Figure 9: Locations of Field Works and Estimated Access to Financial Providers in Kenya
Note: These maps detail the access to various financial services in Kenya, as well as population density and how roads and railways connect rural and urban areas.
Source: S. Johnson, G.K. Brown, and C. Fouillet, 2012, “The Search for Inclusion in Kenya’s Financial Landscape: The Rift Revealed,” fig. 1 (Nairobi, Kenya: FSD Kenya), 3. Used with permission of FSD Kenya.
2014 Carsey School of Public Policy, University of New Hampshire Campaign Commitment
“Today more than 10 million people use savings groups for saving, lending, building financial security, and [accruing] social capital. Carsey has been a leader in savings groups training and learning events for several years and continues to expand opportunities to learn about this growing area of financial inclusion.”
— William Maddocks, director, Sustainable Microfinance & Development Program (SMDP), USA
The Campaign Commitment from the Carsey School of Public Policy includes:
- designing and launching research that measures the impact of savings groups in creating social capital,
- assessing the scale and impact of the projects of savings group training graduates, and
- studying how savings groups spread within and between communities in order to identify replicable qualities.
Maps of financial access points in countries with low population density often look like the maps of Kenya in figure 9. Commercial banks reach major urban centers. Credit unions and post office savings banks reach less populous cities and major towns farther afield. In Kenya, mobile money networks linked with agents reach any place that has a population large enough to justify a mobile network tower. But, there is one form of financial service that extends to every part of the country, from high-income neighborhoods in the big cities to rural markets that gather once a month. People from all income levels and geographies have found that traditional savings societies provide them with the motivation and structure that allows them to accumulate large lump sums of money to buy assets or cover significant expenses.
Most every culture in the world has longstanding traditions of people gathering together in informal groups to save money and lend it out to each other. These chits go by many names, such as tontines, stokvels, mujin, or arisan. They take two primary forms: 1) rotating savings and credit associations (ROSCAs), where each member of the group contributes the same amount at each gathering and that total amount is given to one member on a rotating basis until all members have had their turn; and 2) accumulating savings and credit associations (ASCAs), whose members manage their accumulated savings and lend it out to individuals in the groups based on needs or business opportunities.
In the past two decades, international development organizations have taken what they have learned from the clients they serve about accumulating assets over time and used it to refine and improve the traditional ASCA model. International non-governmental organizations (INGOs), such as CARE, Catholic Relief Services (CRS), Oxfam (with Freedom from Hunger), Plan International, and the Aga Khan Foundation have refined the savings-group methodology and turned it into a tool to help people living in poverty build resiliency and take advantage of opportunities.
Financial service providers can link with these informal groups by providing products that help them to safely save excess deposits and have access to a line of credit that they can use when credit needs within the group exceed the groups accumulated savings.
This savings group (SG) movement now serves 9 million individuals in 65 countries, according to a presentation made by Jeff Ashe at the 17th Microcredit Summit in Mexico in 2014. In India, the Self-Help Group-Bank Linkage program supported by NABARD, now serves over 50 million members. The SG methodology provides several advantages for providing financial access to people living in extreme poverty and in remote areas:
- They do not require outside capital: SG members capitalize their loan fund with their own savings.
- SGs manage their own funds, so they do not need ongoing staffing: Each group decides its own lending policies and interest rates. Group members vote on whether or not to lend money based on requests made by individual group members. Once the group has been trained in how to manage their fund, they do not require outside staff to support them, bringing their ongoing operating costs to zero. Ashe mentions that, “‘Saving for Change’ in Mali reached 450,000 women organized into 19,000 groups with 209 trainers [with] one paid staffer for each 2,000 group members.”
- SGs do not require investments in infrastructure: Whereas bank branches require buildings, staff, and a safe to operate, SGs protect their accumulated funds in a lockbox with three locks. Three different savings group members have keys, so all three have to be present to open the box, and this is only done when all group members are present.
- SGs use easily understood systems that allow the groups to manage and protect their fund: At each group meeting, members account for the total amount deposited, lent out, and repaid. On a regular basis (usually 12 months), the accumulated deposits and interest are distributed to each member according to the amount they have saved.
- SGs can replicate on their own: Once they have been established in a community, SGs can replicate on their own. Non-members can learn from those who participate in a group and establish their own groups. According to a study by Datu Research in Uganda, for every group formed, two new groups start on their own.
These advantages allow SGs to operate at very low costs in difficult areas. Per-client costs, ranging from $20 to $150, depend on the model that INGOs choose to use to scale up and on the number of months of training needed.
The Bill & Melinda Gates Foundation has funded randomized control trials (RCT) to study the impact of SGs in several countries. The studies came to four conclusions:
- SGs reach the very poor: “Outreach estimates range from 34 to 81 percent of SG participants live below the $1.25 a day poverty line across the studies.” On the other hand, “SG members tend to be relatively wealthier and more financially and socially active than non-members.”
- SG members increase their net savings: “The studies show an increase in saving wherever measured…[and] no measurable negative impact on household expenditures or consumption, suggesting that the increased savings does not occur at the expense of consumption spending or reductions in expenditures.”
- SG members build resilience: “Findings from the RCTs suggest some impact on resilience: increased food security among treatment households suggests that shocks have less catastrophic results for group members.”
- SGs show mixed results on business income: “The collective evidence from the RCTs [on business income] is mixed. Although selected studies show evidence of increased business-related spending, profits, and the likelihood that a woman owns a business, these outcomes are not observed in all the RCTs.”
With SGs firmly established in rural communities throughout the world, SG promoters have begun to experiment with the basic model to speed the replication and expand the impact. Innovations being tested and deployed now include a fee-for-service model, mobile savings, health insurance, layering on additional development initiatives, and partnerships with government transfer programs.
CRS has developed the private-service provider (PSP) approach for their savings and internal lending communities (SILC), another SG methodology, in which groups pay certified trainers for their services. This eliminates the need for subsidies to pay for field agents who train new groups. A test of the “PSP program showed that [the] fee-for-service model is both viable and successful. PSP-supported programs outperformed [field agent]-supported programs on key financial measures and member growth rates.”
CRS is also experimenting with introducing health microinsurance into SILC in northern Benin. Partnering with a private insurance company and a healthcare provider, CRS is covering 70 percent of health-related and prescription medication costs at participating health care facilities. This initiative manages to increase healthcare access while simultaneously reducing healthcare expenses for group members. Adding a health insurance component—or other health intervention—to a savings group program strengthens poor families’ ability to resist unexpected health-related shocks.
Several INGOs have partnered with mobile network operators and banks to develop mobile technology to facilitate financial transactions and to allow members to save money in a mobile wallet rather than a lockbox. Three passwords open the wallet, replacing the three keys needed to open the box. CARE has launched several pilots in Tanzania and Kenya with Vodacom, Orange, Barclays Bank, Equity Bank, and Mwanga. In Uganda, Grameen Foundation and Airtel Uganda are working to design Airtel Weza, a mobile solution for savings groups.
Organizations like PACT and the International Rescue Committee also use savings groups as platforms to add domestic violence prevention, maternal healthcare, peacebuilding, or other interventions in order to enhance the resilience of their members.
The Government of the Dominican Republic launched a pilot program in 2014 to form SGs among the people who receive cash transfers under the government’s social protection program. With the technical assistance of Fundación Capital and a partnership with ADOPEM bank, 500 government employees were trained to build SGs and conduct financial literacy programs to help poor households manage their cash flows.
In Ethiopia, the government employed SGs together with an ultra-poor graduation program for a subset of the people participating in its Productive Safety Net Program, calling it PSNP Plus. PSNP Plus created 2,000 SGs between 2008 and 2011, and a USAID impact study reported that they contributed to the graduation of 4,820 households from government assistance.
Savings group promoters: Continue to develop innovations that can support a rapid scale-up in the number of groups and members. At their annual conference in 2013, the organizations leading the savings group revolution launched “50 by 2020,” an initiative seeking to expand savings groups to 50 million members globally by 2020.
Financial service providers: Develop products and services that will meet the needs of informal savings groups and provide a link to formal financial services for those who grow into them.
Regulators: Allow informal savings groups to flourish, while allowing group accounts at banks, which will connect SGs to the regulated financial system.
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Table of Contents
- Executive Summary
- Where’s the Map?
- Global Data Show Diverging Paths
- Integrated Health and Microfinance
- Saving Groups
- Graduation Programs
- Agricultural Value Chains
- Conditional Cash-Transfer Programs
- Digital Finance
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