Beyond the Cash Box: Five Reasons Why You Should be Digitizing Your Community Savings Groups.
Savings groups have been an integral part of community-based financial systems for centuries. Originating from age-old traditions and practices, these groups have offered members a platform to pool resources, access microloans, and provide mutual financial support. Predominantly found in areas with limited access to formal banking, savings groups have acted as financial anchors for many.
Yet, despite their deep-rooted history and significant impact, savings groups operate within a closed financial loop.
Their transactions and economic activities remain detached from the formal banking sector. This detachment implies that members cannot establish a recognised financial history despite regular savings and borrowing, limiting access to a broader range of financial services.
Amidst this, the rise of FinTech has ushered in a new era of innovation to bridge the gap between traditional savings groups and modern financial systems.
FinTech companies, leveraging artificial intelligence, blockchain, and mobile banking, have recognised the untapped potential of these community-based groups. By introducing tailored digital solutions, these companies are enhancing the operational efficiency of savings groups and connecting them to a global financial network.
This fusion of technology and tradition revolutionises how savings groups function, offering them a pathway to greater financial inclusion and empowerment.
At Athari, we are deeply invested in this transformative journey. Here are five reasons why we advocate for savings group digital integration with our NGO clients:
1 / Trust Through Technology: Enhanced Record Keeping
Leveraging blockchain technology and distributed ledger systems, digital platforms can offer tamper-proof and transparent record-keeping.
Every transaction is timestamped, verified, and stored across multiple nodes, ensuring data integrity. This system minimises manual errors and deters fraudulent activities, improving trust within groups and the wider community.
2/ Reaching the Unreachable
Utilising satellite and mesh network technologies, digital financial services can penetrate even the most remote areas.
Even with group access to one basic smartphone, members can access their accounts, conduct transactions, and apply for digital loans. Additionally, some FinTech products have incorporated SMS-based features, allowing groups with analogue phones to receive updates and manage their accounts without internet connectivity. This ensures that savings groups remain connected even in areas with limited digital infrastructure.
3/ Obtain Data-Driven Insights
Advanced analytics and machine learning algorithms can process the vast amounts of data generated by digital platforms.
These insights can identify trends, predict potential financial challenges, and offer proactive solutions, ensuring the sustainability and growth of the savings group. Furthermore, organisations creating savings groups, such as NGOs, can leverage analytics to monitor group activities, assess performance, and provide targeted support.
4/ Building Credit Histories
Integrating with credit bureaus and utilising API endpoints, digital platforms can report savings and loan repayment behaviours, allowing members to build a formal credit score. This score can be pivotal when seeking larger loans or negotiating interest rates with formal financial institutions.
5/ Integration with E-Money Services
Savings groups can seamlessly integrate with e-money platforms and digital wallets by leveraging open banking APIs. This integration facilitates instant transfers, digital loan disbursements, and access to online marketplaces. Moreover, by utilising NFC (Near Field Communication) technology, members can make contactless payments, further promoting the adoption of digital money.