Tanzania: Vicobas Push Up Financial Inclusion

By Gadiosa Lamtey

Dar es Salaam — The government, through the National Economic Empowerment Council (NEEC), is in talks with various commercial banks with a view to see how they can issue loans to Village Community Banks (Vicobas) in a deliberate economic empowerment effort.

Government officials believe the move will put the country on the right footing towards its financial inclusion goal, in a country where such services are still a preserve for those who were born with silver spoons in their mouths.

A Finscope 2013 survey put the population of Tanzanians who have access to financial services at 57.4 per cent, courtesy of mobile phone money transfer technologies.

But NEEC believes this is bound to go up as it courts more commercial banks to start issuing loans to Vicoba.

Currently, it is only Tanzania Postal Bank (TPB) and Akiba Commercial Bank (ACB) that offer Vicoba loans.

NEEC data shows that Tanzania has registered about 23,000 Vicoba groups during the past five years, raking in a combined capital of Sh100 billion.

Initially, Vocoba were meant for women - mostly those who conduct petty business undertakings such as food vending and sellers of used clothes, among others.

Having started about ten years, they used to operate informally until 2010 when the government decided to formalise them and gave NEEC the mandate of nurturing the growth of Vicoba activities as one of the ways to increase financial inclusion.

With that, men also became active members, resulting into a change of dimension and currently, they (men) account for 20 per cent of Vicoba affiliates, according to NEEC statistics.

Similarly, some employees of multinational companies as well as their counterparts in public institutions and organizations are currently on the list of active members of Vicoba as they seek extra income to complement on their monthly salaries.

During the 2015/2016 financial year, the government has released Sh1 billion and deposited the same with TPB to help the commercial bank to issue loans to Vicoba groups.

That way, the government is complimenting on initiatives of other promoters including Vicoba-Sustainability Development Agency, INADES Formation Tanzania, Social Economic Development Initiatives Tanzania (SEDIT) and Care International.

These groups train and educate people on how to run Vicobas for their own good.

And, some Vicoba members believe the initiative has had some vivid positive impacts on their lives.

"The money I earn for being a member of a Vicoba has helped me to pay school fees for the kids... I do not depend on my salary or that of my husband when it comes to paying the kids' fees," says Beatrice Mushi, a member of the Mbezi-based Vicoba Mama Africa.

According to the president for Vicoba Sustainability Development Agency, Ms Devotha Likokola, in 2002, she started the initiative single-handedly but now, the group has 500,000 members countrywide. The 500,000 members are grouped into a total of 10,000 Vicoba groups, with a combined capital of Sh75 billion, kept in 15,000 bank accounts.

"This is why we say Vicobas are changing lives of Tanzanian women," he says.

She believes Vicoba form the basis of sustainable development. This, she says, is because most Vicoba members are able to repay their loans on time and that through the initiative, women are coached on the importance of saving.

"The training we give members in aspects such as entrepreneurship, self-awareness, capital opportunity and financial matters do help them on how to manage their funds... we also provide employment to members who are able to train other people on how to form groups," she says. Vicoba promoters also go as far as linking their members to the market.

"We also buy from one another... For instance, each year, we meet thrice where members find time to talk to each and discuss business deals," she says.

JPM's Sh50 million

During his campaigns, President John Magufuli promised to give Sh50 million to every village so it can help wananchi in undertaking their economic activities.

This calls for all members to be registered under district and municipal councils so they can be recognised and become part of the government's plans, according to NEEC executive secretary, Ms Beng'i Issa.

"It is only when they get registered that they stand a chance of benefitting from President Magufuli's Sh50 million pledge... we believe the simplest way to reach villages is to go through Vicoba," she tells BusinessWeek.

She said the government will supervise them via Regional Administration and Local Government Authorities (RALG) in close collaboration with NEEC.

Money lost

Not everything is good for Vicoba as handled badly, members can easily lose their hard-earned cash via the system.

This is more so in cases where a Vicoba operates without being registered, creating a loophole for some unscrupulous members to collude with some criminal gangs to siphon funds from unsuspecting members of their group.

A vivid example was what happened in Segerea Ward in June last year when the business prospects of some 90 Vicoba members who hoped to expand their undertakings and settle debts got shattered after alleged armed robbers disappeared with their accumulated fund worth over Sh100 million.

At 7.45pm on Sunday June 8, 2014, unidentified thugs grabbed Sh100.6 million that belonged to Ushindi Vicoba group based in Ugombolwa in Segerea Ward, Ilala District in the city.

The chairperson of Ushindi group, Ms Grace Katule, confirmed that early in the evening, four armed men with a sub-machine gun (SMG) and a pistol raided her house and made away with three metal boxes containing the money. The boxes were kept in a room at her house.

"I was helpless because I was surrounded by four armed thugs who ordered everybody in the house to lie down. They entered the room where the money was kept and left with the boxes," said Ms Katule.

She said other wananchi who were outside her house saw what was going on but remained helpless as the armed crooks escaped on four motorcycle taxis, popularly known as bodaboda.

When she was asked why she had risked keeping such a huge amount of money at home, she said it was agreed at a members' meeting the week before that the money be withdrawn from the bank, ready for disbursing to loan applicants.

One of the victims, Ms Irene Kimario, said they had planned to pay dividends to members who had been saving through the Vicoba for one year and a half.

Such stories are not uncommon to members of unregistered Vicoba.According to Ms Issa however, the NEEC plans to start empowering Vicoba groups by giving them financial education on how they can save their shares in banks for security purposes.