In the United Republic of Tanzania, UNCDF’s MicroLead programme funds CARE Tanzania and the Mwanga Community Bank (MCB). This project is one of many linkage projects MicroLead supports in Sub-Saharan Africa between savings groups (SGs) such as the ones created by CARE, and financial service providers such as MCB. The project, targeted on the Kilimanjaro Region, aims at offering formal financial products and services designed for SGs.  Its objective are:

• To financially include over 70,000 new members through SGs and make 100,000 members financially literate including 27,000 existing members;
• To provide access to formal financial services to 50,000 SG members through linkage of 2,000 SGs to MCB;
• To build capacity of MCB, through design of appropriate financial products, processes and appropriate alternative delivery mechanisms; to enable MCB to provide financial services in remote rural areas in a sustainable manner;
• To institutionalize the project, through capacity building of community based trainers (CBTs) and franchisees on financial linkage. Community banks from other Tanzanian regions will gain knowledge of the work being scaled up at MCB for future replication in their respective regions.

CARE facilitated the creation of the Kanani SG in the village of Lembeni by providing the group with training on financial education, guidance in creating their own by-laws and regulations and, most importantly, support in establishing themselves as an informal savings and loan group. The group’s 23 women mainly use their savings for their children’s school fees, but they also invest in their businesses and buy materials for or build additions to their homes. 

MicroLead provided the means and the technical support to link these SGs with MCB through the development of branchless banking services tailored to the groups.

Moreover, it can be said that this SG linkage programme has so far been successful for MCB in terms of growth of the client base, as clients have grown from 11,000 before the partnership to 43,305 at the end of 2014.  MCB offers group savings accounts and just rolled out a group loan product:  average savings per member is $39 and average loan size per member (for groups that receive credit) is $97.  Deposits are remunerated at 3% per annum.  No fees are charged to the customer but there is a minimum initial balance of 15,000 TzSh ($7.50).

In order to review the progress made under the MicroLead programme and share experiences and lessons learned within the regional community, CARE and MCB convened their first annual two-day workshop in Kilimanjaro on 27 and 28 May 2015. The workshop included presentations by CARE, MCB, the Kilimanjaro district head and UNCDF as well as a field trip to a SG and a MCB service centre, using a customer-centred approach. The workshop was attended by approximately 40 participants including CARE franchisees and village agents, community bank representatives, Vodacom representatives, Bank of Tanzania representatives, members of the Ministry of Finance and a guest of honour, the Kilimanjaro district head. 

One main area of discussion centred on the many challenges currently faced by community banks in the country to expand their outreach to rural areas. For example, a new requirement from the Bank of Tanzania compels community banks to increase their capital base from 2 billion to 5 billion Tanzanian shillings. In addition, community banks must increase their capital base whenever new capital investments take place, such as the opening of new service centres, or putting into service ATMs, POS devices, etc. This requirement is an impediment to expanding their outreach and ultimately harms the potential customers who are not yet receiving financial services. Another challenge concerned the burdensome know-your-customer (KYC) requirements for low-income clients. Furthermore, some participants believed that greater importance should be given to educating and strengthening the community bank association so that it can lobby the Government on their behalf. Discussion also touched upon new regulations such as The National Payment System Act, which was enacted in March 2015 to facilitate branchless banking usage. Moreover, microfinance policy is currently being updated by the Ministry of Finance, which is also developing a National Financial Inclusion Framework.

One of the activities during the workshop was a customer journey exercise whereby participants visited rural agents and customers and tried to understand each of their “pain points.” The challenges identified during the journey include: the distance from SG villages to MCB centers was a headache for MCB staff as well as SG members, the process to open an account and obtain a loan from MCB was long and required too many documents, the mobile network and technology are not reliable – transactions don’t register, the agent liquidity and reliability in local area.

As noted during UNCDF’s presentation, the empowerment of rural women is key to pro-poor development and economic growth.  MicroLead is leading the way on this “last mile” financial inclusion, employing innovative strategies, such as SG linkages, to reach rural women. Everyone is looking forward to next year’s workshop to see how MCB will navigate the next phase of its program implementation.

For an overview of the MicroLead project check out the presentations by CARE, MCB and UNCDF at the event here[KW1]