By Irene Rwegalulira, Director of Global Markets, Absa Bank Tanzania
The recent launch of the Absa Africa Financial Markets Index 2025 (AFMI) in Dar es Salaam provided an important opportunity to reflect on Tanzania’s progress in developing its financial markets — and to assess where further reforms can accelerate growth.
For nine years, the AFMI has become one of Africa’s most respected tools for evaluating financial market development across the continent. Beyond ranking countries, the Index offers policymakers, regulators and financial institutions a data-driven framework to understand what is working well, where gaps remain, and which reforms can deliver the greatest impact.
The 2025 report shows that Tanzania continues to move forward steadily. While important foundations are firmly in place, the findings also highlight opportunities to deepen and broaden the market further.
A Strong Foundation of Stability and Transparency
One of the most encouraging findings in this year’s report is Tanzania’s continued strength in macroeconomic stability. The country has benefited from steady and predictable monetary policy, low and stable inflation, and increasingly transparent communication from policymakers.
These elements are critical in building investor confidence. Stability reduces uncertainty, supports long-term planning, and creates a reliable environment for both businesses and households.
The report also reflects ongoing improvements in market infrastructure and the regulatory framework. Efforts to strengthen governance, align regulatory standards with international best practice, and enhance transparency across key segments of the financial system are beginning to yield measurable results.
This progress is not accidental. It reflects sustained commitment from policymakers and regulators to build a credible, resilient and investable financial ecosystem.
Growing Market Depth and Product Diversification
The AFMI 2025 further highlights gradual but meaningful advances in market depth. Tanzania’s financial markets are becoming more diversified, with a broader range of instruments and increased use of capital market solutions.
While bank financing remains dominant, the expanding role of bonds, structured products and risk management tools signals a shift toward a more balanced financial system.
From a global markets perspective, these developments are essential. Deeper markets enhance liquidity, improve price discovery and reduce concentration risk. Over time, they can also lower the cost of capital for both government and the private sector — freeing up resources for productive investment and sustainable economic growth.
Areas Requiring Greater Focus
Despite steady progress, the report also identifies areas where further reform and commitment are needed.
1. Low Participation from Local Institutional Investors
Pension funds and other long-term institutional investors play a critical role in deepening domestic capital markets. Compared to some peer markets, Tanzania still has room to expand institutional participation. Increasing their involvement would provide a more stable and predictable source of local capital, reducing reliance on external funding.
2. Strengthening Legal and Institutional Frameworks
Clear legal frameworks and effective enforcement mechanisms — particularly around financial contracts and insolvency processes — are essential for investor confidence. These are not merely technical reforms; they directly influence the willingness of both domestic and international investors to commit long-term capital.
3. Improving Financial Literacy and Access
Technology has significantly expanded access to financial services in Tanzania. However, meaningful participation in capital markets requires more than access. Continued efforts are needed to improve financial literacy among citizens and small businesses, enabling broader and more inclusive market participation.
A Positive and Aligned Policy Direction
Encouragingly, the policy direction articulated by the Government and the central bank aligns closely with the reform priorities highlighted in the Index.
Ongoing efforts to deepen capital markets, modernize legal frameworks, strengthen pension fund participation, and support product innovation are likely to have a compounding effect over time. If implemented consistently, these actions could fundamentally reshape Tanzania’s financial markets.
The result would be enhanced liquidity, improved resilience to external shocks, and a stronger competitive position as an investment destination within the region.
Importantly, the benefits would extend beyond the financial sector — supporting private sector expansion, infrastructure development and broader economic transformation.
A Shared Responsibility for Long-Term Success
Building deep, resilient and inclusive financial markets is not the responsibility of any single institution. It requires coordinated collaboration across government, regulators, financial institutions, market infrastructure providers and the private sector.
The AFMI serves as a valuable reference point — helping align ambition with measurable progress.
Discussions during the launch made one message clear: Tanzania has built a solid foundation. The next step is to accelerate reforms to ensure our financial markets move from steady progress to transformative impact.
With sustained collaboration and commitment, Tanzania’s financial markets can become a powerful engine for long-term economic growth.
About Absa Bank Tanzania
Absa Bank Tanzania Limited is one of Tanzania’s leading financial institutions, offering integrated solutions across Corporate and Investment Banking, Business Banking (including SME solutions), and Retail Banking. With a 21-year presence in Tanzania, Absa remains committed to delivering local solutions to uniquely local challenges.
Absa Bank Tanzania is part of Absa Group Limited, one of Africa’s largest diversified financial services groups, employing approximately 40,000 professionals across multiple African markets, with representative offices in London and New York.
For more information, visit: www.absa.co.tz
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