Digitizing Savings Groups: Opportunities and Challenges from Uganda
Written by Nick Meakin, Senior Advisor, Digital and Financial Inclusion at Mercy Corps, with the support of the Apolou team in Uganda.
Savings Groups (SGs) are one of the most widespread economic empowerment initiatives worldwide.
By providing the opportunity to save frequently in small amounts and to access credit on flexible terms, SGs help members to meet more immediate short-term consumption, investment, and emergency needs. Group members are able to accumulate assets and increase their resilience to shocks and stresses.
The introduction and adoption of technology is transforming the global landscape for Savings Groups and the agencies that engage with them. Technology solutions are developed and employed to facilitate a wide range of activities such as group mobilization and training, digital recordkeeping, electronic transactions, monitoring and results measurement, and access to financial and non-financial services.
Mercy Corps is working with partners in a number of countries to enable savings groups to use digital applications to record the savings and loan transactions at meetings, instead of using a paper-based ledger. The digitization of record-keeping could:
> improve the accuracy, simplicity, and transparency of record-keeping for SGs, particularly the end of cycle share-out, which can be a challenging calculation
> enable formal Financial Institutions (FIs) to access transaction data (as an indication of a group’s credit worthiness) and provide credit to the groups
In the Karamoja Region of Northern Uganda, Mercy Corps’ USAID-funded Apolou Activity entered into a partnership with a local technology company, Ensibuuko, to enable groups to use the Mobis App. The Apolou Activity recently conducted a pilot in which 170 groups were trained and registered on the app, and provided with one smartphone per group. A recent study evaluated the experience of, and impact on, the groups and the savings group project, and the likelihood of sustained and scaled usage.
PILOT RESULTS: BENEFITS AND CHALLENGES
Improved record-keeping
The feedback from the groups who used the app was generally positive. Groups liked the app because “it is accurate and saves time during the meetings compared with the paper ledger”, and “it makes our work easy because we no longer do a lot of writing”. This simplification of work has “reduced errors and crossings-out”’. Groups also trusted the app because “no-one can manipulate the records” as opposed to the manual ledger in which “pages can be torn and we lose our records”. Using the app, it is “not easy to lose records, unlike the book which might be stolen by thieves from the house”; if the phone is lost or stolen, groups can download the app and get the records again. Groups also found that using the app saved them from buying books, pens, and rulers for the manual ledger.
Challenges of using the app
However, some groups and members also reported challenges with using the app. Even though the app works off-line, groups need to get online after meetings to upload the data; the poor network in some areas can require a user to “move some distance to access an internet network which wastes time”. Some groups found that “charging the phone is an issue, because we lack power”. Another group could not get the app to work and struggled to get the support they required from their supervisor who “did not reply to our message and has not come to visit our group since he trained us on using the app”. Another group was frustrated that “only two members from the group were trained. If they don’t attend the meetings, we can’t use it”’. Ensibuuko indicated that is was often challenging to train more than two people in a group because of low literacy levels and a lack of familiarity with mobile phones and apps. Some groups experienced challenges of keeping and maintaining the smartphones that had been provided by Apolou — some were either damaged, or ‘personalized’ by individual group members.
Improved group monitoring and reporting
In addition to helping groups, the app also proved helpful to Apolou. Until deploying the app, the program was not collecting group data, which made it difficult to monitor and report on group performance. With the deployment of the app, Apolou can now view real-time transaction data from the groups through a dashboard, and view total savings and loan balances by group, by area, and aggregated. This has improved monitoring, supervising, and reporting on the groups and greatly reduced the cost of data collection.
PROSPECTS FOR SUSTAINED & SCALED APP USAGE
Most groups indicated their intention to continue using the app. The extent to which they do so will likely depend on the value proposition for both the groups and Ensibuuko. According to Ensibuuko, this is largely dependent on the groups using the app to access formal credit, which so far has not happened. Ensibuuko’s experience with other programs shows that groups start and continue to use the app partly because of the improved record-keeping experience, but mainly due to an expectation that it will facilitate access to credit. If this does not happen, usage often drops.
From Ensibuuko’s perspective, facilitating access to formal financial services should provide revenue in the form of commission paid by Financial Service Providers who use the data to lend to groups. Groups are currently paying a license fee, subsidized by Apolou, to use the app; though evidence suggests that groups are not willing to pay to use the app just to improve record-keeping.
Enabling MFIs and Banks to lend to groups based on their transaction data from the app has thus far proved challenging. Since the data is largely self-reported, banks may not trust it and prefer to send a staff member to meet and appraise the groups, which can be expensive and time consuming. In an attempt to address this, Ensibuuko acquired a lending licence and is providing loans directly to groups based on their transaction data, to prove to the banks that the data can be trusted and used to evaluate credit-worthiness. So far, the loans have been repaid well by the groups, so Ensibuuko is hopeful that the model can be scaled.
The other initiative that Ensibuuko has developed is deploying ‘Digital Community Entrepreneurs’ (DCEs). DCEs are responsible for supporting the groups to use the app, and for verifying that the data entered is accurate. In return, they are paid commissions from members’ license fees and from loans accessed and repaid by the groups. Some of the Private Service Providers (PSP) deployed by Apolou to train and support groups were trained as DCEs, but few seem to have embraced the role fully. This may be a reflection of a nascent model, which has yet to establish a sufficient income for DCEs. To address this, Ensibuuko has introduced a ‘marketplace’ function on the app through which DCEs can sell products and services to groups, for example solar powered products and airtime, and earn a commission from groups. Ensibuuko are hopeful that this can contribute to the sustainability and scalability of the app.
Looking ahead
While groups have reported an initial benefit to using the app, additional learning and evidence is needed to sustain and scale the model among these and other groups in the Karamoja Region of Northern Uganda.
These lessons are applicable more broadly to the wider savings group community:
- App providers and implementing partners should continue to explore the value proposition to groups, providers, and partners of using apps to digitize savings groups’ record keeping. This should include, but not be restricted to, app providers and financial institutions continuing to explore how the digitization of savings group data can be used to facilitate lending to groups.
- App providers should continue to identify sustainable and scalable business models, including increasing the range of services that are provided and ensuring access to affordable smartphones.
- Partners like Mercy Corps should support the facilitation of testing and scaling models, in the short term, to ensure they are sustainable in the long term.
For more information, contact Nick Meakin at nmeakin@mercycorps.org.
