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Imagine living in a rural village in Africa, where you cannot access a bank account, a loan, or even a safe place to save your money. How would you manage your finances? How would you start or grow a business? How would you improve your livelihood and your community? Could Open Source powered School Community Banks be the answer?
This is the reality for millions of people across sub-Saharan Africa.
According to the World Bank, only 43% of adults in sub-Saharan Africa have an account at a financial institution or mobile money provider. This lack of access to financial services locks people into a vicious cycle of poverty. But there is a solution that is already helping rural communities: school community banks.
School community banks are saving and lending groups established within primary and secondary schools in rural Africa to provide access to basic financial services. These banks, co-created and managed by students, teachers, parents, and local community members, offer savings accounts, loans at affordable interest rates, financial literacy programs, business training, and community outreach. Open-source technologies can play a crucial role in improving the effectiveness of school community banks by providing tools such as financial management software, mobile banking applications, cloud computing for data storage and accessibility, data analytics tools for insights from member financial data analysis. Additionally open-source machine learning libraries can help detect fraud while open APIs enable integration with crowdfunding platforms and e-commerce sites. Digital ID systems built on open-source stacks allow members without official IDs to have trusted digital identities for accessing formal financial services through their community bank. By leveraging these targeted open-source technologies customized to local contexts school community banks can cost-effectively provide secure innovative user-friendly personalized services that promote financial inclusion empowering the unbanked with critical access to finance.SUMMARY
Success story in Bukumbula
Abdul is a farmer in Bukumbula village, Lwengo district, Uganda. He has always dreamed of owning a cow, but he never had enough money to buy one. He used to struggle to make ends meet with his small plot of land and his low income.
But everything changed when he joined the School Community Bank (SCOBA), a Social Finance program by Kisoboka Africa in rural Uganda.
The SCOBA is a group of people who save money together and lend to each other at low-interest rates. Abdul started saving regularly and accessing loans from the SCOBA to invest in a popcorn-making business. He also learned business skills from the training and coaching partner.
“I am thrilled and proud of myself. I have achieved my dream of buying a cow. This cow will help me earn more from selling milk and manure. It will also improve my family’s nutrition and health. I am very grateful to Kisoboka Africa and the SCOBA for supporting me and making this possible,”Abdul said.
As a result, Abdul’s income increased. He was able to repay his loans on time and save more money. After two years of saving with the SCOBA, he finally had enough money to buy a cow. Abdul was overjoyed when he brought his cow home. He said that the cow was a symbol of his hard work and determination.
What are School community banks?
School community banks are saving and lending groups established within primary and secondary schools to provide access to basic financial services. They are co-created and managed by students, teachers, parents, and local community members, who pool their savings and lend to each other at affordable interest rates.
School community banks also offer financial literacy programs, business training, and community outreach. They help their members make informed financial decisions and promote long-term financial stability. For example, students may learn how to budget, save, and manage debt, while parents can attend workshops and trainings on business planning, marketing, and access to credit.
The groups are designed to be self-sustaining and run democratically. In other words, members self-organize and elect leadership committees to oversee group operations.
By giving rural community members control over their finances, school community banks empower people to invest in the future they want to see.
How can open-source technologies help school community banks in rural Africa?
Open-source technologies can play a role in improving the effectiveness and expanding the reach of school community banks.
Here are some specific ways we found that open-source technologies can help:
Financial management software:
Open-source financial management systems and core banking systems allow school banks to digitize records, automate transactions, and analyze data. This boosts transparency, accountability, and operational efficiency. Some examples of such systems are Finscale AI
Mobile banking applications:
With over 46% mobile phone penetration in sub-Saharan Africa, mobile apps built using open-source software can make financial services accessible to unbanked groups, including women and remote community members.
Storing data securely in the cloud via open-source platforms like OpenStack helps school community banks scale while keeping costs low. It also enables access to applications from any device.
Data analytics tools:
Open-source data analytics programs allow school banks to derive insights from member financial data to develop targeted products and services.
Online learning platforms:
Built using open-source learning management systems like Moodle online portals can provide engaging financial literacy content to community members through interactive modules.
More ways open-source technologies help in scaling School Community Banks:
Fraud such as embezzlement or falsified loans can destabilize community banks.
Open-source machine learning libraries can help build algorithms to detect suspicious transactions and anomalies in usage patterns to prevent fraud. For example, TensorFlow could analyze transaction history and flag sudden large withdrawals or transfers to new recipients as risky. This real-time monitoring with ML models protects member savings.
B. Crowdfunding and peer-to-peer lending integration through open APIs:
Open-source financial APIs allow integrating school community banks with crowdfunding, peer-to-peer lending, and e-commerce platforms. This increases their capital pool beyond member deposits, provides credit to members, and enables new income sources like online stores.
For instance, school community banks can utilize MTN Mobile Money’s open API to receive crowdfunded micro-donations from urban supporters on their mobile banking platform.
C. Digital ID systems to provide trusted digital identities: Digital ID systems built on open-source stacks like Hyperledger Aries allow members to have verified digital profiles stored on the blockchain.
This provides those without official IDs a trusted identity to access formal financial services through their community bank. Digital IDs can also be used for e-KYC checks to integrate online with other digital banking tools.
By leveraging such targeted open-source technologies, community banks can cost-effectively provide members with secure, innovative, and user-friendly financial services. By adopting open-source technologies customized to local contexts, school community banks can expand their reach and provide personalized services to community members. This promotes financial inclusion and empowers the unbanked with access to critical financial services.
Open source technologies have immense potential to drive financial inclusion in marginalised rural communities through school community banks. By leveraging their flexibility, security, and cost-effectiveness, we can help unbanked populations take control of their financial futures.
Leora . K, Saniya . A, Jake . H, Dorothe . MOBILE MONEY AND DIGITAL FINANCIAL INCLUSION, Singer Development Research Group. The World Bank https://thedocs.worldbank.org/en/doc/4fff8526d366d112cd9fd96eaf4adbb1-0050062022/original/FindexNote1-062419.pdf
GSM. The Mobile Economy, Sub-Saharan Africa 2022. https://www.gsma.com/mobileeconomy/wp-content/uploads/2022/10/The-Mobile-Economy-Sub-Saharan-Africa-2022.pdf
Aiaze Mitha. CGPA. MTN Uganda Opens Up Mobile Money APIs https://www.cgap.org/blog/mtn-uganda-opens-mobile-money-apis
Kisoboka Africa https://kisobokaafrica.org