September 2011 I Access Africa Technical Learning Series : No. 2

TANZANIA LINKING SAVINGS GROUPS

TO MOBILE BANKING

Chake Chake

Tunduma

Buhemba

Uvinza

Utete

Same

Njombe

Ndareda

Ndala

Mpanda

Mohoro

Mbamba Bay

Manda

Mahenge

Liwale

Kisiju

KibauKasanga

Ikola

Ifakara

Chunya

Sumbawanga

Songea

Singida

Musoma

Mbeya

Lindi

Iringa

Bukoba

Tunduru

Tukuyu

Tarime

Pangani

Nzega

Ngudu

Newala

Nachingwea Mtwara

Mbulu

Matambwe

Masasi

Manyoni

KorogweKondoa

Kilwa MasokoKilwa Kivinje

Kibondo

Kasulu

Handeni

Geita

Tabora

Shinyanga

Mwanza

Moshi

Morogoro

Kigoma

Kilosa

Bagamoyo

Tanga

Arusha

Zanzibar

Dar es Salaam

Dodoma

ManyaraRegion

Tanzania

ZoNe of INTerveNTIoN SAve Up projecT

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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 savings-led 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 80 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 savings-led methodology; it is estimated that, in all, more than 4 million Africans are now benefiting from this approach.

In 2008 CARE launched Access Africa, a 10-year program designed to scale up the VSLA methodology to reach 30 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 2009, 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 2011, it had established more than 18,000 VSLAs in these three countries, serving more than 400,000 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 2009 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.

IntroductIon

When Africa’s rural

poor gain access to

financial services,

the benefits can be

transformative.

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As of 2010, 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 4,800 VSLAs in northern Tanzania with a total of more than 100,000 members, launched its M-Pesa linkage pilot project with a small number of VSLAs in early 2010 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

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.

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 2009 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.

for vSLAs Mobile Banking Means Safety, efficiency And cost Savings

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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.

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

How VSLAs Open and Utilize M-Pesa Accounts

1. Group is trained by CBT

2. Group has a working cell phone

3. Members sign resolution

4. Group chairperson or secretary registers at Vodacom outlet

5. Four appointed PIN holders from the group choose PIN code

6. Group representative obtains SIM card from Vodacom

7. Group representative takes cash tonearest M-Pesa agent

8. Group can now access their M-Pesaaccount at meetings

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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 20 and 50 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 2010, 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 2011, are shown in Table 1.

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.

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

Total value of withdrawal transactions in all group M-pesa accounts

Average balance on M-pesa accounts at any given time

TABLe 1 : VSLA Groups’ M-Pesa Transactions in Three Districts as of April 2011

76

39

72

$8,388

49

$4,852

$126.90

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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 $1,108, 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 $3,280. For Tier 2 clients, transactions are limited to $325 each, but M-Pesa allows up to 10 transactions in any one day, totaling $3,250.

TABLe 2 : M-Pesa Fees (in U.S. Dollars as of April 2011)

fee Type

Deposit money

Send money

Withdraw money

pay bill

check balance

change pIN

change language

call customer service

AMoUNT

$0.65 - $654

$0.65 - $6.54

$6.55 - $32.72

$32.73 - $65.44

$65.45 - $130.88

$130.89 - $196.33

$196.34 - $261.77

$261.78 - $654.45

$0.65 - $6.54

$6.55 - $32.72

$32.73 - $65.44

$65.45 - $130.88

$130.89 - $196.33

$196.34 - $261.77

$261.78 - $327.23

rATe

Free

$0.46

$0.79

$1.11

$1.44

$2.09

$2.75

$3.40

$0.33

$0.65

$0.98

$1.31

$1.96

$2.62

$3.27

Depends on company

$0.03

$0.03

Free

Free

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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

11/02/10

25/02/10

11/03/10

25/03/10

06/05/10

03/06/10

05/08/10

01/10/10

pUrpoSe (If pAyMeNT, NoTe

TeLephoNe NUMBer)

Cash deposited

Cash deposited

Cash deposited

Withdrawn for share out

Cash deposited

Cash deposited

Cash deposited

Transfer for fertilizer payment

opeNINg M-peSA

BALANce

0

200,000

300,000

650,000

223,000

453,000

683,000

913,000

MoNeyADDeD To M-peSA

200,00

100,000

350,000

230,000

230,000

230,000

MoNeyWIThDrAWN

froM M-peSA

420,000

800,000

feepAID

0

0

0

7,000

0

0

0

400

eNDINg M-peSA

BALANce

200,000

300,000

650,000

223,000

453,000

683,000

913,000

112,600

verIfIcATIoN

Signature

Signature

Signature

Signature

Signature

Signature

Signature

Signature

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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 50 kg of fertilizer and 20 kg of seed for each member. Based on experience, they estimate they will need TShs 30,000 ($19) each or TShs 660,000 ($418) for the group. In July each member starts saving 10,000 ($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 880,000 ($557.33), more than enough for the purchase. In August they buy from a reputable supplier in Arusha, making an advance payment of TShs 100,000 ($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 25,000 ($16) instead of TShs 30,000 ($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 110,000 ($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 2011, 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 2011 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.

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• 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.

Zimbabwe

Zambia

Uganda

Tunisia

Togo

Tanzania

Swaziland

Sudan

South Sudan

South Africa

Somalia

Sierra Leone

Senegal

Rwanda

Nigeria

Niger

Namibia

Mozambique

Morocco

Mauritania

Mali

Malawi

Madagascar

Libya

Liberia

Lesotho

Kenya

Guinea-BissauGuinea

Ghana

Gambia

Gabon

Ethiopia

Eritrea

Equatorial Guinea

Egypt

Djibouti

Cote d'Ivoire

Congo

Democratic Republicof the Congo

Chad

Central African RepublicCameroon

Burundi

Burkina Faso

Botswana

Benin

Angola

Angola

Algeria

Western Sahara(Occupied by Morocco)

6,899

238,366

123,914

30,322

1,634

17,799

5,621

27,358

4,000

101,150

299,179

461,380

149,763

9,115

1,000

139,436

104,113

9,423

14,323

12,597

157,348

12,977

248,114

503,402

8,000

cAre vSLA Membership

Data as of June 2011

first Wave

Second Wave

Third Wave

excluded

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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 ©2010 by Cooperative for Assistance and Relief Everywhere, Inc. (CARE). All rights reserved.

headquartersCARe USA151 Ellis StreetAtlanta, GA 30303-2440 T) 404-681-2552 F) 404-589-2650

ACCeSS AFRICA Program Office

CARe Tanzania P.O. Box 10242 (mailing)Plot No 101 Kinondoni Road (physical)Dar-Es-SalaamTanzania

www.care.org

CARE’s Save Up initiative is funded by: