• Financial Services
Start Date:
26 Sep 2022

A Federation of Savings Group in Ayalagaya

A key milestone toward self-sufficiency


Karimu is very pleased with the performance of the savings groups we have trained in Ayalagaya. The groups that have graduated from our training are running their meetings efficiently and transparently. We are seeing their savings grow year to year. And those that have taken advantage of our financial assistance program have all repaid their loans with zero late payments. However, we do not want to continue to be the main source of additional capital for groups. We want to support each community to be self-sufficient enabling Karimu to move its focus to other communities. 


To that end, we are helping the savings groups that have graduated from our training to form a village savings and loan federation. The federation is a group of member savings groups who pool their resources to enable larger and longer term loans to be made available to savings groups and its members. It operates similarly to a savings group providing member groups with savings, investments, loans and loan insurance. Loans are given to savings groups rather than individual members. The Savings groups process individual member loans as normal.  Groups are allowed to borrow up to 3 times their savings but no more than 50% of their prior years total share-out. 


Each member group elects representatives to the federation. The federation is a self-governing organization with elected officials from the representatives and a mutually adopted constitution.  Since transactions that affect the groups are carried out by their representatives, they are not done under the eye of all of the savings group members.  To establish trust in the federation and its processes, the transactions of the federation are modeled on those of a savings group using the VSLA method. It is essential to ensure that federation procedures are fully understood and rigorously implemented in a standardized way. Thus, everyone who represents a savings group at a federation meeting is immediately familiar with the way in which meetings are conducted and is able to carry back reports to their own group that everyone will understand.  The federation strives to maintain the same level of simplicity, transparency, and maturity as the savings groups. In addition, the federation has formed an Assessment Committee. This committee is responsible for monitoring the effectiveness and loan portfolio quality of the federation member groups and for assessing the readiness of groups to receive loans from the federation. This is a function that Karimu has been performing up to know, but will train federation members to perform this function for its member groups. 


A key distinction from the savings group is that while a traditional savings group is decapitalized annually, the federation is not. Only the profits are shared-out annually so loans can be made year round.


Given the larger loan values, a federation may need access to external funds to be able to meet members’ expectations for loans. Once the federation has been fully trained and is operating effectively, Karimu will redirect the Financial Assistance program away from individual savings groups and towards the federation.


The group representatives receive training in how the federation works. It included lecture style presentations, small group practice, and field visits to member groups.

In late September 2022, we invited Tanzanian microfinance expert, Stella Tungaraza, to come train our groups. The federation was officially formed with 8 member groups and 3 representatives from each. In October the group registered with the government and in November opened their bank account. They began saving together in December. We will continue to train and review the Village Savings and Loan Federation procedures and will also train members in how to perform assessments to assure that member groups remain creditworthy and continue to score 80% or above on the assessment. We hope to see the group fully functioning by early 2023.


The federation representatives work on completing the forms for registering with the government.


Federation meeting of representatives from member savings groups.


Update December 2023: The federation has been operating very well all year. They began saving together and giving loans to member savings groups. Their initial assessment in May scored a 97% which speaks to the quality of the representatives each group has sent and they ended the year with 99%!


In order to operate independently, we trained a disciplinary committee on how to perform assessments of their member groups and perform data collection. During assessments they evaluate and give feedback to member groups about their meeting practices, committee effectiveness, and record keeping to ensure that all groups maintain creditworthiness. They plan to maintain a 2 year rotating committee membership so that experienced disciplinary committee members can train new members each year.  They have assessed each member group during the second half of the year and all member groups have maintained above an 80% score. The average assessment across member groups is 90%.


Part of the practical training, disciplinary committee members attend a member savings group meeting, conduct an assessment, and provide feedback to their group.


Beyond the basics in their constitution, the federation has documented key processes and practices to maintain consistency and quality in their membership and the ability to demonstrate creditworthiness of the federation overall e.g. how to admit a new member group or what is required for a group to receive a loan. In addition, they have assessed each member group to assure that they are maintaining their creditworthiness.


In December, the federation held their first profit sharing meeting marking their first successful year. All members of all savings groups were invited to attend the annual general meeting and many had questions which the federation management committee and other representatives answered clearly and confidently.


The annual meeting where all members of all member savings groups are invited.


Members ask questions and our program manager reviews the books as part of the assessment.


At year’s end, they applied for and received $12,867 in  financial assistance from Karimu. This represents another major milestone towards community self-sufficiency as the federation becomes the focal point for loans to savings groups in Ayalagaya. We anticipate that the federation will begin adding new members in 1Q 2024.


Update June 2024: The federation opened to new membership in 2Q 2024. Savings groups that have graduated from the Karimu program and are assessed at 80% or higher are eligible to join. Federation members met with eligible groups to discuss the federation, how it works, and entry and participation requirements. New groups must pay Tsh 50,000 (~$20) to the loan fund which is about what each originating member paid to get the federation started plus another Tsh 45,000 to the insurance fund. Each group pays a monthly fee of Tsh 15,000 into the insurance fund for covering losses, should any arise, so this is the equivalent of 3 months of payments. Two groups have applied to join and been accepted bringing the total to 10 members groups, with 7 more graduated groups remaining eligible. We expect other groups to join as they pay off their Karimu Financial Assistance since we will not be offering them future loans.



  • Self-governed group that can mobilize greater capital for loans

  • Simplified process for Karimu to augment capital available to savings groups



  • Karimu cost: $6,000

  • Community cost: All operational costs are born by the member groups.