NEW BANK, VISIONFUND TANZANIA EYES RURAL CUSTOMERS

The Swedish Ambassador to Tanzania, Lennarth Hjelmaker speaks during the official opening of VisionFund Tanzania in Arusha recently.

Arusha. It was all cheers as VisionFund Tanzania, a new banking facility, was officially inaugurated in Arusha the other week with prospects that it would boost small businesses and reach out to rural farmers.

“We are committed to reaching out to rural areas to enable villagers open accounts and enable them to access loans,” said Joyce Temu, microfinance company deputy chief executive during the launch.

She said using a new technology platform, including financial transactions through mobile phones, the bank was geared towards serving as many Tanzanians as possible to boost their incomes through soft loans. “We will issue loans and receive deposits through mobile phones. There will be no fees for opening savings accounts or any charges for transactions,” she said before Swedish ambassador to Tanzania Lennarth Hjelmaker, who cut a ribbon to open the new bank.

The microfinance company, which operates as Seda from 1996, was in May this year licensed by the Bank of Tanzania (BoT) to operate as a new bank, offering loans to its clients and it receives deposits. “We were granted a licence to operate as a microfinance company to be regulated by BoT in May this year. That paved the way for VisionFund Tanzania,” she said during the event, which also saw the opening of the first branch of the bank along Arusha’s India Street.

Other branches will be opened soon in Mwanza and Tanga, but currently the facility has 12 branch offices, four field offices and additional 32 outreach centres in the country. It is based in Arusha. According to Ms Temu, VisionFund Tanzania has over 36,000 clients, a loan book of about Sh13 billion and Sh23 billion assets. It has spread its services in 13 regions in Tanzania Mainland and is currently ranked the fourth largest and fast-growing microfinance institution in Tanzania.

“One of the bank’s new products,” she explained, “is ‘VFT Chap Chap’ under which the bank will receive deposits and issue loans through mobile phones. Our clients do not need to come to our branches”.

To deliver its financial products as efficiently and effectively as possible, VFT, as the bank is also known in its acronym, operates a state-of-the-art banking system (Temenos T24 MCB version R10) and communications backbone.

Under this, it has rolled out a cashless banking system that will provide clients with 7/24 (seven days/24 hours) access to their accounts through their mobile phones and the ability to transfer funds between their accounts and a mobile wallet.

The microfinance institution is also developing a tablet-based solution that will make internal processes, including loan and savings account application processes paperless. The system will also have a geographical positioning system mark and biometrically tag all clients and internal transactions to reduce fraud chances. But there are other reasons why VisionFund Tanzania is different from other banks besides VFT Chap Chap, a cashless mobile banking platform that enables clients to receive, repay loans and save.

These focus on serving rural areas, the provision of agricultural balloon loans that defer repayment of the principal until the end of a loan cycle and focuses on becoming savings-led, encouraging clients to save always and borrow carefully and only for investment. Others focus on the provision of foundational training clients required to become successful. This includes training in financial literacy, business basics, life skills and an empowered world view. Bank officials say the use of the modern technology platform in its transactions has already seen some benefits, including reduced overall administrative costs, automated operational activities and increased outreach to the population.

Access to funds in VisionFund Tanzania accounts has been through Vodacom’s M-Pesa, Airtel Money and Tigo Pesa and has also reduced client transportation costs, security risks and time commitment. Speaking during the launch, Arusha regional commissioner Stanslaus Mulongo urged microfinance institutions (MFIs) to extend their services to rural areas. He specifically called on them to target the livestock herders who have large herds of animals, but who risked losing them during severe drought or other calamities like disease outbreaks. He cited the 2008/09 drought in Arusha Region during which many of them lost thousands of cattle because of prolonged drought. “Let us re-design our focus to ensure livestock keepers don’t remain poor despite their many head of cattle”. Mr Mulongo also warned against the emergence of informal MFIs, which charge high interest rates to unsuspecting borrowers and called on the relevant authorities to monitor them because they were not licensed and did not pay tax. The Swedish ambassador to Tanzania said his country was supporting VisionFund Tanzania (and its predecessor Seda) through Financial Sector Deepening Trust (FSDT), which mobilises funds from Sweden, the Netherlands, Canada, United Kingdom and other developed countries.