AKF Digital Savings Groups (DSG)
The Aga Khan Foundation has been training savings groups for decades, starting with Rural Support Programs and most recently in the form of Community Based Savings Groups (CBSGs). However, scale is inhibited by implementation cost (an average of $30 per member globally), as CBSG is an entirely donor-dependent activity. Further, in Tanzania, where AKF has its largest CBSG program, the risk of cash theft is a growing issue.
In 2016, in order to scale faster, at lower cost, as well as to eliminate the risk of cash theft, AKF began testing a new Digital Savings Group offering with experienced CBGSs in Southern Tanzania. The DSG platform was designed by AKF with the facilitation from Bankable Frontier Associates. It was developed, and is hosted by Selcom, a Tanzanian technology company and payments aggregator. Financial Sector Deepening Trust provided the financial support for this effort.
AKF Digital Savings Groups, are groups of 15-30 members who operate a savings group over a nine-month to one-year cycle on average, just as CBSGs have always done. However, DSGs are entirely cashless and paperless, while maintaining the social aspects. Unlike the cash groups, members of DSGs can save whenever they like, with no maximum limit to the amount. During meetings, which occur every two weeks, members can request a loan for up to three months, at a cost established by the group itself. Once per cycle, the DSGs must share out all of their savings and profits, and may start a new cycle if they wish. Most importantly, DSGs are a physical group, rather than a virtual group. The presence of a mutual support group has significant implications for extending outreach to users at the bottom of the pyramid.
DSG members pay a user fee for access to the DSG platform, which is a shared software service. By saving digitally, members eliminate the risk of cash theft, as well as the inconvenience of count cashing and recordkeeping in the cash-based system. They also meet half as often freeing up time for other activities. DSGs will be far cheaper to train than cash-based CBSGs.
The DSG offering uses the the GSM network (with the current platform, mobile data is not required) and depends upon access to at least one network, as well as an agent of a mobile money provider.
DSGs will support digital finance ecosystem development by encouraging mobile wallet uptake and the use of complimentary digital financial services. Very critically, DSGs can supporting the mobilization and training of late adopters of technology through peer-to-peer interaction, which has significant implications for inclusion at the bottom of the pyramid. AKF welcomes inquiries from banks and e-money issuers who are interested to explore strategic partnerships to resolve financial exclusion amongst the poorest.
For any questions please contact us at firstname.lastname@example.org
Hugh Allen writing in Savings Revolution: “Coming your way (like it or not) Digital Savings Groups”