Making Money Work: How a Village Savings Group Functions Like a Cooperative, a Micro-Lender, and a Friendly Society
Introduction: Three Financial Functions, One Group
In rural Tanzania, savings groups often perform three essential financial functions. They operate as savings and loan associations, pooling weekly contributions to provide short-term loans. They follow the principles of cooperatives, with elected leadership, shared rules, and proportional profit distribution. And they serve as friendly societies, offering mutual support for events like illness, school expenses, and funerals.
The Umoja Savings Group in Mikongi village illustrates how these functions come together in practice. Over the course of a single 12-month cycle, Umoja mobilised savings, issued loans, financed small-scale farming, and returned a profit to its members while also building financial literacy, confidence and mutual trust.
DMDO’s Role: Foundations, Monitoring, and Ongoing Support
Umoja is one of eight groups formed through a structured programme delivered by DMDO. On 8 November 2023, DMDO trained local facilitators in savings group management, financial literacy, and group governance. Each facilitator then supported group formation in their respective villages.
DMDO ensured that every group:
Elected a leadership team
Drafted a constitution
Registered with government authorities and obtained a certificate
Received a basic start-up kit (record books, cashbox, tools)
Beyond formation, DMDO continues to monitor and train groups to strengthen their capacity for self-management over time.
Umoja Savings Group members in Mikongi Village
Introducing Digital Support: The DreamSave App
To support group transparency, consistency, and data security, DMDO introduced the DreamSave app. Each group uses it to record savings, loans, repayments and decisions digitally, replacing traditional paper records.
Key features of DreamSave:
Real-time group records: All transactions and member activities are tracked digitally
Member updates: Each member receives weekly SMS updates on group performance, outstanding loans, and business activity
Goal setting and tracking: Members define personal goals such as improving a household Latrine and receive automated progress updates based on their savings and the group’s overall performance
Data access for DMDO: The app gives DMDO visibility into group activity, allowing timely intervention when participation drops or challenges arise
By digitising records, DreamSave improves both transparency and resilience, making groups less vulnerable to human error or physical record loss.
We started using this in March this year. Please take a look at the savings groups here (username: office@dmdo.org password: Dmdo2025!).
Group Operations: Contributions and Discipline
Umoja launched in December 2023 with 15 members, eight women and seven men. Members met weekly and contributed between one and five shares, each valued at TZS 1,000 ($0.4) per week was allocated to a community fund.
Over 53 weeks, Umoja mobilised:
3,130 shares, totalling TZS 3,130,000 (~$1,204)
TZS 338,000 (~$130) for the community fund
To ensure group discipline, the following penalties were agreed:
TZS 200 for late arrival
TZS 500 for absence without a valid reason
TZS 200 for failing to answer group-related questions
Removal from the group after three weeks of unexplained absence, with contributions retained
Lending: Internal Capital in Circulation
Members could borrow up to three times the value of their shares, repayable within three months. Loans carried a flat 10% interest, and late repayments attracted a penalty of TZS 5,000 (~$1.92) per month.
During the cycle, the group issued:
46 loans, totalling TZS 5,610,000 (~$2,158)
Interest income of TZS 561,000 (~$216)
All loans were repaid by year-end. Interest earnings were added to the total available for distribution.
Selemani Chikulunga receiving a loan of TZS 400,000 (~$154) from the group
Group Investment: Farming for Profit
The group collectively prepared and cultivated one acre of land for cowpeas and half an acre for Peanuts. The land was generously donated by a group member at no cost.
The farming expenses were as follows:
Insecticides: TZS 28,300 (~$10.88)
Cowpea seeds: 5 kg at TZS 1,500 per kg, totaling TZS 7,500 (~$2.88)
Peanuts seeds: 4 kg at TZS 2,500 per kg, totaling TZS 10,000 (~$3.85)
Total farming costs amounted to TZS 45,800 (~$17.62). All labor during land preparation and crop maintenance was voluntarily provided by group members.
Peanuts: Cultivated on half an acre, harvested 5 bags, each sold at TZS 10,000 ($3.85), generating TZS 50,000 ($19.23) in revenue.
Cowpeas: Grown on one acre, yielded 66 kg, sold at TZS 1,000 ($0.38) per kg, earning TZS 66,000 ($25.38).
The total income from farming activities was TZS 116,000 (~$44.62). After deducting the farming costs of TZS 45,800 (~$17.62), the group made a net profit of TZS 70,200(~$27.00), a 60% margin.
The experience demonstrated that joint investment, however small can generate meaningful returns and provide a learning platform for future activity.
Community Fund: A Reserve for Emergencies
Umoja’s Community Fund is designed to provide immediate financial support during unforeseen emergencies, helping the members remain resilient, responsive, and protected in times of crisis.
The fund offers targeted support in the following situations:
Illness or hospitalization of a member or close family: TZS 20,000 (~$7.69)
Funerals and natural disasters: TZS 10,000 (~$3.85)
Support for community education and health initiatives: TZS 30,000 (~$11.54) once per year
Any unused portion of the fund is added to the year-end distribution. The Community Fund operates as an internal insurance mechanism, not an investment tool and is therefore kept separate from assessments of the group’s core financial performance.
“By pooling resources and standing together in times of need, the Community Fund strengthens our bonds of solidarity and ensures that no member faces hardship alone. It reflects Umoja’s core values: unity, care, and mutual support.” Salumu Mpiko, Group Secretary
Final Share-Out: Putting Capital to Work
By cycle end, Umoja distributed all savings, interest earnings, and agribusiness profits to members in proportion to their shareholding.
The total productive capital (excluding the community fund) yielded a nominal return of 36%. Each share initially worth TZS 1,000 (~$0.4) returned about TZS 1,360 (~$0.52).
A member who saved TZS 1,000 (~$0.4) per week for 53 weeks,TZS 53,000 total (~$20.4) received approximately TZS 72,000 (~$27.7) with gains driven by interest income and farm profits. These were not external injections but value generated internally by putting the group’s own capital to work through lending and productive activity.
Member Experience and Impact
Most members began the cycle with a defined goal such as upgrading a latrine, paying school fees or, in the case of Selemani Chikulunga, increasing his goat herd. The DreamSave app helped them track their progress, week by week, using their contributions and group profits.
"I am grateful that through the group, I was able to achieve my 2024 goal of growing my livestock from 3 to 6 goats." Selemani Juma Chikulunga
Selemani Chikulunga with his goats
Beyond returns, the group helped members:
Learn financial planning and borrowing discipline
Access flexible, local capital without dependence on external loans
Strengthening peer relationships and building shared accountability
Challenges and Lessons
The group faced common seasonal pressures:
Contributions slowed during school term and planting periods
Attendance fluctuated during holidays and peak farm work
Some loans were repaid later than scheduled, linked to harvest cycles
Thanks to DreamSave’s real-time data, DMDO and facilitators were able to monitor these trends and provide targeted support where needed.
Conclusion: Structured Finance at the Community Level
Umoja shows how a savings group, properly structured and supported, can operate as a community-based financial engine. With consistent contributions, disciplined lending, small-scale investment, and real-time digital tools, members created tangible value for themselves and their peers.
The model aligns individual goals with group success. It is replicable, measurable, and grounded in everyday realities, making it a reliable tool for building household resilience and advancing local development.
