Digitalising Saccos to unlock inclusion

Kaka Mbabazi feels more in control of her life these days. She turned 73 at the beginning of this year and has never owned a bank account, until June when her granddaughter, Patience, signed her onto a mobile wallet service in addition to registering her with her local Sacco. 

Long story cut short, Kaka can now safely save her money—she suspects her other grandchildren were pinching the money she used to save in a knot tied up in the corner of her suka, which she wears daily. But even better, all her grandchildren can now send her money directly. She no longer has to go down to the trading centre to get money sent from the mobile money vendor.

 Kaka’s experience is an example of the immense possibilities opening not only for the previously unbanked masses but for the economy. The coming together of the Saccos and fintech is proving to be a powerful tool for promoting financial inclusion. According to the recent Finscope report released earlier this year, Saccos recorded the fastest growth in uptake, at 14 percent from five percent in 2018. It also showed Village Savings and Loans Associations (VSLAs) and Saccos—in that order, are being used by most Ugandans as savings mechanisms. 

In addition, the mobile phone has seen its rates of adoption as a savings mechanism jump to 42 percent last year from 23 percent in 2018. In rural areas, mobile phone ownership stands at 67 percent. To take us back in time, access to financial services was confined to the big urban areas. To have access, one would have to walk to a branch, fill in massive amounts of paperworkwhile interacting with intimidating officials and very often still fail to meet the bank’s requirements for opening an account or giving up when one came face to face with the onerous terms around opening and minimum balances required to maintain the account. 

The explosion in Sacco numbers means the fear factor has been greatly reduced and now with the adoption of fintech, financial inclusion is becoming a real possibility for more and more people, for whom this was a myth. Over the last 12 months, we have signed on hundreds of thousands of individuals, thousands of Saccos, VSLAs and processed millions of transactions from mainly the previously unbanked populations. From a macroeconomic perspective, this mobilisation of resources can only benefit the economy with higher savings rates and subsequently more credit resources, fulfilling the bank’s purpose of fostering prosperity for all Ugandans wherever they are.

 While there is widespread adoption of the mobile phone, there is great need for digital literacy so that people can be more comfortable exploring and using the full potential of their phones. It is a daily endeavour to teach our clients how to use their phones not only to access their mobile wallet but to improve their own productivity. Secondly, while there are thousands of Saccos out there, few are licensed. This is often because some do not meet all the compliance criteria to be recorded. Saccos need further help to help register them with Uganda Microfinance Regulatory Authority (UMRA).

 It goes without saying that greater opportunities avail themselves when these organisations can be properly incorporated. The ease of accessing mobile money service platforms is such that even individuals with limited digital skills, like those using USSD, can engage with the platform without difficulty. 

Accessibility is key in ensuring no one is left behind in the digital revolution. The combination of easy access and competitive interest rate has empowered many like Kaka to safely save and grow their money, contributing to a greater sense of financial security and inclusion.

The convergence of Saccos and fintech is proving to be a powerful tool for promoting financial inclusion, turning what was once a myth into a reality.

The author, Ms Brenda Mpoora is the Head of Fintech Business at PostBank.