1 TANZANIA LINKING SAVINGS GROUPS TO MOBILE BANKING September 211 I Access Africa Technical Learning Series : No. 2
2 Tanzania Bukoba Musoma Tarime Buhemba Mwanza Kibondo Geita Nzega Ngudu Shinyanga Mbulu Ndareda Arusha Moshi Same Kigoma Kasulu Uvinza Ikola Mpanda Tabora Ndala Singida Manyoni Dodoma Kondoa Kilosa Manyara Region Korogwe Handeni Bagamoyo Morogoro Tanga Pangani Zanzibar Chake Chake Dar es Salaam Kisiju Kasanga Sumbawanga Tunduma Mbeya Chunya Tukuyu Iringa Njombe Kibau Ifakara Mahenge Utete Mohoro Kilwa Kivinje Kilwa Masoko Manda Mbamba Bay Songea Tunduru Matambwe Liwale Lindi Nachingwea Mtwara Masasi Newala Zone of intervention Save Up Project
3 Introduction When Africa s rural poor gain access to financial services, the benefits can be transformative. CARE has been nurturing this process of transformation since 1991 when it began to cultivate a savingsled micro-finance movement based on village savings and loan associations (VSLAs) in Niger. Today CARE s VSLAs serve more than 2.8 million people in 26 African countries nearly 8 percent of them women who, experience shows, invest most effectively in improving their families lives. Meanwhile many other organizations working in developing countries have also adopted the savingsled methodology; it is estimated that, in all, more than 4 million Africans are now benefiting from this approach. When Africa s rural poor gain access to financial services, the benefits can be transformative. In 28 CARE launched Access Africa, a 1-year program designed to scale up the VSLA methodology to reach 3 million people in 39 African countries during the decade. Access Africa s first project, Save Up, began working intensively in Malawi, Tanzania and Uganda in 29, expanding the number of VSLAs through demand-driven replication by trained VSLA members called village agents (VAs). When this phase of Save Up ended in August 211, it had established more than 18, VSLAs in these three countries, serving more than 4, members. As VSLAs mature, their need for more sophisticated financial services becomes apparent. Many VSLAs today are accumulating larger and larger amounts in savings and emergency funds that need to be stored securely and earn interest. Often members need to borrow more than their VSLA funds can provide. They need to transfer money instantly and they need access to specialized insurance, especially to defray the unforeseen costs of funerals. In other words, like the rest of us, Africa s poor need to be linked to a variety of formal financial services and products such as bank accounts, mobile money transfer technologies and insurance. In 29 CARE s Save Up program launched three pilot projects to provide such linkages in the three Save Up countries: bank accounts in Malawi, mobile phone banking in Tanzania and funeral insurance in Uganda. This publication describes the process of linking VSLA members in Tanzania with mobile wallet accounts that provide safe money storage and instant money transfer services. 1Sept. 211 I Access Africa Technical Learning Series : No. 2
4 For VSLAs Mobile Banking Means Safety, Efficiency And Cost Savings Lilian Mushi is a 54-year-old farmer and mother of eight in Longido district, northern Tanzania. She is a member of a VSLA in her rural community that was established by CARE s Wekeza/Save Up project. (Wekeza means invest in Swahili.) In 29 Lilian was asked to serve as a community-based trainer (or CBT, called a VA in other countries). As a CBT Lilian has established and trained members of 13 new VSLAs. Each one has, on average, 22 members, 77 percent of whom are women. Lilian is especially proud that four of these new VSLAs have already matured sufficiently consistently saving money each week and sharing out their savings among members at the end of the year to be eligible to participate in the next phase of CARE s program: linkages with the formal financial sector. In Tanzania s Wekeza/Save Up program, the linkage consists of access to M-Pesa (M for mobile, pesa for money in Swahili), a mobile phone payment service of Vodacom, the leading cellular network provider in Tanzania. As of 21, out of the 18 million mobile phone users in Tanzania, 5 million were using the M-Pesa mobile phone payment service. Convinced that M-Pesa can provide fund storage and transfer for many of Tanzania s 16 million-plus unbanked mobile phone users, Vodacom is extending M-Pesa to reach this wider community. M-Pesa s core product is generally used by individuals, but Vodacom Tanzania has customized its technology for group accounts specifically to help meet the needs of VSLAs. CARE s Wekeza/Save Up program, which has established some 4,8 VSLAs in northern Tanzania with a total of more than 1, members, launched its M-Pesa linkage pilot project with a small number of VSLAs in early 21 to test how the groups can use M-Pesa to store excess cash temporarily, pay bills and transfer money to any other mobile customer in the country. But the main benefit for VSLAs is security. Without M-Pesa, VSLAs keep savings that are not yet lent to members in a metal cash box, usually stored in the home of a group member. As the groups approach their annual share-out of savings, the amounts in the boxes can be considerable, and the risk of theft is high. Theft can also be a concern during the off-season when loan funds increase due to low demand because of the annual hiatus in farming or other productive activities. Methodology Learning to use M-Pesa With support from CARE staff, CBTs who have been trained in the M-Pesa process in turn train VSLA members. The training consists of an eight-module course that can be given in 1 day or over 8 weeks during a group s 2Sept. 211 I Access Africa Technical Learning Series : No. 2 M-Pesa Agents An M-Pesa agent is a local shopkeeper, kiosk manager or owner of a petrol station who has been trained and authorized by Vodacom and who is available to customers at all times during the day. Some M-Pesa agents were already established and managing accounts for individuals or other groups before the Wekeza/ Save Up pilot. Others are local businessmen who were invited to become agents and trained in M-Pesa s new VSLA group methodology. M-Pesa agents take precautions to ensure the safety of the cash they store, including employing security guards when necessary, and they avoid keeping very large amounts on their premises. In the Wekeza/Save Up project, M-Pesa agents tend to be located within access to VSLAs, since the growing number of local M-Pesa agents in the pilot districts was one reason for choosing these locations. VSLA members making deposits into their M-Pesa accounts reach their agents on foot, by bicycle or via public transport. To date, no group members have been robbed on these journeys.
5 regular weekly meetings. The training includes instructions on how to deposit money, withdraw funds and make payments, with emphasis at every phase of the training on the security and transparency of each transaction. After the training, all members of a group must sign a resolution paper affirming that they agree to open a group M-Pesa account. The M-Pesa agent who manages transactions will keep the original resolution paper, and a copy is kept in the group s cash box. How VSLAs Open and Utilize M-Pesa Accounts 1. Group is trained by CBT 2. Group has a working cell phone 6. Group representative obtains SIM card from Vodacom 3. Members sign resolution 4. Group chairperson or secretary registers at Vodacom outlet 5. Four appointed PIN holders from the group choose PIN code 7. Group representative takes cash to nearest M-Pesa agent 8. Group can now access their M-Pesa account at meetings But before a VSLA can use the services of a local M-Pesa agent, the group must register with Vodacom at a selected Vodacom shop or by contacting local Vodacom officials who are assigned to support VSLAs during the registration process. As the next step in opening an M-Pesa account, each VSLA elects four members who will be entrusted with the group s access code or personal identification number (PIN). The PIN keepers are divided into two pairs. Both of these pairs will be responsible for two of the numbers in the PIN code. These two pairs of code holders, working together, are the only members who ever know the group s access code, and no one, including these two pairs, knows the entire code. The pairs of PIN keepers will stand some distance from the group, and some distance from each other, to enter their two digits. As the two pairs of digits are entered into the telephone, only the two PIN keepers will know the numbers. When 3Sept. 211 I Access Africa Technical Learning Series : No. 2
6 the first two numbers are entered by the first pair of PIN keeper, asterisks (**) will appear on the screen. The next pair of PIN keepers is then given the telephone. When they enter the next two numbers, asterisks will also appear (****). The PIN keepers do not share their two digits of the PIN code with anyone, and they must never write it down. In this way, these four members are needed every time the code is used either to access or move funds. In most of the VSLA groups trained by a CBT, between 2 and 5 percent of members already have a cell phone that can be used for M-Pesa transactions. In addition, a group also needs a subscriber identity module (SIM) card that will serve as their mobile wallet for storing funds. SIM cards are provided free of charge at a Vodacom shop in each pilot district and they are also available from many M-Pesa agents at a price of 34 cents. If a group s SIM card is lost, stolen or malfunctions, no one else can use it without the four-digit access code. When they sign the resolution, the group designates three signatories whom they trust with the responsibility of authorizing the replacement of a lost, stolen or damaged SIM card. If this happens these three members can obtain a replacement card from an authorized Vodafone shop. To activate an account the group s chairperson or secretary takes the money to be stored to the nearest M-Pesa agent, shows proper photo identification and provides the group s resolution paper. When a group member enters the group s SIM card into their phone, then the two members with the M-Pesa PIN numbers can enter the codes onto the phone so that the group can access their M-Pesa account. To maintain security and transparency, every M-Pesa transaction takes place at a VSLA meeting that all members are expected to attend. Learning to use M-Pesa The original plan for the pilot was to identify and train members of 27 eligible VSLAs to use M-Pesa. However, while this process was under way, other groups, even from outside the pilot area, heard about the project and asked to be included. As of December 21, 76 VSLAs had been trained on how to use M-Pesa and 39 of them had opened a wallet and were using the accounts to store and transfer their funds. The levels of M-Pesa activities in the three districts, as of April 211, are shown in Table 1. Table 1 : VSLA Groups M-Pesa Transactions in Three Districts as of April 211 Total number of groups in M-Pesa pilot Number of pilot groups that have opened group M-Pesa accounts Number of deposit transactions in all group M-Pesa accounts Total value of deposit transactions in all group M-Pesa accounts Number of withdrawal transactions in all group M-Pesa accounts $8, Sept. 211 I Access Africa Technical Learning Series : No. 2 Total value of withdrawal transactions in all group M-Pesa accounts Average balance on M-Pesa accounts at any given time $4,852 $126.9 Lilian s VSLAs use their M-Pesa accounts on a weekly basis to store excess cash from their group savings and social funds (used to meet members emergency needs). Excess cash is money above what is needed for lending to each other and what usually remains in the group s box week after week. The money stays in one M-Pesa account, but group members keep careful track of how much of it is savings to be shared out at the end of the yearly cycle and how much stays in the social fund. As soon as the group completes its weekly savings meeting, one member rushes to the M-Pesa agent to deposit the money collected at the meeting, Lilian explains.
7 Money can be deposited in a group s account, also known as a mobile wallet, at no charge, but fees are charged for withdrawals or money transfers (see Table 2). Vodacom has created two levels of M-Pesa accounts: Tier 1 for money storage and Tier 2 for transactions. For Tier 1 account holders, the maximum amount that can be stored is $1,18, and the maximum that can be withdrawn in a day is $325. The fees for withdrawals range from 26 to 96 cents, depending on the amount withdrawn. Through a customer request to Vodacom, Tier 1 account holders can be upgraded to a Tier 2 account, which allows them to store up to $3,28. For Tier 2 clients, transactions are limited to $325 each, but M-Pesa allows up to 1 transactions in any one day, totaling $3,25. Table 2 : M-Pesa Fees (in U.S. Dollars as of April 211) fee type Amount rate Deposit money $.65 - $654 Free Send money $.65 - $6.54 $.46 $ $32.72 $.79 $ $65.44 $1.11 $ $13.88 $1.44 $ $ $2.9 $ $ $2.75 $ $ $3.4 Withdraw money $.65 - $6.54 $.33 $ $32.72 $.65 $ $65.44 $.98 $ $13.88 $1.31 $ $ $1.96 Pay bill Check balance Change PIN Change language Call customer service $ $ $ $ $2.62 $3.27 Depends on company $.3 $.3 Free Free 5Sept. 211 I Access Africa Technical Learning Series : No. 2
8 All transactions must be approved by the entire VSLA, and these approvals may be given only during a regular weekly meeting. Each transaction is recorded immediately in the group s M-Pesa book, which shows the purpose of the transaction, the account s opening balance, the sum added to the account, any money withdrawn from the account, fees paid and the ending balance. The format of the M-Pesa book, designed by CARE and Vodacom, has been standardized and is available in the M-Pesa training manual. Table 3 shows an example of one VSLA s M-Pesa book with entries recorded. Table 3: A VSLA s M-Pesa Book Showing Deposits, a Withdrawal and a Transfer (in Tanzanian Shillings) Date Purpose (if payment, note telephone number) Opening M-Pesa Balance MONEY ADDED TO M-Pesa MONEY WITHDRAWN FROM M-Pesa FEE PAID Ending M-Pesa Balance Verification 11/2/1 Cash deposited 2, 2, 25/2/1 Cash deposited 2, 1, 3, 11/3/1 Cash deposited 3, 35, 65, 25/3/1 Withdrawn for share out 65, 42, 7, 223, 6/5/1 Cash deposited 223, 23, 453, 3/6/1 Cash deposited 453, 23, 683, 5/8/1 Cash deposited 683, 23, 913, 1/1/1 Transfer for fertilizer payment 913, 8, 4 112,6 6Sept. 211 I Access Africa Technical Learning Series : No. 2
9 Buying in Bulk In the M-Pesa training manual a hypothetical case illustrates the savings that can be realized by VSLAs if they purchase items such as farm inputs in bulk. In the example the 22 members of one group all needed seed and fertilizer for maize planting. Without M-Pesa, each member would buy her own supplies, and each would need to pay for transport. With M-Pesa the 22 members can make one purchase in bulk. The group decides to purchase 5 kg of fertilizer and 2 kg of seed for each member. Based on experience, they estimate they will need TShs 3, ($19) each or TShs 66, ($418) for the group. In July each member starts saving 1, ($6.52) per month, in addition to their group savings, to get ready for the big purchase. After 4 weeks of saving, the group has accumulated TShs 88, ($557.33), more than enough for the purchase. In August they buy from a reputable supplier in Arusha, making an advance payment of TShs 1, ($63) via M-Pesa, by simply transferring this amount to the supplier s M-Pesa account. Not only does the supplier agree to deliver the goods for free, but the group is pleased to find that the cost for each member is only TShs 25, ($16) instead of TShs 3, ($19). Because of their bulk purchase, and perhaps because of the ease and efficiency of the M-Pesa payment process, the group has incurred savings totaling approximately TShs 11, ($69). In addition to her VSLAs M-Pesa accounts, Lilian helped 15 individual members open their own personal M-Pesa accounts, mostly for saving and for transferring money to dependants. Group members also plan to use their group account to transfer money from their social fund to help one another in emergencies, such as when they are hospitalized. Both Lilian and the group members are happy with the service, as they can save and withdraw at any time from their M-Pesa account. They only wish that the transaction fees charged by M-Pesa were lower, as this would motivate them to carry out even more transactions. When CARE Tanzania monitored the pilot program in April 211, they found that groups were depositing and withdrawing their liquid assets on a regular basis, but that the service provided by M-Pesa agents was sometimes slow, and sometimes agents did not have the cash that a group wanted to withdraw from its account an amount often larger than the typical withdrawal of an individual. In such cases the group had to find another agent who could meet its cash withdrawal needs. To remedy this, Vodacom is seeking to partner with several banks so that M-Pesa can quickly meet the larger cash demands of VSLAs. Future Plans and Lessons Learned The first phase of the linkage pilot project ended in August 211 and has been extended by sending trained CBTs into new communities to support the formation and training of new groups and provide training in M-Pesa. CARE has forged additional opportunities to link mobile wallets to groups through a partnership with Tigo, another mobile network operator in Tanzania. Through this new partnership, groups will have access to their savings account at Mwanga Community Bank through their Tigo-Pesa wallet. This new initiative will bring groups closer to achieving financial inclusion with the formal financial sector. As more and more groups obtain M-Pesa and Tigo-Pesa accounts, CARE will continue to monitor the performance and development of all the mobile wallet linked groups. Some lessons learned by CARE during the first phase of the M-Pesa linkage pilot include the following: CARE Tanzania s intention was to help VSLAs keep their funds safely and to introduce them to the money transfer features of M-Pesa. However, some groups would also like to access financial institutions such as banks that provide loans. CARE is currently taking steps with Tigo to establish VSLA savings accounts and encouraging Vodacom to establish partnerships with financial institutions whose products would enable VSLAs to transfer money into interest-earning group savings accounts housed at a bank. 7Sept. 211 I Access Africa Technical Learning Series : No. 2
10 Due to a number of problems related to M-Pesa agents, CARE is interested in seeing CBTs become agents themselves. However, for now, few CBTs meet all of Vodacom s requirements, which include having minimum capital and a permanent premises from which to operate the service. CARE recommends that Vodacom hold regular meetings for capacity building and for both CBTs and VSLAs to improve the groups ability to understand and use M-Pesa accounts. Having well-equipped, knowledgeable users will encourage more VSLAs and individuals to register with the service. Since M-Pesa in Tanzania is mainly used by individuals, its use by groups is a new phenomenon that has yet to spread widely. Therefore, Vodacom needs to build the capacities of their staff in the Vodacom shops located near VSLAs that use M-Pesa, enabling the staff to become conversant with the M-Pesa group technology and improve their ability to provide effective service to VSLAs. As CARE continues to support financial linkages in its Save Up countries, there is a strong expectation that mobile wallets such as M-Pesa will continue to be an important means of facilitating financial inclusion. Increasingly, this technology will enable other financial linkages to be provided at lower cost. If, for example, a VSLA has a savings account with a bank, a mobile wallet will enable the group to carry out transactions without leaving their home village, saving time and costs at both ends. Similarly, if a VSLA receives a loan from a bank, the credit can be disbursed electronically to the group s e-wallet. The group can make loan repayments by phone as well, again saving money on transport. Mobile wallets are quickly emerging as an over-arching linkage technology that can strengthen and facilitate the operation of other financial linkages that CARE is promoting for its VSLA groups. 8Sept. 211 I Access Africa Technical Learning Series : No. 2
11 CARE VSLA Membership Tunisia Western Sahara (Occupied by Morocco) Morocco Algeria Libya Egypt 6,899 Senegal Mauritania Mali 123,914 Niger 238,366 Chad Sudan Eritrea 4, Gambia Guinea Guinea-Bissau Sierra Leone 3,322 Liberia 1,634 Cote d'ivoire 17,799 Burkina Faso Nigeria Ethiopia Ghana South Sudan 11,15 27,358 Central African Republic Togo Cameroon Benin 5,621 Uganda Equatorial Guinea 53,42 Congo Kenya Gabon Rwanda 299, ,114 Democratic Republic Burundi of the Congo 149,763 Angola 12,977 Tanzania 461,38 Djibouti Somalia 8, Angola 9,115 Zambia 1, Malawi 157,348 Mozambique 14,113 Namibia Botswana Zimbabwe 139,436 Madagascar 9,423 First Wave Swaziland Lesotho 14,323 South Africa 12,597 Second Wave Third Wave Excluded Data as of June 211
12 Headquarters CARE USA 151 Ellis Street Atlanta, GA T) F) ACCESS AFRICA Program Office CARE Tanzania P.O. Box 1242 (mailing) Plot No 11 Kinondoni Road (physical) Dar-Es-Salaam Tanzania CARE s Save Up initiative is funded by: Editorial Credits Author: Kristin Helmore, Editor: Sybil Chidiac Photo Credits Cover, Pages 3 and 8: Sarah Elliott/CARE; Pages 1: Brendan Bannon/CARE; Page 6: Nicole Cappello/CARE. CARE is an Equal Opportunity Employer and Affirmative Action Employer (AA/M/F/D/V) dedicated to workplace diversity. CARE and CARE Package are registered marks of CARE. Copyright 21 by Cooperative for Assistance and Relief Everywhere, Inc. (CARE). All rights reserved. Sept. 211 I Access Africa Technical Learning Series : No. 2 1