Tanzania emerges as East Africa’s next startup powerhouse

When thinking about a vibrant market in East Africa, Kenya is the first country to come to mind. However, its neighbour, Tanzania, has quietly emerged as a destination for startups expanding to the region.

Earlier this month, a leading Nigerian fintech, Fincra, announced its expansion to Tanzania. Likewise, PalmPay plans to be in Tanzania before the end of the year.

According to John Haule, Founder of Swahilies, a Tanzania-based fintech, “Most fintechs expand here because Tanzania is basically the Nigeria of East Africa with over 60 million people and three million SMEs.

The market is big, but still early. So, there’s room to lead or even dominate. Success stories like Nala (raised $40 million Series A) and Selcom (recently acquired a bank) prove there is something here.”

Tanzania’s landscape and digital divide

Despite its low profile, Tanzania has methodically built a digital base that is now paying dividends. Its mobile connectivity covers more than 86% of the population, and while smartphones (23.4 million in use) still lag behind feature phones (56.9 million), the balance is steadily shifting. Smartphone usage grew by 18% in 2024 alone. An early indicator of rising digital consumption.

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Yet the digital divide remains. Only 31.9% of the population actively uses the internet, compared to 45.6% in Kenya and 35.5% in Nigeria. But this figure only tells part of the story. The vast mobile penetration and growing smartphone ownership mean millions more Tanzanians are on the cusp of coming online. In fact, mobile data subscriptions rose to 48 million in Q4 2024, up from 41.4 million the previous quarter—an astonishing spike that signals accelerating demand.

What’s most notable, however, is not just who’s online but how they’re engaging with the digital economy.

This growth is attributed to supportive government initiatives, investment-friendly policies, and a growing tech-driven entrepreneurial ecosystem. Late in 2024, Tanzania began drafting its first-ever Startup Act, joining other African nations in formalising support for early-stage innovation.

“This report reflects our continued commitment to supporting Tanzania’s entrepreneurial journey,” said Zahoro Muhaji, CEO of the Tanzanian Startup Association. “We hope the findings will assist all those working to support and promote the growth of Tanzania’s startup ecosystem, and we look forward to strengthening these efforts in the years ahead.”

Outcome in funding and startup activity

Tanzania’s startup funding crossed a major milestone in 2024, attracting $53 million in capital more than double the $25 million raised in 2023, according to Africa: The Big Deal. This leap elevated the country to seventh in Africa for total funding, edging closer to Rwanda ($45 million) and building momentum behind regional leaders Kenya ($634 million) and Nigeria ($400 million).

In parallel, the number of startups jumped to 1,041 in 2024, up 24% from 842 the previous year. The momentum is undeniable.

Fintech remains the dominant sector, drawing in $41.4 million, or 78.3% of Tanzania’s total foreign direct investment. But agritech and healthtech are gaining ground. Encouragingly, female-led startups now represent 16% of the ecosystem, a sign of growing gender inclusivity in a traditionally male-dominated space.

Despite lagging Kenya and Nigeria in funding volume, Tanzania ranks sixth in Eastern Africa and 116th globally on StartupBlink’s global index outpaced only by regional peers like Rwanda (ranked 96th globally). But unlike some flashier ecosystems, Tanzania’s rise is built on durability, not hype.

Tanzania’s startup ecosystem benefits from a growing number of incubators and accelerators that provide support and resources for early-stage companies such as PESATECH, DeveloPPP Ventures, AMCET Hub, Buni Hub, Amua Accelerator, and CEED Tanzania. The telcos and banks are backing innovation as their total market potential presents vast opportunities for fintechs.

Tanzania isn’t trying to be another Silicon Savannah. It’s building something more sustainable. The governmental institutions are working tirelessly to solve issues like regulatory bottlenecks, lack of local venture capital presence, and infrastructural gaps by gaining foreign partnerships. Tanzania is becoming the kind of place where fintechs can scale, agritechs can thrive, and digital tools can reach the last mile.

It may have started quietly, but Tanzania’s tech journey is no longer going unnoticed and 2025 could be the year it moves from potential to prominence.