In 2013, CARE launched the Gates Funded LINK Up Programme in both Kenya and Tanzania, with the objective of linking savings groups with formal financial institutions by creating customer centric products based on the needs of VSLAs, thereby reducing their vulnerability to income shocks, and enhancing their ability to invest in income generating opportunities.
Linkage has been an area that has proved to be beneficial for groups, as it reduces risk and fraud both internally and externally for groups, but also linkage to formal financial services creates opportunity for groups to access other products including credit and insurance.
Data from the program has proved that linkage creates a platform for growth of groups, as groups' return on savings, and profit, increase. Data also reveals a rise in female empowerment, especially for linked households. Additionally, a rise in knowledge makes for better members, with data revealing that trained linked groups have better usage of accounts than untrained groups.
In Tanzania, CARE’s major partners in this initiative have been National Microfinance Bank (NMB) and AccessBank, with which we have linked more than 7,000 groups. Through their Pamoja and Kikundi Accounts - two products created with VSLAs in mind, including one having a 3-pin code, replicating the 3-keys of a traditional VSLA group box - a total of about 2.7 billion Tanzanian Shillings has gotten into the formal financial market from informal saving groups.
The partnerships have been one of mutual investment, with CARE providing critical information on savings group behaviours, training on how to target rural communities and strategic support in designing group savings products, and the banks investing in designing and launching of savings accounts, marketing them to rural communities and providing a safe and stable location for savings with a good interest rate.
With this has come mutual benefits, with both organisations meeting strategic objectives. For the banks, they have seen:
- Increased customer base: group linkages lead to individual account opening over time and the longer a group has had an account, the more individual members also open accounts.
For CARE, we have seen:
- Increased access to financial stability and security for rural savings group members
- Increased product on the market, and a movement towards better credit options for rural communities
- Increased deposit mobilization: the proportion of group and member savings being held in the bank is increasing over time
- Increased understanding of the savings group market, providing a firm foundation for full financial inclusion in Tanzania in the future.
Additional to this, data shows us that:
- The proportion of groups with active bank accounts is growing over time, from 48% in the third quarter of 2015 to 75% in the first quarter of 2017.
- Linked groups have a consistent rate of growth in their return on savings; data showed a difference of 80% between linked and non-linked groups in terms of change of returns on savings.
- Linked households experience a rise in female empowerment: The amount of household decisions that are made jointly almost doubled, which is the preferred decision making style reported by our respondents; women are 78% more likely to feel comfortable speaking in a community meeting at least six months after their group received a bank account; The number of female-headed households who could rely on savings in a period of financial hardship increased by 20%.