Analysts upbeat on Saccos' digitisation

Dar es Salaam. Analysts expressed confidence Wednesday that as more Savings and Credit Cooperative Organisations (Saccos) digitise their operations, more Tanzanians will have access to financial services, develop wealth, and boost economic growth.

If the current Saccos’ determination to go digital materialises, its members will be accessing the same services that a bank customer today does, wherever he or she is.

Over the years, Saccos have been crucial in promoting financial inclusion, which is key to shaping the country’s economy.

They have played a crucial role in providing financial services to underserved communities, especially those in rural areas.

However, despite the key role they play, only five to 10 percent of Saccos in Tanzania have em-braced digitization, according to the Savings and Credit Co-Operative Union League of Tanzania (SCCULT (1992) Ltd) executive secretary, Mr Hassani Mnyone.

Until May 2023, he said, a total of 862 Saccos were issued operating licences by the Bank of Tanzania (BoT).

This suggests that only between 43 and 86 Saccos have digitised their operations.

This being the case, a country has a mountain to climb if it is to ensure all Saccos are digitised.

It is on those grounds that SCCULT (1992) Ltd. and UBX/Umoja Switch last week signed a Memorandum of Understanding (MoU) meant to make Saccos go digital with a view to enhancing its members’ access to a wide range of financial services at their fingertips.

Under the cooperation with an information technology company, UBX/Umoja Switch, Saccos members will be able to save, take credit, and transact with greater ease and convenience.

The University of Dar es Salaam’s economist, Prof Abel Kinyondo, told The Citizen yesterday that the expansion of digital financial services in Tanzania holds great promise for advancing growth and driving broader socio-economic development in the country.

He said digitising the Saccos operations could improve the governance system, which in turn will have implications for the country’s economy.

With digitisation, added Prof Kinyondo, there will be a proper financial management system that will give Tanzanians confidence to join Saccos.

According to the latest study by Global Findex Report 2021, there are almost 1.4 billion unbanked people in the world who do not have access to proper banking services in their locations.

The major reason for this astounding number is a lack of awareness, access, convenience, steady income, and trust. But, trust is a huge factor, as it keeps people unbanked even if they have access to banking facilities.

 These statistics above reveal the need for a system that can provide access to banking services in every location and to all classes of people.

That is where digitisation of Saccos came into the picture.

“As in Bangladesh, digitalization will contribute in poverty alleviation,” Prof Kinyondo exuded his optimism.

In Bangladesh, Saccos are seen as an important instrument for reducing poverty.

An economist from Mzumbe University, Daud Ndaki, said digitization of Saccos will play a crucial role in supporting the local economies by enhancing financial inclusion.

This, he added, will in turn attract greater participation from various segments of the economy in the formal financial system.

“Easy accessibility of financial services will save time that one could have used to visit the physical offices of Saccos,” Dr Ndaki told The Citizen yesterday.

He added: “This will give members of Saccos more time to concentrate on economic activities.”Customers today do not have time to waste and believe in as much convenience as they can get, especially in financial services.

With the increased penetration of mobile device users and mobile money services, it is now necessary to allow members of Saccos to access financial services through their mobile devices.

The University of Dar es Salaam Head of Finance Department, Dr Tobias Swai, cautiously welcomed the Saccos digitisation plan, saying it will make economic sense only if robust systems are put in place.

The majority of the members of Saccos are small business owners, who are away from banking facilities, and considering that factor, Dr Swai said, digitisation will be a sigh of relief to them.

“This is the case because digitization will boost financial inclusion and money in circulation,” he told this paper.

Small businesses need the best financial partner that can provide smooth functioning and quality services to grow their businesses.

“The performance of the digitised Saccos will depend on how robust the system is. The system needs to be carefully developed,” cautioned Dr Swai.

Speaking last week, Mr Mnyone said UBX/Umoja Switch will have a responsibility to build a robust system that will take Saccos and its members into a deliberate channel where they can transact through Umoja Switch Automated Teller Machines (ATMs).

The system, he added, will also help them use mobile applications so that they can make transac-tions—depositing, withdrawing, and making payments for various services wherever they are.

In this transformative project, DSIK Tanzania, which represents the German Sparkassen Finance Group’s development-policy arm, will support SCCULT through technical advisory and capacity building.

DSIK Tanzania deputy country director Marius Siebert said that by leveraging the power of technology, they could enhance the efficiency and sustainability of Saccos.

“With the help of digital tools, Saccos can now track transactions in real-time and reduce paper-work, which ultimately contributes to reducing extra costs while still offering quality services to their members,” he noted.

Saccos were first introduced in Germany in the 1870s for poor people to avoid control and exploitation from money lenders.

In the 1900s, the idea eventually moved towards North America.

Then it reached Canada, the United States, Australia, and Ireland.

And as of now, Saccos has spread across 60+ countries, with a member pool of around 100 million people.