VICOBA and SACCOS: How Group Loans and Interest Are Calculated

The short answer

A VICOBA member buys shares at each meeting, borrows against them, and repays with interest — but the interest is not lost to an outside lender. At the end of the cycle it is redistributed among the members, so the group is effectively lending to itself.

That single structural difference is why a VICOBA can charge what looks like a very high monthly rate and still be worth joining. It is also why comparing a VICOBA rate to a bank rate directly is misleading.

How a VICOBA cycle works

A VICOBA is a self-governing savings and loan fund. Members buy shares, the pooled money becomes a loan fund, and the group lends to itself.

• Groups are commonly 15 to 30 self-selected members, often organised in sub-groups of five.
• Members meet weekly — weekly meetings grow the fund faster than monthly ones and keep repayments on time.
• At each meeting a member buys between one and five shares. The share value is set by the group itself.
• Alongside shares, members contribute to a social fund, used for emergencies and group running costs.
• The loan fund commonly starts lending about twelve weeks in, once enough capital has accumulated.
• At the end of the cycle, shares are returned and the interest earned is shared out among members.

How a group prices a loan

Most groups quote a monthly interest rate on the amount borrowed, with the loan repaid over a short, fixed term.

The multiple on shares is the rule that keeps a group solvent. Because a member cannot borrow more than a few times what they have saved, the fund cannot be drained by someone who has contributed little.

The arithmetic matters here. A 5% monthly rate is roughly 60% a year if you simply multiply it out — which sounds alarming next to a bank loan. But in a VICOBA the interest returns to the members at the end of the cycle, so for the group as a whole it is a way of accumulating capital, not a cost paid away.

A worked cycle

Buying 40,000 TZS of shares a month puts 480,000 TZS into the group over a year (52 weekly meetings). A 300,000 TZS loan at the commonly charged 5% a month over 3 months costs 45,000 TZS in interest, so you repay 345,000 TZS — about 115,000 TZS a month. At the end of the cycle your shares are returned and the interest is shared out among members, so that interest comes back to the group rather than leaving it.

Treat the share figure as an illustration of the structure, not a recommendation of what to contribute — groups set their own share value, and it should reflect what members can realistically sustain every week.

Nothing in the table above is a national rule. A VICOBA writes its own constitution, and two groups in the same ward can set different share values, different loan multiples and different interest. Conventions reviewed: 10 September 2026 — confirm the terms in your own group's constitution before borrowing, because that document, not this guide, governs your loan.

You can run the same arithmetic on your own group's numbers. Multiply the amount borrowed by the monthly rate by the number of months to get the interest, add the principal, and divide by the months to get the instalment. If the treasurer's figures do not come out the same way, ask which of the three numbers is different — that conversation is usually the most useful thing a member can bring to a meeting.

VICOBA and SACCOS are not the same thing

Both are member-owned and both lend to members, but they sit at different levels of formality.

• A VICOBA is typically informal: a village or neighbourhood group with its own constitution, its own books, and no external supervision.
• A SACCOS is a registered cooperative society, subject to supervision and reporting requirements, and usually larger and longer-lived.
• SACCOS societies commonly take external deposits and may borrow from banks to on-lend; a VICOBA normally lends only what its members have saved.
• Because a VICOBA is unsupervised, its safety depends almost entirely on the honesty of its treasurer and the quality of its record-keeping — which is the real risk, not the interest rate.

Joining and leaving

Four questions worth settling before you join, because every one of them is hard to reverse afterwards.

Groups that write these answers down before admitting a member avoid most of the disputes that eventually break groups apart. A constitution nobody has read is not a control.

• What happens to your shares if you leave mid-cycle — returned at once, or only at the year end?
• Can a new member join after the cycle has started, and what do they pay to catch up?
• Is the social fund contribution returned when you leave, or retained by the group?
• Who physically holds the cash between meetings, and what controls exist over it?

What goes wrong

Group lending fails for social reasons far more often than for mathematical ones.

A group that writes its rules down, keeps a share register and reads the numbers out at every meeting avoids most of this. The arithmetic in this guide is the easy part.

• Loans taken because the money is available rather than because there is a plan to repay it.
• Interest redistributed equally rather than by shares contributed, which quietly penalises the members who saved most.
• Informal or incomplete ledgers, so nobody can prove what was contributed or repaid.
• Pressure not to chase a defaulting member, which passes their loss to everyone else.
• No written constitution, so disputes are settled by whoever is loudest at the meeting.

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