CONCLUSION

Bringing Savings Groups to Fifty Million People

I have been working in international development for almost half a century. I started in my twenties, bringing village leaders together in Ecuador to define how they were to secure their land under the agrarian reform law. In my thirties, I introduced solidarity group lending to Acción, leading to the commercialization of microfinance. In my forties, I brought group lending to the United States through a domestic microfinance program, Working Capital. Recognizing that microfinance would not reach the poor in significant numbers, over the past thirteen years I have embraced savings groups as the simplest and most practical way to serve the poor.

In all these endeavors, the underlying theme has been the same—providing a simple structure to help people take charge of their future. I have been both amazed and humbled by the energy and commitment of those we serve when they are in charge and we get out of their way.

The savings group experience gives us room to hope that the seemingly intractable problems of poverty can be addressed on a scale that makes a difference. I am by no means suggesting that savings groups are sufficient for development. Access to rule of law, institutional financial services, basic services, education, roads, and markets are all necessary—but savings groups are perhaps the best and most practical place to begin.

In all my life’s work, I have found that people have a common desire to join together to support one another in gaining more control over their lives. There is one truth that has been consistent—development must be “in their own hands.”

In their book, The Business Solution to Poverty: Designing Products and Services for Three Billion New Customers, authors Paul Polak and Mal Warwick suggest, “To meet the biggest challenge in development—scale—your enterprise must aim to transform the lives of 5 million customers in the first five years and 100 million during the first ten.”⁹ Savings group initiatives increased their outreach from one million to ten million members in just six years.

The remarkable difference with savings groups is in how they are able to achieve this growth—not through building financial institutions as microfinance and credit unions have done or by producing and selling “relentlessly affordable” products, as Polak and Warwick suggest, but by catalyzing the problem-solving capacity of the poor. Practitioner organizations provide the simple savings group structure and transitory support. The members do the work of choosing members, electing officers, writing bylaws, mobilizing their group’s fund, and issuing and collecting on loans; they take it on themselves to spread the message of savings groups within their own and neighboring villages.

Villagers join savings groups because they make their lives better. Beyond providing essential financial services that increase community resilience and reduce the effects of shocks, these groups are beginning to serve as platforms for a variety of community and economic development programs. Some groups will initiate their own projects or reach out to the government and international and local NGOs for help in building wells, schools, health posts, and roads, and the effects of the groups are being multiplied as the leaders of established groups train new ones.

Given the instability and weak institutions of the poorest countries, the fact that these groups have proved to be extraordinarily robust is yet another reason for supporting their expansion. In Mali, despite a coup, an insurgency in the north, a severe drought, an influx of refugees, skyrocketing food prices, limited opportunities for work outside the village, and faltering institutions, few Saving for Change groups have disbanded, while many new groups have been trained by volunteers.¹⁰ Similarly, groups in Zimbabwe survived hyper-inflation,¹¹ and groups in Nepal thrived after the withdrawal of outside support and a Maoist takeover of the region.¹² This is a testament to the power of local ownership and control that underpins the savings group approach.

Savings groups cannot solve all households’ problems, but villagers generally join these groups because they work. In a separate study of savings groups programs across Oxfam America, Freedom from Hunger, CARE, and CRS, researchers found:¹³

• 89 percent of the groups were still saving and lending.

• The total assets of each group—savings, interest, fines—more than doubled.

• 85 percent of the groups’ funds were on loan to members.

• When the fund was divided, each member received an equivalent of $1.38 for every dollar the member saved. Instead of paying interest to financial institutions or moneylenders, they had paid themselves.

The same study showed that self-replication is occurring at staggering rates. For every staff-trained group, two more groups were established by copying what they had seen other groups do or with the help of leaders from established groups. Word-of-mouth replication had effectively reduced the cost of training a group from $400 to $133, with this cost poised to decline even further as volunteers train more groups in the years to come.¹⁴

Evidence from savings group programs in Uganda,¹⁵ Zanzibar,¹⁶ Nepal,¹⁷ Ecuador,¹⁸ and Guatemala¹⁹ documents a similar pattern of viral replication. This should not be surprising; ROSCAs—whether they are called tontines, Susus, merry-go-rounds, tandas, or chit funds—spread from village to village before roads and mass communication, and certainly before development workers like us.

Expanding Outreach to Fifty Million Group Members

At the SG 2013 savings group conference in March 2013, in Washington, DC, the major savings group practitioners—Oxfam America, Freedom from Hunger, CARE, CRS, Plan International, and the Aga Khan Foundation—presented their “50 million by 2020” vision statement.²⁰ The advisory committee concluded that savings groups had the potential to become a major source, if not the major source, for financial inclusion in the world’s poorest countries. On reaching the target of fifty million members, savings groups will be saving and distributing more than one billion dollars ($500 per group) of their own money every year. The majority of those who benefit will be those living on less than $2 per day, with a majority living on less than a dollar per day. This population has been nearly impossible to reach with any level of success through traditional financial institutions, except in densely populated Bangladesh, India, and Indonesia.

The cost of growing savings groups to fifty million members is modest indeed:

• $1,000 to $1,500 per village

• $5 million to introduce savings groups to three thousand villages with a quarter of a million members

• $150 million per year over seven years to meet the fifty million group member target

The cost for training a group is trending downward. Jong-Hyon Shin, a student of mine from Brandeis University working in the Dominican Republic, is able to train savings groups through single two-hour simulations.²¹ CRS is expanding its Private Sector Provider model, which pays local agents by the groups they train, further reducing the cost of expanding the program.²² Freedom from Hunger is using low-cost mobile phones loaded with animated pictorial guides to help volunteers train groups and provide business education, which lessens costs as well. Simple applications are being tested to automate record keeping,²³ and in high-crime slums, members send their savings to the group treasurer via cell phone and groups send their extra cash to banks for safe keeping electronically.²⁴

With the simple model described in this book, groups are trained quickly and operate well on their own. When we add complexity—matching funds, elaborate record keeping, or handouts—we unwittingly create dependency and under-cut word-of-mouth replication, the essence of “in their own hands” development.

The stakes are high. Development has been a failure in large part, with hundreds of billions of dollars misspent. We throw the driver in the back seat and take over. Staff-intensive and costly interventions, will never serve more than a small percentage of the truly poor—that is, if they work at all. By promoting simple ideas—savings groups are only one of them—we can, to use Oxfam’s term, “right the wrong.”

The strategy of savings groups is based on awareness that good ideas spread as they always have: through talking with neighbors and helping one another. We will judge ourselves successful when development passes from our hands to theirs. Few will be lifted out of poverty, but the harshness of living on the edge will have been lessened, and that in itself is a major achievement. As I observe savings groups, I wonder what lessons the gaggle of children intently observing each meeting absorb as they watch their mothers undertake the revolutionary act of taking charge of their future.