Formal financial institutions like banks cannot be everything to everyone. There are limits within formal banking environments that make it difficult for them to serve all customers. For instance, farmers, boda boda drivers seeking loans or favorable savings products struggle to provide collateral or afford the fees that would satisfy the regulations and requirements governing a traditional financial institution.
Those individuals often turn to alternatives, such as Micro-Finance Institutions (MFIs) and Savings and Credit Cooperative Societies (SACCOs).
The current gap
According to a report by Researchgate, SACCOs are making a great contribution in changing the saving culture of the members and increasing the financial savings. This improves the rural microfinance mobilization. SACCOS as a tool have contributed to changing the saving culture of rural members on efficient and effective utilization of resources. Even though, in their bylaws every member must save fixed amount of money regularly in the form of deposit in prescribed time, the receipt journal of the societies shows that there is irregularity of saving the money by some members.
The challenges are shortage of finance for loan, irregularity in saving, weak collection of loan receivables, no collaboration with other financial institutions, limitation in awareness creation, and limited support of government to lower administrative level. Therefore, to fulfill the members’ financial need cooperatives have to increase the number of members to arrange capital injection.
Many members that previously used such groups for most of their financial needs, are starting to move to other providers for convenient day-to-day transactions such as transfers and payments, and only use MFIs or SACCOs for specific requirements such as lending.
Efficiency and access lie at the heart of the problem, as most MFIs and SACCOs groups still rely heavily on paper-based processes, costing them money and limiting their reach with customers. It also amplifies their risks: with limited liquidity, defaulting customers can quickly make it hard to maintain operations. Additionally, complying with regulations is much more challenging.
This, combined with a generally riskier customer base, can put a lot of pressure on their financial resources. And since many of their potential customers are in rural areas, it’s expensive to enrol new ones.
Imagine what a SACCO or MFI agent can achieve if they could do all of their customer onboarding on the road with a tablet device?
Wakandi aiding the process of digitization
Previously, traditional financial institutions could not affordably and effectively serve those outlying customers. Yet now, SACCOs and MFIs are aiming to digitise their infrastructure the way banks are.
Digitisation with Wakandi isn’t expensive and SACCOs and MFIs can shift to the latest technology without huge investment. While many SACCOs and MFIs don’t have the resources to implement these digital solutions by themselves, there is an alternative.
The majority of these groups favour a revenue-sharing model with an appropriate banking technology platform, using the ‘as a Service’ approach to keep their initial investment costs down.
SACCOs and MFIs can use the Wakandi solution to offer loan and savings products that work for their members, such as flexible micro-loans or group savings accounts. Wakandi CAMS application can be used as the platform for digital onboarding and mobile apps. Moreover with Wakandi, these institutions will be able to offer lower rates on loans, including mortgages, and higher yields on savings products .
Utilizing the Wakandi services eliminates the need for these groups to ramp up their technical expertise and investment in IT infrastructure. This promotes cost savings, but more importantly allows them to focus on the more important aspects of the business.
Wakandi provides simpler yet tech-empowered ways for members of a SACCO to transact – via apps on smartphones or USSD that does not require a smartphone. This helps SACCOs and MFIs to take the center stage in providing financial services to places where other financial institutions cannot.