New linkage product for savings groups in Tanzania shows potential of this growing financial services market

by 24th Feb 2016
VSLA members, NMB and CARE staff pose for the press at the Pamoja Account launch in Dar es Salaam, Tanzania VSLA members, NMB and CARE staff pose for the press at the Pamoja Account launch in Dar es Salaam, Tanzania

This February has marked a key step in CARE’s efforts to promote universal financial inclusion in Tanzania as the National Microfinance Bank (NMB) and CARE announced the official launch on 17 February of a new financial product tailored to the needs of Village Savings and Loan Associations (VSLAs) and other groups like them across the country. The product, called Pamoja (meaning ‘together’ in Swahili), is the latest foray by an industry-leading bank into this increasingly visible market segment.

That the event coincided with the release of The State of Linkage Report (a joint initiative by CARE, Barclays and Plan to document the breadth of financial products targeting savings groups globally) was no surprise. The State of Linkage Report unearthed a myriad of ways in which the private sector is increasingly recognising the potential of advancing financial inclusion by serving savings groups and their members.

As we have noted in previous posts, savings groups present banks and other financial service providers with benefits ranging from higher overall bank valuation, advancing women’s social and economic empowerment, unlocking billions of dollars of domestic resources and increasing bank capacity to effectively reach the unbanked. The substantial market size estimations for savings groups in Tanzania and other African nations has also not been lost on market leaders.

For years CARE has been working with some of the largest and most progressive banks on the continent including Equity Bank Kenya, Fidelity Bank in Ghana and Post Bank in Uganda. The launch of the Pamoja savings account with NMB marks another example of a growing trend of large-scale financial institutions investing in reaching and serving savings groups.

Why it matters for Tanzania

When asked about the market size for savings groups in Tanzania, CARE Tanzania Country Director Paul Daniels noted that “CARE has now supported over 23,000 VSLAs nationwide and our best estimates suggest that there are over four million Tanzanians in groups like these around the country with a collective potential savings of nearly 400 billion TZS (130.4 million GBP). And these numbers are growing every year.”

As I wrote in a previous post, 2014 World Bank figures revealed there are over 17 million financially excluded Tanzanian adults, typically young, rural, female and of low-income. With a significant and growing portion of these Tanzanians being members of savings groups, NMB’s new product and broad reach could have significant social and economic benefits for all involved.

Leading the way for banks

NMB Managing Director Ineke Bussemaker highlighted NMB’s leading position in bank-led financial inclusion as a key to their success in the under-served market. NMB bank is the largest financial service provider in Tanzania with the most branches, agents and ATMs throughout the country. Unlike smaller, community-level banks who more often target the under-served, NMB possesses the brand recognition, technology and scale to serve the remote and oft-overlooked savings groups. Working in tandem with CARE’s network of community-based trainers, NMB’s new Pamoja product will be available en mass in the near future.

Nathan Randall

Nathan Randall was formerly a Financial Inclusion and Linkages Analyst for CARE Access Africa based in Dar es Salaam, Tanzania. He supported CARE’s efforts to link savings groups with banks in Kenya and Tanzania, collecting and analysing data from rural savings groups and financial services providers to evaluate linkage performance and help improve our models. Nathan holds a Bachelor’s Degree in International Business from Carleton University in Ottawa, Canada, and is a current participant in the Aga Khan Foundation of Canada’s International Youth Fellowship Program.