone
handset. This address factors such as complexity, network reliability as the mobile
phone will be communicating with a nearby PoS.
With NFC a handset can be used as a credit card by just putting it near the merchant
PoS and manage transaction.

83
5.3.2 Increasing number of mobile money merchants countrywide
Service availability was one of the factors that have significant contribution to the
adoption. Mobile operators are recommended to increase number of merchants that
receive mobile money payment because more that 50% of respondents agreed that
they did use mobile phone to pay for the purchased service because the service is not
available.
5.3.3 Increase awareness of mobile money payment
Awareness is one of the factors that contribute to the adoption of mobile money
payment as shown in the Multiple Regression model. Service providers should put
more effort on publicizing the service. The Government should also take charge in
educating people about the advantages of electronic money payment (like mobile
money payment) over cash payment
5.4 Limitations of the Study
Every study, no matter how well is conducted, has limitations. Simon & Goes (2013)
defined research limitations as matters and occurrences that arise in a study which
are out of the researcher's control. They limit the extent to which the study could go.
Study limitation may affect the end results or even the conclusion that can be drawn.
Study limitations if careful pointed out they give opportunities for further research
study in the same or different area. Like many other researches, this one also has
some limitations.
84
The first limitation was the study area. This study was conducted only in Dar es
Salaam. Mobile Financial Service is spread all over the country and thus many
people in the country can use the service to pay for the purchased goods. With Dar es
Salaam as the only study area, one cannot apply its findings to the whole of
Tanzania. The study did not cover other areas due to financial constraints.
There are three key stakeholders that were involved in mobile money payment:
MNOs as service providers, Merchants/Sellers and Users/ buyers. The study asked
MNOs and users. The adoption may also be affected by merchants unwilling to
accept mobile money payment. This was revealed by service providers as one of the
factors for low uptake of proximity mobile money payment. Financial constraint and
time was a hindrance to have opinion from merchants.
5.5 Suggestions for Further Research
This study has given out opportunities for further research as Mobile Financial
Service is very broad. The similar study can be done by expanding to other areas and
also take into consideration the opinions of merchants. Other researchers can conduct
a qualitative research on the same subject and same study area and compare the
results. Further study can be done on the use of Near Field Communication to
facilitate the use of USSD code to access the payment menu for proximity or close
payment
85
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APPENDICES
APPENDIX I:
QUESTIONNAIRE TO MOBILE PHONE USERS
Questionnaire to Mobile Phone Users Questionnaire

Number…..
Dear Respondent
I am a student at the College of Engineering and Technology (CoET), University of

Dar es Salaam, undertaking Master of Engineering Management (Project
Management).
I’m doing a research titled “Assessing Factors affecting adoption of mobile money
payment in Tanzania”. The aim of this study is to establish enabling and inhibiting
factors for mobile money payment and how does they relate to mobile money
payment adoption as alternative to cash payment.
You have been recognized being as a key and important contributor to my study.
Your answers will help the Government and Telecom operators to take appropriate
action on promoting the use of mobile phone as a payment method and get away with
cash.
Thank you for agreeing to take part in this very important research. Today I will be
gaining your thoughts and opinions so that you will be enjoying the service
tomorrow. This survey should take 4-5 minutes to complete.
Be assured that information collected in this questionnaire will be used sorely for
academic purposes only and will be kept in the strictest confidential.
Definition of key Terms
Remote payment services are those services that someone does not need to be
Physically at the Merchant or Point of Sales (Example payment of Luku, DSTV,
Azam, Dwasco etc )
96
SECTION A: RESPONDENT PROFILE

Number Question
Q1 (Tick One Box)
Gender:
Male Female
Q2 Age (Tick One Box)
0 - 18 61 and above
19 –35
36 – 60
Q3 Highest education level currently attained (Tick One Box)
PHD Certificate
Masters Form Six
Postgraduate Diploma Form Four
First Degree Standard Seven
Advanced Diploma Not attended school
Diploma
Q4 Occupation (Tick One Box)
Self Employed Student
Employed Entrepreneur
Unemployed
Q5 Location: (Tick One Box)
Temeke District
Ilala District
Kinondoni District
97
SECTION B : MOBILE MONEY PAYMENT ADOPTION AND FACTORS

Number Question
Q6 How Many Line (Simcard) do you have (Tick ONLY One Box)
1
2
3
4
5 \
6
Q7 Which Company are you connected? (Put a tick inside the box, you
choose more than one company)
Q7A Vodacom Q8E Zantel
Q7B Airtel Q8F TTCL
Q7C Tigo Q8G Halotel
Q7D Smile Q8H Spice Net
Q8 Have you subscribed to Mobile Money Service or Mobile Financial

Services (e.g. Mpesa, Eazy-Pesa, Tigo Pesa)?
(Put the tick in one of the box)
YES NO
If NO Please go straight to question Q20 and Finish Filling the

questionnaire
If YES Please proceed with Q9 to Q19
Q9 Which Mobile Money Service have you subscribed (Mpesa, Tigo Pesa,
Airtel Money)?
(Put a tick inside the box, you may choose more than one service)
Q9A Mpesa Q9C Airtel Money
Q9B Tigo Pesa Q9D Eazy-Pesa
Q9E Halopesa
98
Section B2 Factors Affecting Adoption of Mobile Money Payment in Tanzania

Num Question
ber
Q10 (This question refers to the Use of Mobile Phone to pay a
Shopkeeper/Seller/Merchant for ANY purchased goods (Example Rice,
Kerosene, Beans, Meat, Sugar, Hardware, Clothes e.t.c))
Have you ever used your mobile phone to pay for the purchased goods at a
shop or market? (Example Rice, Kerosene, Beans, Meat, Sugar, Hardware,
Clothes e.t.c).
(Put a tick in ONLY ONE box)
YES NO
If NO please answer Q11 (Then Skip Q12, Q13 and Q14 and Proceed)
If YES please Skip Q11 and go straight to Q12 and Proceed
Q11 (This question tries to find the reason as to why you have NOT USED the
Mobile Money Service to pay Shopkeeper/Seller/Merchant for ANY
Purchased Goods Example Rice, Kerosene, Beans, Meat, Sugar,
Hardware, Clothes e.t.c)
Why have you not used your mobile phone to pay for the purchased goods at
a shop or market?
(Answer all Questions)
Strongly Somewhat Neither Agree Somewhat
Agree Agree nor Disagree Disagree
Q11A Not aware if it is possible
Q11B No such a service in our
area
Q11C Transaction cost
Q11D Complex in use
Q11E Service quality
Q11F No trust on security
Q11G Service reliability
Q12 (This question tries to find the reason as to why you have USED the Mobile
Money Service to pay Shopkeeper/Seller/Merchant for ANY Purchased
Goods Example Rice, Kerosene, Beans, Meat, Sugar, Hardware, Clothes
e.t.c)
Why did you choose to pay Using your Mobile Money Service and not Cash?
(Answer all questions by putting a TICK inside ONE Box ).
99
Strongly Somewhat Neither Somewhat Disagree

Agree Agree Agree Disagree
nor
Disagree
Q12A Quicker
Q12B Easier to
use
Q12C Safer
(Safety)
Q12D It has
advantage
over cash
payment
Q12E More
convenient
(24/7
Access
from
anywhere
and
Anytime)
Q11H I did not
have cash
Q13 This questions tries to find what EXTENT have you used the Mobile
Money Service to pay Shopkeeper/Seller/Merchant for ANY Purchased
Goods Example Rice, Kerosene, Beans, Meat, Sugar, Hardware, Clothes
e.t.c)
Always Often Sometime
Q13 To what extent have you you’re your Mobile
Money Service to Payment for any purchased
goods at a shop, market e.t.c eg. Sugar, Rice,
Meat, Cooking Oil, Kerosene, hardware e.t.c)
Q14 Which Challenges did you face when Paying for goods you purchased at the
shop (e.g Rice, sugar, cooking oil, hardware) using your Mobile Phone. (Put
a tick inside the box, you May Choose more than one item)
Q14A Network Unreliability

Q14B No Challenges
Q14C The Seller not accept Mobile Money payment
Q14C Others (Please mention them below)
Q15 Have you ever used your Mobile Phone to pay any Remote Services
(Example School fees, Electricity, Water, Gas, Ringtone, Airtime, Zuku,
Startimes, Ting, DSTV, Azam, Road Licence, Insurance, DAWASCO, e.t.c)?
(Put a tick inside ONE box)
YES NO
100
If the answer is NO please answer question no Q16 (Then Skip Q17 and Q18
and Proceed)
If the answer is YES please SKIP Q16 proceed to answer question no Q17
Q16 If NO why? (Put a tick inside the box, Please answer all questions)
Strongly Somewhat Neither Agree Somewhat
Agree Agree nor Disagree Disagree
Q16A Not aware if it is possible
Q16B Transaction cost
Q16C Complex in use
Q16D Service quality
Q16E No trust on security
Q16F I have never have that
responsibility
Q17 If YES, Why did you choose to pay through a Mobile Phone to pay any
Remote Services (Example School fees, Electricity, Water, Gas, Ringtone,
Airtime, Zuku, Startimes, Ting, DSTV, Azam, Road Licence, Insurance,
DAWASCO, e.t.c) (Please Answer ALL Questions)
Strongly Somewhat Neither Somewhat

Agree Agree Agree nor Disagree
Disagree
Q17A Quicker (Save Time)
Q17B Easier to use
Q17C Safer (Safety)
Q17D It has advantage over cash
payment
Q17E More convenient (Anywhere and
anytime)
Q18 To What EXTENT have you used your Mobile Money Service to pay any
Remote Services (Example School fees, Electricity, Water, Gas, Ringtone,
Airtime, Zuku, Startimes, Ting, DSTV, Azam, Road Licence, Insurance,
DAWASCO, e.t.c)? (ANSWER ALL QUESTIONS By Putting a TICK
inside one box)
Always Often Sometimes
Q18A Payment of Utility ( e.g Water,
Electricity or Gas
Q18B Subscription Payment to any of
TV decoder service (Example
Zuku, Azam, Zuku, Ting,
StarTimes, Continental)
Q18C Purchasing of Airtime
101
Q18D Purchasing of Ringtone

Q18E Payment of School Fee
Q18F Payment of Road Licence to
TRA
Q18G Paying for Ticket ( Air ticket,
Bus Ticket of Train Ticket)
Q19 How often use the following services
Always Often Sometimes Rarely
Q19A Transfer Money (To a friend, relative
e.t.c)
Q19B Receive Money (From a friend,
relative e.t.c)
Q20 Why have you not subscribed to Mobile Money Service? (Put a tick inside
the box, you choose more than one box)
Q20A Not aware of the service

Q20B My Company Does Not Provide that service
Q20C Not interested
Q20D Any Other reason
……………………..

Factors Affecting Mobile Money Payment in Tanzania

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ASSESSING FACTORS AFFECTING ADOPTION OF MOBILE

MONEY PAYMENT IN TANZANIA

MEM (Master of Engineering Management) Dissertation

A Dissertation Submitted in Partial Fulfillment of the Requirements for the

University of Dar es Salaam

The University of Dar es Salaam a dissertation titled: Assessing factors affecting

adoption of mobile money payment in Tanzania, in partial fulfillment of the

requirements for the degree of Master of Engineering Management of the University

Dr. Victoria Mahabi

similar or any other degree award.

on intellectual property. It may not be reproduced by any means, in full or in part,

scholarly review or discourse with an acknowledgement, without the written

the University of Dar es Salaam.

AFI Alliance for Financial Inclusion

ATM Automatic Teller Machine

BOT Bank of Tanzania

C2B Consumer to Business

EFT Electronic Funds Transfer

EPS Electronic Payment System

DoI Diffusion of Innovation

ITU International Telecommunication Union

MFS Mobile Financial Services

MMP Mobile Money Payment

MMS Mobile Money Services

MNOs Mobile Network Operators

MoU Memorandum of Understanding

NFC Near Field Communication

P2B Personal to Business

P2P Personal to Personal or Peer to Peer

PEOU Perceived Ease of Use

PDA Personal Digital Assistance

POP Point of Presence

POS Point of Sales

PRA Perceived Relative Advantage

PSQ Perceived Service Quality

PST Perceived Security and Trust

PTC Perceived Transaction Cost

SIM Subscriber Identity Module

STK SIM Tool Kit

TAM Technology Acceptance Model

TCRA Tanzania Communications Regulatory Authority

TPF Tanzania Police Force

TTMS Telecommunication Traffic Monitoring System

USSD Unstructured Supplementary Service Data

in the Multiple regression model.

and increase number of MMP merchants

Declaration and Copyright ...........................................................................................ii

Table of Contents ......................................................................................................viii

List of Tables............................................................................................................. xiv

List of Figures ............................................................................................................ xv

List of Equations ......................................................................................................xvii

CHAPTER ONE : INTRODUCTION ..................................................................... 1

1.1 General Introduction ..................................................................................... 1

1.2 Statement of Problem .................................................................................... 3

1.3 Research Objectives ...................................................................................... 4

1.3.1 Main Objective .............................................................................................. 4

1.3.2 Specific Objectives........................................................................................ 4

1.4 Research Questions ....................................................................................... 4

1.5 Significance of the study ............................................................................... 5

1.5.1 Government ................................................................................................... 5

1.5.3 Telecom operators. ........................................................................................ 6

1.6 Scope of the study ......................................................................................... 6

CHAPTER TWO : LITERATURE REVIEW ........................................................ 7

2.1 Introduction ................................................................................................... 7