The Financial Sector Deepening Tanzania (FSDT), in collaboration with Mixx by Yas (formerly TigoPesa) and the Financial Sector Deepening (FSD) Network Gender Collaborative Programme, has spearheaded the digitization of Community Microfinance Groups (CMGs) in Tanzania.
This initiative, as detailed by Happy Mathew Sollo, Lead-Digital Financial Services & Infrastructure Development at FSDT, and Tolulope Babajide, Gender Network Manager at FSDA, aims to enhance financial inclusion, particularly for women, by transitioning informal savings groups to digital platforms.
CMGs, also known as Rotating Savings and Credit Associations (ROSCAs), Village Savings and Loan Associations (VSLAs), or Village Community Banks (VICOBA), play a critical role in Tanzania’s financial ecosystem.
They account for 12% of the adult population, enabling approximately 5 million Tanzanians to save, invest, and improve their economic well-being. However, these groups traditionally operate outside the formal financial system, limiting their members’ access to credit and other financial services.
The Case for Digitization
The digitization of CMGs has sparked debate, with some arguing that it could disrupt the social cohesion and flexibility inherent in traditional systems. Concerns about privacy, security, and digital literacy have also been raised. However, proponents highlight the potential benefits, including improved cash handling, transparency, and access to value-added services.
In 2023, FSDT and its partners launched a project to digitize CMG transactions, building on the Tanzanian Government’s Microfinance Act of 2018, which formally recognized these groups as tier 4 microfinance institutions. This legislation enabled the Bank of Tanzania (BOT) to create an online registration system, resulting in the registration of over 48,659 CMGs nationwide.
Launch of Mixx Kikoba
In April 2024, Mixx by Yas, supported by FSDT and Tanzania Commercial Bank (TCB), introduced “Mixx Kikoba,” a digital platform designed to streamline CMG operations. The platform allows members to store funds in digital accounts, replacing the traditional physical cash boxes, and automates transaction records.
The launch was accompanied by extensive training for community development officers (CDOs), community-based trainers (CBTs), and group promoters to ensure members could effectively use the platform. The pilot phase targeted three regions—Singida, Morogoro, and Tabora—selected for their low financial inclusion rates and Mixx by Yas’s market presence. Over 600 trainers were involved, and more than 15,000 CMGs, representing over 55,000 members, were onboarded as early adopters.
Benefits and Impact
Early adopters of Mixx Kikoba, predominantly women, have reported significant benefits, including enhanced cash security and transparency. Members can now track their group’s savings and loans, fostering trust and accountability within the groups. The platform has also reduced the risk of theft, a common issue with traditional cash-based systems.
FSDT and its partners aim to leverage the data generated by these digital transactions to develop tailored financial products, such as credit, investment, and insurance, to further empower women and youth in CMGs. Discussions are ongoing with TCB and mobile network operators to optimize the value of this data and create innovative solutions.
Challenges and the Way Forward
The digitization of CMGs is a complex process that requires careful planning and community engagement. It is essential to preserve the social and economic benefits of traditional systems while introducing digital tools. FSDT emphasizes the importance of understanding the unique dynamics of rural and urban CMGs and providing hands-on support during the transition.
By addressing these challenges, the digitization of CMGs has the potential to expand financial inclusion, empower communities, and ensure the long-term sustainability of these vital groups.
For more information, visit FSDT’s website.
