As part of her first visit to the field to become acquainted with UNCDF programs in Sub-Saharan Africa, the recently appointed Executive Secretary (ES)of UNCDF, Judith Karl, visited MicroLead Expansion partners in the Kilimanjaro region of Tanzania.
MicroLead Expansion (MLE) is funding CARE and Mwanga Community Bank (MCB) in Tanzania. CARE in partnership with (MCB) is working in the Kilimanjaro region to develop and offer formal financial products and services designed for savings groups called village savings and loan associations (VSLAs).
The objective of the project is to link VSLA with MCB through the development of branchless banking services tailored to VSLAs. The VSLA group visited by the ES was founded by 23 women in the village of Lembeni two years ago. Their creation was facilitated by CARE which provided the VSLA with financial education training, guidance in creating their own by-laws and regulations and most importantly, support in establishing themselves as a savings and loans group. The women range in age, income generating activity and education, but what they do have in common is a desire to come together on a weekly basis and “buy shares” of savings that will have two purposes: 1) to allow them to accumulate and store savings over a one-year period and 2) to pool their savings so they can be on-lent to fellow group members who have little or no access to credit from formal financial intermediaries.
In addition to the savings fund, the Kanani Group (the name of the VSLA) decided to establish a social fund as well as a community fund – three funds in total. The VSLA members decide to contribute about 10 cents each, every week to the social fund which can be used upon a common vote to help members with unexpected expenses such as funerals, medical bills or other unforeseen life emergencies. The community fund was established to provide support to a cause outside of their group, in the case of the Kanani Group, it is to help impoverished village families in dire circumstances.
Each weekly meeting begins with a song, a greeting, attendance check and the counting of the money held in the metal lock-box. Formalities are respected and fines are imposed for missing meetings, mobile phone interruptions and speaking out of line.
This is the Kanani Group’s 45th week in its third savings cycle. Over the course of this period, they were able to accumulate a total of 5 million Tanzanian shillings ($3,125) of which 3.6 million has been loaned to its VSLA members. What is unusual about the Kanani Group is that they not only have a lock-box to hold their money, but they also hold a group bank account with a formal financial institution, Mwanga Community Bank.
An uncommon arrangement, MCB, has been working with CARE to do exactly that: link VSLAs with local banks by offering savings services that speak to the needs of the group. Still at an early stage of the pilot, MCB has nevertheless managed to open 197 group savings accounts with the support of CARE, which has been providing financial education to the VSLAs and preparing them for a banking relationship.
Another ground-breaking innovation from CARE is the VSLA’s ability to deposit their share funds into their bank account through a branchless banking agent. The Kanani group does just that; when it has accumulated a substantial amount, it meets with a local Vodacom agent and uses M-Pesa to deposit its share funds to its secure bank account held with MCB. This mobile banking solution is being fine-tuned even further in collaboration with Vodacom and CARE so as to allow VSLAs to transact as a group rather than as an individual representing the group (greater security, flexibility and less fraud).
For now, the Kanani group is pleased with its achievements. In a few weeks, the women will participate in the share-out, when the pooled savings are given back to the members. The women will use their savings mainly for their children’s school fees, but there are also women who will invest in their businesses, and buy materials or build additions to their homes. Will the women come together again after the share-out and begin another cycle? The response is a definite yes! As one member said, “the VSLA has made a difference in our lives. It has taken us out of our grass roots and given us strength to prepare for our future.”