Transforming Financial Access through Village Banking, Stokvels, and Savings and Credit Cooperatives.
Village Banking, Savings and Credit Cooperatives (SACCOs), and Stokvels are evolving to meet the changing needs of their members. While each of these community-based financial systems has unique characteristics and challenges, they share a common goal of providing accessible financial services to underserved populations. They are also fulfilling a particularly acute need for local women, who remain persistently excluded from formal financial services in many countries.
Village banking (as often seen in Zambia) is an evolving microfinance model, this is largely due to its reach; the fact that it offers both a savings as well as credit component; and has a participatory management structure at the village bank level. It is reported that Zambia has more than 1000 operating as village banks.
SACCOs (a rapidly growing offering in countries such as Uganda which, as of 2023, had 33,000 registered SACCOs), are vital players in the financial inclusion landscape, particularly in rural areas. They also offer savings and credit services which have been tailored to local needs. They not only provide financial services but also foster social cohesion among members.
South Africa’s Stokvels, meanwhile, are undergoing a demographic transformation, attracting younger and higher-income members who are looking for alternative savings methods outside traditional banking systems.
A new study by market research specialist Ipsos has revealed that South Africa’s R50 billion Stokvel sector is made up of more than 800 000 stokvel groups and 11-million members. The research company describes them as a “network of dynamic ‘human banks’ in the South African economy”.
These community-based systems often focus on supporting women-led initiatives by providing tailored financial products and training. This support helps women entrepreneurs overcome barriers to accessing capital, which is crucial for starting and expanding their businesses.
A quiet banking revolution
In the bustling townships and rural communities of Southern Africa, a quiet revolution is taking place. This grassroots movement is the focus of the Sikhula Sonke Living Archives of Afrofuturist Village Banking project, supported by the Interledger Foundation's grant program.
The project, involving communities from Zambia, Eastern Cape, and Cape Town in South Africa, sought to bridge the gap between the language and practices of the formal financial sector and the community-driven village banking model. It used art, storytelling, and community engagement to document and showcase the resilience and cultural significance of these grassroots financial inclusion initiatives.
"Village banking and stokvels provide a vital financial lifeline for women, particularly those who are unbanked or underserved by traditional financial institutions," explains Esther Mwema, the project lead. "These community-driven models not only offer access to credit and savings but also foster a sense of collective care, mutual support, and cultural resilience."
At the heart of this movement are the women themselves, who are taking control of their financial futures and redefining wealth on their own terms. In Unathi Pukwama’s Imizamo Yomfazi Stokvels and Burial Society in South Africa, for example, members are required to undergo counseling and therapy before joining, recognising the deep connection between financial well-being and mental health.
"Stokvels are not just about money - they're about empowering women, preserving cultural traditions, and creating a safety net for the community. By integrating mental health support within these financial inclusion initiatives, we're able to address the holistic needs of women in a culturally-relevant way,” Pukwama shares.
The project also explores the potential of Open Payments and blockchain technology to enhance the transparency, security, and efficiency of village banking practices, while preserving their decentralised, community-driven nature. Prudence Kalunga, a researcher at ZCAS University in Zambia, has been prototyping a blockchain-based platform to help village banking groups manage their transactions and finances more effectively.
"Blockchain can be a powerful tool to address the challenges faced by village banking groups, such as trust, record-keeping, and financial risks," she says. "But the key is to develop these solutions in close collaboration with the communities, ensuring the technology aligns with their needs and cultural contexts."
Interledger Protocol poised to help financial inclusion in Uganda
In Uganda there are around 48 million people but only 20 million bank accounts. But many people belong to multiple SACCOs. Maria Gorrettie Namuddu, Chief Operations Officer at Kanzu Finance Limited, is helping in the digitization of these SACCOs and believes blockchain technology and the Interledger Protocol (ILP) can assist in driving financial inclusion in her country.
"I think Interledger is a powerful vehicle that will drive microloans. At Kanza Code, we are focused on inclusion. Our focus is to drive inclusion through technology, through empowerment and to make sure that every last person at the grassroots levels has access to finance,” she says.
Gorrettie Namuddu has firsthand experience of the power of SACCOs, sharing a story of a young widow who used a $20 microloan to start a vegetable garden, eventually growing her business to generate $200 each month. The cooperative she joined helped improve infrastructure, such as drainage channels and feeder roads, benefiting the entire community.
She paints a picture where Interledger could enable instant, cross-border transactions without the delays and barriers of traditional financial systems. This would allow for the rapid disbursement of small, microloans across borders.
The decentralised and distributed nature of blockchain networks can also support the scaling of microloan programs to reach more people in remote or underserved areas. This could catalyse the kind of ripple effects already seen in the women's cooperatives.
Gorrettie Namuddu, says by leveraging these capabilities, an Interledger-based microloan infrastructure could facilitate instant, borderless, and accessible financial services for marginalised communities. This could drive financial inclusion, empower individuals, and catalyse sustainable economic development in underserved regions.
The Sikhula Sonke project that featured village banking and stokvel communities in South Africa and Zambia; and work done in Uganda serve as a powerful example of how community-based financial inclusion models can bridge the gender gap, promote mental health, and empower women to define their own financial futures. In the face of a persistent gender imbalance in the formal financial sector, these grassroots initiatives are proving that true financial inclusion starts at the community level, with women leading the way.
If you are interested to learn more about these projects you can watch these live sessions from the 2024 Interledger Summit: