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Presented at the Poverty Policy Week Mwal . Nyerere International Conference Hall - Dar es Salaam. The Case of Village Community Banks (VICOBA). SCALING UP BEST PRACTICES IN MSMEs FINANCING AND MAXIMIZING POTENTIAL OPPORTUNITIES FOR SUSTAINABLE PRO-POOR AND INCLUSIVE GROWTH.
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The Case of Village Community Banks (VICOBA)
SCALING UP BEST PRACTICES IN MSMEs FINANCING AND MAXIMIZING POTENTIAL OPPORTUNITIES FOR SUSTAINABLE PRO-POOR AND INCLUSIVE GROWTH
By Mr. Filbert Sambagi
(SEDIT EXECUTIVE DIRECTOR)
+255 754 618809
Tanzania is among the developing countries in the world, however, the government and its people are struggling to reduce poverty and improve their economy.
The Tanzania economy is characterized by a small segment of large firms made up of subsidiaries, franchisees and a few state owned companies and very large segment of micro-enterprises dominated by very small enterprises most of which are informal.
An insignificant small and medium sized enterprises segment separates the two segments.
Therefore sustainable scaling up of best practices should focus MSMEs most of which are informal for the sake of filling the so called “the missing middle”.
SMEs play a fundamental role in utilizing and adding value to local resources
SMEs development model
Financial access Strand 2009 - 2006
Informally included strand
Reasons for not having savings and investment products
Is a non-governmental, non-political, non-religious organization which has been established with the mandate of bringing social and economic development for the majority poor Tanzanians in rural and urban areas.
Sustainable Pro poor and Inclusiveness
VICOBA (Village Community Banks)
The Village Community Banks (VICOBA) is a development model , that employees holistic approach. It is the replication of MMD (Mata MasuDubara) model. MMD which means Women on the Move towards development was promoted by Care International in Niger in 1991 being an adoption of African traditional self help practices.
VICOBA model operates through self selected groups of people of 25-30 members who are essentially in smaller groups of fives called collateral groups (these acts like pressure groups in loans payments and guarantee systems).
VICOBA (Village Community Banks)
Once it is formed, members elect the group management committee leaders among themselves; and there after the whole group undergoes training on business management, entrepreneurship and group management
For around 16 weeks, the group attends banking and training. The banking operation starts by pre determining a group share value, of which can Tsh.1000, 2000, 5000 etc, depending on the economic status of the group members. Each member has to buy between 1-3 shares per week plus other pre determined health, education and group operations funds contributions. Thereafter, group is linked to formal financial service provider-commercial bank.
VICOBA Training Phases
SEDIT has a developed a special package for training VICOBAs with well-defined curriculum. Training is a sustain inability pillar that forms the major strength of VICOBA model
To sensitize the local authorities and the community acquaint them with the basic characteristics of the VICOBA methodology and recruit them into the program and form groups.
To enable group members understand clearly how to manage their group activities and provide business management skills to enable them select, plan and manage their IGAs profitably.
III Development phase - 4 months
Objective: Assist the group to become self-governing
The group members at this phase are taking loans and reimbursing accordingly. It is a high time as well for other integrative training like appropriate skills, governance, agribusiness etc
IV Maturity phase - 3 months
Objective: Assist the group to become independent from the project
The Field Agents visits the groups at the end of three months. At that time, they will do a final evaluation of the group. Based on this evaluation, decision is done on whether the group is ready to be independent, or if it still needs assistance. Based on the evaluation results the Field Agent can estimate appropriate time, and determine type of and magnitude additional assistance to the weak groups.
Due to the support from international organizations, government and companies in implementing SEDIT has impliemented several VICOBA programs
For about 8 years SEDIT has conducted different VICOBA projects with the support from partners like FSDT for 20 districts, WWF 5, SONGAS 2 districts, UNDP/Ministry of Finance – Poverty eradication Department 6 districts.
SEDIT ‘s SUCCESS TO SCALE UP
Over 4000 VICOBA groups with 120000 members, with loan fund of over Tzs.80Bil. from rural areas, 60 % being women. Also there are about 500 paraprofessionals trained by SEDIT as VICOBA FTs
Over 50 institutions have been capacitated to run VICOBA projects including local government institutions and NGOs
Linkages of VICOBA groups to other service providers particularly agribusiness, health, simple technologies, education and good governance has been successful and between groups.
CHALLENGES IN SCALING UP VICOBAs FOR INCLUSIVE GROWTH
Standards and quality management
Political interference in the VICOBA groups and the model
Missing recognition for linkage with forma sector due to Informality
Absence of institutions for linkage to provide services like simple technologies
Timely information flow and gathering of data.