I support the shift towards a cashless economy, and I have researched and written about the wider digital economy. But the government’s new mandatory electronic-payments order, which took effect on July 1, 2026, deserves close scrutiny.
The order requires electronic payment for specified transactions, including hotel and restaurant bills, transport fares and property transactions. It raises a central question: should the state compel people to pay digitally, or should it make digital payments the easy and attractive choice?
For many person-to-business transactions, from rent to accommodation, food and beverages, a nudge may work better than a mandate. The wider debate also extends to online tax services.
In economics, the law can itself supply criminals. That is why I have argued against criminalising people as “rogues and vagabonds”: poorly designed laws can manufacture unnecessary offenders. In Tanzania, failing to demand or report the denial of a fiscal receipt is already an offence. In an economy where much work and trade remains informal, strict rules can turn many ordinary people into offenders.
A large number of convictions could overcrowd detention facilities and require the state to spend more on enforcement, prosecution and imprisonment. This is partly why economics has extended into fields such as the economics of crime, law and economics, and behavioural economics: to get closer to the best practical outcome. A government can pass any law it chooses, but a law does not guarantee compliance. When people do not comply, the state bears the cost of enforcement.
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A behavioural approach can reduce the unnecessary problems that a law may create. If Tanzania wants to become cashless, it needs a nudge, not simply a law. The Bank of Tanzania has taken important steps to support electronic payments and lower their direct costs. Yet many people still withdraw cash.
FinScope Tanzania 2023 found that 39 per cent of Tanzanians knew about mobile-money merchant-payment services, but only 13 per cent had used them in the previous month. Lipa Namba was the most commonly used merchant-payment channel. The gap between awareness and regular use is precisely where a better nudge is needed.
Some people also use Lipa Namba to withdraw money because it can be cheaper than using an agent number, a point previously noted by this publication. Some commercial banks and microfinance institutions have adopted mobile-money-friendly channels with lower charges than those of some telecommunications companies. These are encouraging developments, but the broader cost problem remains.
A better deal
Digital money relies on reliable identity. It is therefore positive that more people are obtaining national identification numbers: FinScope Tanzania 2023 found that the share of adults with a national identification number rose from 10 per cent in 2017 to 57 per cent in 2023. Other initiatives also move the country towards a cashless economy.
Even so, mobile-money costs, especially for person-to-merchant payments, remain a barrier. The same FinScope study found that only four in ten mobile-money customers considered charges reasonable, and identified high costs as a key concern, especially for lower-income users in rural areas.
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The problem can be greater when customers pay merchants using a different network, for example when a Mixx by Yas customer pays an M-Pesa merchant, as The Chanzo has reported. Unlike cash-out and money-transfer charges, these costs are not always displayed as clearly on public tariff charts.
To avoid such difficulties, some business owners feel they need more than one Lipa Namba. Tanzania has several telecommunications companies offering the service, meaning a merchant may need several codes and phones. For a small enterprise, that is an unreasonable burden.
Banking provides a useful lesson. Card networks such as Visa and Mastercard made it possible to pay across different banks. Mobile money has some interoperability, and the Tanzania Instant Payments System is designed to make transfers across banks and non-bank providers more efficient. But the customer experience still needs to become simpler.
A merchant should have one Lipa Namba that works smoothly for every customer, without an extra charge because the customer uses another provider. That would cut costs and make digital payments more convenient.
Design for real users
I have proposed making Lipa Namba more accessible to merchants and small-business owners, an idea that has since been discussed during the 2026/27 budget process. I also proposed that a person’s mobile-money record should serve as security for government loans, with borrowers assessed individually rather than only through groups. This approach has been introduced, although it still needs improvement before it can work fully.
These are only some of the available nudges. Others could bring even micro-business owners into mobile money without forcing people to pay through a particular channel. Cash remains in use in some government-payment settings, including ferries and bus terminals.
A card may work for a regular ferry user, such as a Kigamboni resident, but less so for an occasional visitor. For a fare of less than Sh500, paying by mobile money is difficult to justify if fees are high or the process is inconvenient.
These issues deserve serious attention. They offer a chance both to spur innovation in the digital economy and to design better nudges, rather than impose a mandatory system that will be costly to enforce. Will officers visit business premises to check whether customers are paying digitally? And would deploying officers to police payment choices be worthwhile?
Tanzania should continue making mobile money cheaper, clearer and more convenient. Once that happens, people will have a reason to use it to pay for goods and services. That is the nudge a truly cashless economy needs.
Francis Nyonzo is a Fulbright Alumnus, economist and theorist. He can be reached at francisnyonzo@gmail.com. The opinions expressed here are the writer’s own and do not necessarily reflect those of The Chanzo. If you are interested in publishing in this space, please contact our editors at editor@thechanzo.com.
