VICOBA strengthen SME access to capital

DAR ES SALAAM: COMMUNITY-based savings and credit groups are playing a growing role in financing small and medium-sized enterprises by mobilising domestic savings into affordable loans and profit sharing schemes, helping cushion SMEs from limited access to formal credit.

As commercial lending remains costly and selective, these groups are emerging as a key source of working capital, enabling small traders to expand operations, stabilise cash flow and reinvest profits, while strengthening local economic activities through member-driven financing.

As a growing number of VICOBA groups across the country conclude their annual savings cycles, profit distributions are increasingly serving as a critical source of reinvestment capital, enabling members to recapitalise businesses, expand trading activities and strengthen their financial positions ahead of the new financial year.

Data from selected groups show that profit distributions have risen by up to 30 per cent this year compared to last year, reflecting stronger loan recovery, expanding membership and the growing performance of member-owned enterprises, which together signal improved financial sustainability within VICOBA groups.

Speaking to Daily News, the group’s Founder and Chief Executive Officer, Ms Bahati Kyajoba, said VICOBA groups have increasingly filled a critical financing gap by providing working capital to small traders who are largely excluded from conventional lending systems.

“Our members mainly invest in small businesses which has enabled members to scale up operations and improve cash flow,” she said.

According to her, this year’s loan access tenure in her group ‘Zuia Rushwa’ has increased to 6.0m/- from 3.0m/-.

Interest earned from loans remains the main revenue stream, with three major sub-groups generating approximately 125m/- this year. She added that as profits grow, the group also adjusts their registration fee which currently stands at 100,000/- which aimed to strengthen capital and ensure sustainability of the lending system.

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In addition, Mr Yanga Omary, a VICOBA trainer and supervisor of Corner Boys group said the steady growth recorded by many groups reflects the rising role of VICOBA in SME development.

“Unlike formal lenders, VICOBA loans are accessible, flexible and tailored to the realities of micro-entrepreneurs, making them a critical tool for local economic growth,” said Mr Omary.

Moreover, Ms Asnati Simon, chairperson and member of several savings groups said VICOBA financing has enabled her to build multiple income-generating ventures over the past four years with her annual savings this year soars to over 6.0m/- from below 2m/-.

“Through these funds, I have invested in at least three businesses, managed operational costs and strengthened my financial position,” she said.

Similarly, in Iringa Region, Lugalo Group member Ms Devotha Mwadisa said VICOBA financing enabled her to start a small business with start-up capital of about 2.0m/- after completing one savings cycle.

As savings cycles draw to a close, VICOBA are reinforcing their role in SME financing by effectively mobilising domestic savings into productive capital, supporting business expansion, job creation and the growth of household incomes at the local level.