Savings groups become digital lending pipeline
DAR ES SALAAM: DIGITAL banking is giving savings groups a new route to formal credit, allowing members to leverage their deposits for collateral-free loans while lowering the cost of selected digital transactions.
VisionFund Tanzania Microfinance Bank is betting on that shift with the launch of its VFT Smart Banking App, expanding access to banking services beyond its physical branch network as competition for underserved customers intensifies.
Chief Executive Officer Mr Rogathe Godson said yesterday that the digital strategy represents a broader shift in how the bank delivers financial services, allowing it to reach customers beyond its branch footprint.
“The strategy is aimed at taking banking beyond physical branches and bringing financial services closer to customers where they live, work and conduct their businesses,” he said.
High transaction costs remain a barrier to digital financial adoption, particularly among low-income customers, according to VisionFund Chief Financial Officer Mr Henry Horombe.
The bank expects removing charges on selected transactions will encourage customers to shift from cash to digital channels.
VFT Smart Banking allows customers to pay bills, government levies and Lipa Namba transactions without transaction charges, Horombe said, potentially increasing digital payment activity while lowering the cost of everyday financial transactions.
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“Lowering the cost of digital transactions can help bring more underserved customers into the formal financial system and support the transition towards a digital economy,” he said.
Chief Operating Officer Mr Deogratius Siria said the app’s key innovation, the Dunduliza Group Account, is designed to turn group savings into a source of faster and larger credit without requiring collateral. The account combines the savings discipline of traditional VICOBA groups with digital records and automated transactions, improving visibility over contributions, borrowing and repayments, he said.
Under the model, members can borrow up to three times their savings without collateral, while the digital system is intended to shorten waiting periods associated with traditional group lending. The bank charges 4 per cent a month on Dunduliza loans, with repayment periods of up to three months, according to the lender.
The move comes as financial institutions increasingly shift services to digital platforms to reduce distribution costs, widen customer reach and increase the use of formal financial services.
For VisionFund, the strategy could also deepen its lending base by converting savings-group participation into a pipeline of borrowers while using digital channels to serve customers outside its branch network.
