How catalytic investment capital is transforming Tanzania's fintech ecosystem and unlocking finance for underserved MSMEs
Building the missing link between innovation and investment
Tanzania's digital economy presents one of Africa's most compelling opportunities for fintech-led financial inclusion. The country combines high mobile money penetration, a rapidly growing entrepreneurial ecosystem and millions of underserved micro, small and medium-sized enterprises (MSMEs). Yet despite this potential, access to finance remains constrained by informality, limited collateral, fragmented transaction records and the absence of reliable business data that financial institutions need to assess credit risk. For many MSMEs, the challenge is not simply a lack of capital—it is a lack of visibility within the formal financial system.
Fintechs are increasingly addressing this challenge by converting everyday business activities into trusted digital data. Transactions generated through agriculture, healthcare, transport, retail, education and enterprise management platforms create digital footprints that enable lenders to design alternative credit scoring models, embedded finance solutions and working capital products tailored to real business behavior. Increasingly, Tanzanian fintechs are becoming the infrastructure through which banks and investors can sustainably serve underserved MSMEs.
However, innovative fintechs often face their own financing challenge. Many demonstrate strong market potential but struggle to progress beyond the early commercialization stage because they lack investment readiness, strategic partnerships and institutional credibility. This "valley of death" between innovation and investment represents a persistent market failure that limits both fintech growth and MSME financial inclusion.
Challenges Tanzania's fintech ecosystem faces, UNCDF analysis 2021
Market-shaping approach to fintech development
To address this challenge, the European Union, through the Digital4Tanzania (D4T) programme, funded the PesaTech Accelerator, implemented by UNCDF under the Tanzania Inclusive Digital Economy (TIDE) project as a flagship initiative of the FinWise approach to financing high growth start-ups.
Rather than operating as a traditional accelerator or grant programme, PesaTech was designed as a market-building platform that de-risks promising post-revenue fintechs while strengthening the wider ecosystem needed for sustainable growth. This is done by partnering with promising local investment entities as opposed to competing with their offerings.
The programme uses a market systems development approach to combine:
- catalytic investment grants,
- tailored business development and technology advisory services,
- investor readiness support,
- regulatory engagement and
- partnership facilitation with financial institutions and investors.
Together, these interventions strengthen enterprise capabilities while helping create the market conditions required for fintech innovation to attract commercial capital.
Demonstrating commercial traction
Across the first two cohorts, PesaTech has supported 22 post-revenue fintech companies operating across digital lending, payments, agritech, healthtech, enterprise software and digital infrastructure. Collectively, these businesses demonstrate that Tanzania's fintech ecosystem is maturing from experimentation to commercial scale.
With approximately USD 397,000 in catalytic funding, the portfolio has mobilized more than $18 million in follow-on investment, representing a capital multiplier exceeding 45 times. Portfolio companies now collectively serve more than 2.3 million active users, generate approximately $19.2 million in annual revenue, and have facilitated over $126 billion in digital transactions. These outcomes reflect more than programme success, they demonstrate that Tanzanian fintechs are building commercially viable business models capable of attracting institutional investment and expanding financial inclusion at scale.
The programme has also begun generating broader market outcomes. Portfolio companies have attracted venture capital, strategic partnerships and commercial finance, while corporate transactions, including acquisitions and merger discussions, signal growing confidence in Tanzania's fintech ecosystem from private investors.
Fintech as infrastructure for MSME finance
A defining feature of the PesaTech portfolio is its evolution beyond digital financial services. Many portfolio companies are creating trusted digital infrastructure that generates verified operational and transaction data from sectors such as agriculture, healthcare, transport and commerce.
More broadly, the portfolio suggests that some of the most promising fintechs are not simply providing financial services, they are becoming critical infrastructure through which financial institutions can better understand and serve MSMEs.
These data streams reduce information asymmetry between lenders and borrowers, enabling financial institutions to assess business performance using cash flows rather than collateral alone. This creates opportunities for embedded finance, alternative credit scoring, insurance and working capital products that better reflect the realities of MSMEs. In doing so, fintechs become strategic partners for banks rather than competitors, extending the reach of formal finance into previously underserved markets.
From catalytic finance to market ownership
PesaTech illustrates the FinWise approach to market systems development: using catalytic public capital to reduce early-stage risk, strengthen investment readiness and crowd in commercial finance. Rather than replacing private investment, public resources help create investable enterprises capable of attracting venture capital, commercial lenders and institutional private sector investors.
This market-shaping approach is now entering its next phase. From December 2026, PesaTech will transition to NMB Bank for long-term management, reflecting a deliberate shift from donor-supported innovation to locally owned market infrastructure. The transition demonstrates how catalytic capital can build sustainable institutions that continue expanding access to finance long after development programmes conclude.
Looking ahead
The success of PesaTech demonstrates that strengthening fintech ecosystems requires more than funding startups. It requires coordinated investments in enterprise capabilities, partnerships, regulation and market infrastructure. By helping fintechs become investment-ready and positioning them as trusted infrastructure for MSME finance, PesaTech has established one of East Africa's most promising pipelines of investable fintechs.
As Tanzania's digital economy continues to mature, the lessons from PesaTech offer a replicable model for how catalytic finance, strategic partnerships and local market ownership can work together to unlock private capital, strengthen financial ecosystems and expand economic opportunity for millions of underserved entrepreneurs. As stakeholders around the world mark World FinTech Day, these lessons offer a valuable contribution to the global conversation on how fintech can expand access to finance and unlock economic opportunity at scale.
The accompanying technical notes explore these issues in greater depth, offering additional insights from the PesaTech portfolio on the trends shaping Tanzania's evolving fintech ecosystem.
Read the technical notes in the series
Analysis 1: Why Tanzanian fintech is becoming the infrastructure for MSME finance
How digitizing everyday business activity creates trusted data that reduces information asymmetry between lenders and borrowers.
Analysis 2: Revenue growth is separating market leaders from market participants
An analysis of the $18 million in portfolio revenue generated in 2025 and the emergence of commercially scalable fintech champions.
Analysis 3: Fintech growth is creating thousands of private sector jobs
How portfolio companies created 3,836 net new jobs, demonstrating fintech's role as an engine of economic transformation.
Analysis 4: Catalytic investment capital is building Tanzania's fintech investment market
How $18 million in public catalytic capital has crowded in commercial investment across the ecosystem.
Analysis 5: Emerging fintech models for inclusive MSME finance
A look at vertically integrated and partnership-based business models, and the role of digital public infrastructure (DPI) in scaling access to finance.
Together, these notes offer investors, policymakers and development partners a data-driven view of how Tanzania's fintech sector is building the infrastructure for inclusive, sustainable MSME finance.
