Karimu Financial Services Program

Lack of access to financial services leaves families in rural areas —  where banking services are limited or non-existent — without a safety net. When an emergency strikes, it is not uncommon to see a family being forced to sell their most critical assets, e.g. their only cow that provides milk to feed their children, their chickens that provide eggs for the family, the seeds and fertilizer for next season’s planting, etc., pushing them further into poverty. Additionally, it limits their ability to improve their financial situation — buy the inventory needed to open a small business,  buy seeds or fertilizers to cover their entire plantation, lease land for additional farming  — as their savings are insufficient for major investments. 


Poor families have limited ability to withstand hardship or invest in their future


The Karimu Financial Services Program intends to create and strengthen the financial security of poor and rural communities by leveraging the well-known concept of community-led savings groups. Through the savings groups the program intends to increase access to financial services: savings, insurance, loans, and loan insurance for the communities we serve. Furthermore, savings groups can come together to form federations to further increase their aggregate capital and make larger and longer term loans available to its membership. Karimu views the federation as an ideal avenue to infuse the system with additional capital to assure that loans are available when needed by membership. 


Initiated by CARE in 1991 village savings and loan associations (VSLAs), also known as savings groups, have been shown to provide a platform for economic and social change. (Read about the history of the program here.) 


Members improve their financial and economic capacity as access to basic financial services enable them to better manage household cash flow, invest in small economic activities, and acquire assets.  Social capital will increase as leadership skills develop, members participate actively in the democratic process of making group decisions, and different groups in the same community begin to compare experiences.


Savings group experiences can have an impact on individual empowerment for members including women, youth, and the disabled.  Such empowerment includes increased self-efficacy related to health, increased self-confidence and decision-making, learning how to discover opportunities for future livelihoods and feeling empowered to act on them.  Also, the combination of improved financial circumstances and the confidence to make decisions will have beneficial effects on households including: increases in family assets, better school attendance, better access to food and nutrition, improvements in housing, and increased collaboration between spouses. In general, savings groups are composed of a group of people known to one another with a common interest around which they aggregate funds. The savings group provides a means of saving money, taking out microloans, and earning interest on loaned funds.  


Karimu is aware that many governments sponsor programs to develop and support savings groups as a means to increase access to financial services. However, the government programs have often been unable to meet the financial needs of all the communities. The Karimu Financial Services Program will work to create or extend that capacity.  It will work to 

  1. increase the number of savings groups within the communities, 

  2. provide training to improve their effectiveness, 

  3. supplement capital funds where needed, and 

  4. develop a self-sustaining model within the community. 


While savings groups are very effective, a limitation of the approach is that the annual share-out typically decapitalises the savings group, reducing access to loan capital for several months in the next cycle and, at the same time, preventing the possibility of longer-term lending. The federation, however, is able to mobilize additional capital (from member groups), which can be lent to other member groups that are short of loan capital at critical times (usually early) in their annual cycle. Thus, the federation provides a ready-made infrastructure for Karimu to increase the loan funds made available to savings groups. Karimu is adapting the training material from [Village Savings and Loan Associates](  and [Plan Canada](  under the guidance of Stella Tungazara, a Tanzanian expert and independent microfinance  consultant.



The main objective of the Karimu Financial Services Program is to create and strengthen the financial security of the communities we serve.  This objective will be fulfilled by achieving the following specific goals:

  • Increase interest in, access to, and use of financial services using savings groups. 

    • Target:  Increase the number of households participating in Program savings groups to meet the overall 25% Program objective below. We hope that savings groups will increase organically after that.

    • Target: 25% of the savings groups will be youth (under 21) or young adult (under 35) savings groups.

  • Enable 25% of households to have greater access to loans when needed.

    • Target: Establish one or more Savings and Loan Federations as the vehicle to increase loan funds available to the member savings groups.

    • Target: Establish a process whereby Karimu increases the capital available for loans through the federation.

  • Create a self-sustaining financial services model

    • Target: Community Based Trainers (CBTs) are available in every village in the ward to provide fee-based training for savings groups.

    • Target: The savings groups and federations participating in the Karimu Financial Services Program operate transparently, effectively, and independently. They monitor their own and their members process adherence maintaining a high level of maturity over time. They are sufficiently funded to support the goals above.  

Overview of the Program

There are four main components of the Karimu Financial Services Program: 

  1. Increase savings groups that function in an effective, efficient, and consistent way – To this end we will expand the number of savings groups operating in the area and use best practices for training savings groups to assure their effectiveness and to reach a high maturity level that is necessary to obtain access to larger loans. 

  2. Establish a savings and loan federation serving the community – The federation will provide larger and longer term loans to savings groups, make loan insurance available, and provide quality oversight of member savings groups. 

  3. Increase the capitalization of the federation so that loans can be made available when they are needed – Karimu will establish a method to provide low interest loans to the federation to increase loan funds available to member savings groups. An increase in the loan fund is intended to meet planned community needs for capital e.g. for seasonal planting, school registration, business goals, community projects,  etc.

  4. Create a self-sustaining financial services model – Initially, Karimu will jumpstart the program by funding expert consulting, training, and loans. However, Karimu will, in parallel, begin training Community Based Trainers. The Community Based Trainers, once trained, will be paid by the savings groups they train, such that high quality training will remain available within the ward. The federation, a self-governing entity, will also become self-sufficient as the membership gains expertise in the model, accrues sufficient funds to support the membership and becomes credit worthy for bank or government loans.


There is a natural ordering that lends the implementation of these key elements to various phases. Savings groups must be trained and confident in a common methodology before they can operate together in a federation. The federation must be trained and well run to be creditworthy of receiving loans. So we will address these elements in 3 phases as described below. We expect it to take 3-5 years to fully have the program self-sustaining.


Savings group meeting


Phase 1: Effectiveness of Savings Groups

Karimu will work with existing savings groups and encourage the formation of new savings groups. Karimu staff will train the savings groups in recordkeeping, transparency, loan portfolio quality, goal setting, borrowing wisely, budgeting, communication, leadership, conflict resolution, and decision making. The training material is based on best practices as documented in the Village Savings and Loan Association Village Agent Training Guide by VSL Associates and the Youth Savings Group Programme Guide: Empowering Young Men and Women through Access To Finance, Life Skills, and Gender Awareness by Plan International and augmented by the Karimu staff assessment. We have savings group projects in Ayalayaga ward and in Arri ward.



The result of the training should provide an adequate pool of savings groups that use a  consistent savings methodology that both manage effective savings and loans within their group and prepare them to participate effectively in a federation. It should also provide a pool of candidates from which Community Based Trainers can be trained. 



  • Agreement by the area leadership to the Karimu Strategic Plan

  • Agreement to the Karimu Financial Services Program including stakeholder signing of the Savings Group and Federation Memorandum of Understanding (MoU) 


Savings Group:

  1. Be willing to learn and adopt the VSLA model, and change how they operate, if necessary.

  2. Commit to reach the maturity necessary for Karimu Federation membership. The maturity requirement is set at scoring 80% or higher on the Consolidated VSLA Evaluation Tool which measures process adherence, management committee effectiveness, and member participation.

  3. Pay for any materials required during training (e.g. passbooks, lockbox with locks, etc.). Payments will be made monthly and the full cost must be repaid within 3 months. 

  4. Welcome Karimu staff to train, supervise, and assess the savings group. The training will last from 3 months to 1 year as determined by the Karimu staff.  

  5. Provide data to Karimu as requested to analyze and improve the program.

  6. Ensure that all savings group members attend all meetings on time and work to learn and apply the method within the savings group. If a member is unable to attend a training meeting, the group must make arrangements to deliver the training to that member before or during the next meeting. 

  7. Ensure that all members of the savings group fully understand the terms and conditions of the Program.


Local Leadership

  1. Encourage all savings groups within the community to join the Karimu Financial Services Program in order to be trained and receive the financial benefits available through the Karimu Federation.

  2. Encourage the creation of new savings groups within the community with special focus on youth and young adults.

  3. Help Karimu successfully implement the program.



  1. Drive outreach to engage existing savings groups and encourage the formation of new savings groups.

  2. Train and consult in forming and running a savings group according to the VSLA method. Training needs will be determined by the trainer and oversight will continue through 1 year. 

    1. Train CBTs so that the program can be sustained into the future.  CBTs are experts in savings groups who are paid by savings groups and not Karimu.

  3. Collect data from all savings groups participating in the program in order to analyze and improve the program and to assess the savings groups.

  4. Assess and provide feedback to the savings groups in their use of the VSLA method and their maturity necessary for Karimu Federation membership. Failure to do so will prevent the savings group from joining the federation and accessing federation loans.  

  5. Work with the stakeholders in monitoring and evaluating the implementation and progress of the program.


Training in record keeping

Phase 2. Formation of a Savings and Loan Federation

A Village Savings and Loan Federation (VSLF), or 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, with representation from each member group, but loans are given to savings groups rather than to individual members. The savings group then handles individual loans. It is modeled on savings groups, so like them it is a self-governing organization with elected officials 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 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. 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.


The federation provides member groups with savings, investments, loans and loan insurance. Groups are allowed to borrow up to 3 times their savings but no more than 50% of their prior years total share-out. Given the larger loan values, a federation may need access to external funds to be able to meet members’ expectations for loans. Karimu will augment federation loan funds to enable such investments in Phase 3 of this program.



  1. Commitments made in prior phases of this program have been or are being met.

  2. At least 7 savings groups in the community have 

    1. Completed at least one full year savings cycle

    2. Reached the maturity necessary for Karimu Federation membership 

  3. Agreement by the stakeholders to their obligations below plus those included in the Karimu Strategic Plan


Savings Group 

  1. Be trained to participate in the Karimu Federation.

  2. Has reached and maintains the level of maturity required for membership in the Karimu Federation. 

  3. Elect the prescribed number of representatives from their membership to attend monthly Karimu Federation meetings on behalf of the savings group. 

  4. Ensure the Karimu Federation fulfills the following conditions:

    1. It only accepts savings group members that understand and use the VSLA method with a high level of maturity.  Its loans may only be given to savings groups who have reached and maintain the maturity necessary for Karimu Federation membership.

    2. It understands and uses the Consolidated VSLA Evaluation Tool to assess a savings group’s maturity for membership and readiness to take on loans. 

    3. The federation conducts a maturity evaluation at least annually for all savings group members; more often if any member group falls below the loan qualification level. 

    4. The federation itself operates at comparable or higher maturity as it requires of its member savings groups. Karimu is in agreement with its constitution and any future changes.

    5. The federation participates in data collection and reporting on its operations transparently using Karimu specified tools.

    6. Comply with the terms of the Karimu Federation.


Training of Karimu staff on savings groups


Local Leadership

  1. Encourage all savings groups within the community to join the Karimu Federation.



  1. Assess and provide feedback to the savings groups in their use of the VSLA method and their maturity necessary for Karimu Federation membership. 

  2. Engage savings groups to generate interest in joining the Karimu Federation by explaining its value.

  3. Prepare them in the procedures necessary to become Karimu Federation members.

  4. Establish a Karimu Federation when the criteria have been fully satisfied.

  5. Collect data from the federation in order to analyze and improve the program.

Phase 3. Increasing the Capitalization of the Loan Fund

While aggregating funds across members or savings groups may provide some relief in terms of increasing access to loans, it is unlikely that this aggregation alone will be able to meet all the needs for loans, at least in the short term. 

Karimu-KAHESO Financial Assistance Program for savings groups

Due to a decision to delay the formation of the federation, Karimu is introducing a program to provide financial assistance to savings groups that have graduated from our training program. This process will be discontinued or revised when the federation becomes independently operational and a loan process is established with the federation. 

To be eligible for the Karimu-KAHESO Financial Assistance Program (referred to herein as Assistance) a savings group must meet the following criteria: 

  1. They have completed the Karimu Village Savings and Loan Association training program.

  2. They are registered with the government.

  3. They have been assessed within the last 3 months by the KAHESO Financial Services Program Manager as operating at 80% or higher based on the Consolidated VSLA Evaluation tool. 

  4. They have no outstanding loans from Karimu or other financial or government institutions.

  5. All prior loans were repaid in full and they did not default on any loans.

  6. They have an NMB bank account through which they will receive the Assistance funds.

  7. Repayment of the funds will be made in monthly payments to the KAHESO NMB account specified in the Assistance agreement.

  8. They have reviewed the terms of the Assistance program with their savings group.


Assistance will have the following limitations and requirements:

  1. Applications should demonstrate that the savings group loan funds have been or will be exhausted based on known demand.

  2. Applications can be for no more than the minimum of:

    1. three times the aggregate value of group savings (loan fund plus outstanding loans)

    2. 50% of the prior year share out

  3. Karimu-KAHESO will review Assistance applications received by the 7th of the month for funding that month. Approved applications will be funded by the last day of the same month. Applications received later than the 7th will be considered the following month.

  4. The savings group accepts quarterly KAHESO oversight including VSLA Evaluation and data collection during the Assistance period. Assessments must be maintained above 80%.

  5. Assistance may be taken for a period 6-12 months. Those receiving Assistance for the first time are limited to a period of 6 months. No loans may be taken that extend beyond share out. 

  6. Assistance funds may only be used for member loans or group investments. At no time will Assistance funds be used to augment the social fund, or be distributed as earnings.

  7. Assistance funds will be repaid to KAHESO in monthly payments by the 28th day of the month according to the Assistance repayment provisions.

  8. Monthly repayments will be deposited into the KAHESO NMB account specified in the Assistance agreement and the deposit slip brought to the KAHESO office for recording.  

  9. Unlike loans, no interest will be charged for financial assistance as Karimu and KAHESO are not-for-profit organizations.

  10. Late Assistance payments will accrue fines as follows:

    1. 10% of late payment value (e.g. if 100,000 is owed on a monthly payment, then the fine would be 10,000)

  11. Financial Assistance must be fully repaid to KAHESO prior to savings group share out.

  12. A savings group is in default of its Assistance contract when no payment has been received within 30 days after due. The following process applies: 

  • After 30 days late - A demand letter is sent to the savings group with a copy to the Ward Development Committee, Ward Executive Officer, and Ward Chairperson. Karimu Assistance to all savings groups in Ayalgaya may be suspended until all due Assistance payments are made to Karimu. 

  • After 60 days late  - The savings group is taken to court and the Ward Chairperson and Executive Officer are informed of Karimu projects at risk of being stopped until all due Assistance payments are made in full.

  • After 90 days  late - The Sponsoring Executive is taken to court  and Karimu projects will be suspended.


Karimu-KAHESO Financial Assistance Program for federations

Once the federation is formed, it will likely need to increase its loan funds beyond the member savings to be able to fully satisfy the loan demand. Karimu’s objective in this phase is to provide increased capital while also incenting good borrowing behavior. Thus, it proposes to provide very low interest or no interest loans to a federation. This sets the example that loans must be repaid and prepares the federation for the potential to take other bank or government loans in the future. 


  • Commitments made in prior phases of this program have been or are being met.

  • Federation completed all training and has been operating independently for at least 6 months achieving an 80% maturity evaluation. 



  • Complete a loan application

    • Loan applications should demonstrate that the member loan funds have been or will be exhausted based on known demand

    • Loan applications can be for no more than 3X the aggregate value of member group savings.

    • Loan application must include the date, reviewer, and score of the last VSLA Assessment 

  • Agree to the loan terms in the loan agreement

  1. Loans may be taken for 6-12 months.

  2. Loan payments must be made monthly according to the loan repayment provisions. Late payments accrue fines.

  3. Loan funds will only be used for loans. At no time will loan funds be used to pay federation expenses or member group earnings.

  4. Accepts oversight by Karimu for the duration of the loan, or until Karimu determines that supervision is not needed.



  • Generate funds to be used for loans given to the federation

  • Define loan application requirements and agreement terms

  • Review and approve/deny loan applications. 

  • Oversee loan repayment and assess fines as defined by the loan agreement. 


Karimu COO and Local Financial Services Program Manager meet with the Ayalagaya savings group leaders to discuss the program status and next steps.


Current Program Status (December 2022)

Karimu expanded the Financial Services program into Arri ward in 2022. We will look at status by ward.


Phase 1: Effectiveness of Savings Groups


Karimu has graduated 9 groups from its training and 9 more are in training.   About 86% of group members are women and ~17% are young adults (under 35). We are estimating that we are touching 19.5% of households today.


To assess the effectiveness of the training, we assessed the savings groups prior to training and currently (those that have completed the basic VSLA modules). Prior to training, existing savings groups scored an average of 48% on the Village Savings and Loan Association evaluation tool. The tool is a composite measure of operational transparency, record keeping accuracy, management committee effectiveness, and member participation. Currently, we are seeing an average score of 77.5% across groups in training and 87.3% across the groups that have graduated.


Members are saving an average of $191 each annually (up from $120 at the end of 2020). That represents a 60% increase. Our groups are seeing an average return on savings of 22.9% . Benchmarking with all of Tanzania (as reported through the SAVIX Information System) our savings per member and our return on savings are above the national average.


Read more about our training program in Ayalagaya in the Effective Savings Group project page


Phase 2. Formation of a Savings and Loans Federation


We formed a federation with 8 inaugural member groups in 4Q2022. They are currently in training and saving money together. We plan for them to be running fully independently by the end of the year. 


Phase 3. Increasing the Capitalization of the Loan Fund


Our original plan was to provide capital only to the federation. However, given our decision to delay forming the federation, we decided to provide capital directly to savings groups as a bridge to capital access until the federation is fully trained and operating.


In March 2021 we introduced the Karimu Financial Assistance program. This program provides financial assistance to savings groups having graduated from our program, maintaining 80% or higher on their VSLA evaluation, with no outstanding loans or loan defaults, and with the sponsorship of the Ward Executive Officer. This assistance is provided at no charge and with no interest, but must be repaid within12 months and before the group’s share out. Loan sizes are bounded by 50% of the group’s prior year share out (total savings). To date we have provided 20 loans totalling $42,973.06 and there have been zero late payments!  


We plan for this program to phase out support of direct assistance to savings groups in favor of funding the federation by year end 2023. Read more about this project in our Financial Assistance project page.


Phase 1: Effectiveness of Savings Groups

Karimu currently has 6 groups in training and at least 7 more have expressed interest in starting.  About 93% of the savings group members are women and a little over 12% are young adults. The groups in training have improved their performance from a baseline score of ~49% to almost 62%, but that is still short of our 80% target. No groups have graduated training yet. In total we have about 169 members touching around 144 households.

Read more about our Training Savings Groups in Arri on our project page

Phase 2. Formation of a Savings and Loans Federation

We are unlikely to form a federation in Arri before late 2024


Phase 3. Increasing the Capitalization of the Loan Fund


We will likely offer Financial Assistance to graduated savings groups in 2023