When a handful of women in Ukonga gathered under a mango
tree in 2002 to pool their small savings, few imagined they were planting the
seeds of a movement that would later reshape Tanzania’s financial landscape.
What began as a humble “circle of trust” has evolved into
one of East Africa’s strongest grassroots financial networks—formal, digitised,
and protected by law.
This transformation is embodied in the rise of Tanzania’s
structured Microfinance Groups, which have now replaced the informal VICOBA
system that dominated communities for nearly two decades.
Once loosely governed and prone to misuse, the model is
today anchored under the Microfinance Act of 2018, marking a turning point in
how low-income households access finance, credit, and economic empowerment.
The shift did not unfold overnight.
Speaking during a capacity-building session for business and
economic journalists in Dodoma on November 20, 2025, the Bank of Tanzania’s
Microfinance Supervision Manager, Mr. Dickson Gama, paused briefly before
revealing a figure that drew murmurs across the room.
“Today, more than 70,900 microfinance groups have been
formally registered through the Wezesha Portal,” he said — a milestone that
reflects just how deeply community finance has embedded itself across the
country.
For years, what Tanzanians casually referred to as VICOBA
were simply informal savings circles. Families depended on them for school
fees, start-up capital, or emergency needs.
The system, according to him, lacked regulation, proper
records, or accountability.
“Some members lost their savings; others gave up on the idea
entirely,” he said.
Before the new law was introduced, VICOBA groups were widely
used but riddled with challenges — leaders who operated without transparency,
members who felt misled, and a complete absence of national data.
Yet despite these weaknesses, the model remained a lifeline
for financially excluded households.
The government’s reforms recognised this potential — and
moved to professionalise it.
Under the new framework, Microfinance Groups must register
through the Wezesha Portal, a digital system managed by the Bank of Tanzania in
collaboration with Local Government Authorities.
According to him, registration requires a constitution,
membership list, founding resolutions, and endorsement from the local
government office.
“Approval transforms the group into a legal microfinance
entity bound by rights and responsibilities under national law,” he noted.
Groups can operate with between 10 and 50 members, appoint
interim committees, and begin operations within three months of registration.
Their obligations are clearly defined: keeping accurate
records, running bank accounts, and submitting semi-annual performance reports
— all while safeguarding members’ rights.
Strong internal controls are built into the system. Every
group must appoint an internal auditor, while the Bank of Tanzania and
delegated authorities can conduct oversight visits.
“Mismanagement now carries consequences — ranging from
suspension of leaders to cancellation of registration and fines of up to TZS 10
million,” Mr. Gama noted.
Even operational boundaries are set by law. Registered
groups may collect savings, issue loans to members, and support community
welfare initiatives — but they cannot open branches or accept deposits from
non-members unless licensed.
“This ensures that microfinance activities remain secure and
community-driven,” he said.
Digitisation is adding a new layer of transformation. Poor
record-keeping and weak supervision long exposed groups to losses, but the
shift toward digital microfinance groups, integrated with mobile networks and
commercial banks, is reshaping safety and transparency.
Mr. Gama said the Bank of Tanzania’s supervision of digital
financial services has strengthened the reliability of mobile transactions,
offering real-time monitoring and improved data integrity.
Yet the story goes far beyond finance. These microfinance
groups are quietly influencing women’s empowerment, household resilience, local
entrepreneurship, and community development. They help families pay school
fees, absorb economic shocks, invest in farming, and start small businesses. In
villages where banks are kilometres away, these groups are the bank.
The evolution traces back to 2000, beginning with the Jozani
Savings and Credit Association in Zanzibar—later refined by innovators such as
Salim Zagar and supported by organisations like CARE International. Today, the
model stands as a key pillar of Tanzania’s financial inclusion strategy.
Its impact is visible across the country: from market
vendors in Mwanza running stable kiosks, to smallholder farmers in Ruvuma
securing seasonal loans, to youth groups learning to turn savings into capital.
Each group operates as a miniature economy, built on trust but strengthened by
law.
As Tanzania accelerates economic reforms and digital
transformation, microfinance groups stand as proof that when communities
organise around shared goals, they do more than save — they propel social and
economic change.
And just like that meeting under the mango tree 23 years
ago, the future of grassroots finance still rests on something simple: people
coming together, believing in one another, and understanding that progress
often begins with the little they have.