If the traditional MF sector has not been able adequately to meet the needs of the very poor, there is a

grassroots structure that is. It is through groups functioning in villages across sub-Saharan Africa (in which

members meet to save together; lend their savings to each other; and, like tiny financial institutions, charge

interest that they periodically share among themselves) that the very poor are finding the MF services

they need. These are called “savings groups” (SGs) and are part of a rapidly growing movement involving

poor people who want a safe place to save, access to credit, and the benefit of being part of an informal

social safety net that group membership provides. These groups are sustainable (as studies of SGs in Niger,

Zanzibar and Nepal, for example, show) and reflect remarkable adaptability and resilience in economically

and politically challenged settings.4

SGs are structured somewhat similarly to ubiquitous, age-old, community-based entities that for centuries

have provided their members with access to basic financial services. SGs are related to rotating savings and

credit associations (ROSCAs) in which each of perhaps 10 to 30 members contributes the same amount to

a collective “pot” and then, across meetings held regularly, each member has a turn to receive the total

collected. A more complex version of the ROSCA is the Accumulating Savings and Credit Association (ASCA).

In ASCAs, members bring their equal contributions to regular meetings, but because the money is not

immediately disbursed but put into a fund managed by the group to provide loans to members, the fund

increases over time. The SG is a type of ASCA in which group members contribute and then, periodically, at

a time pre-determined by the group, distribute the fund among themselves.

The self-managed, autonomous and community-based SG thus serves as a mechanism that allows poor people,

men and women alike, to access financial services in the community. It is highly appropriate for the poor and

extremely poor, many of whom live at subsistence levels, because it offers the highly valued chance to save,

not just borrow, and saving can be flexible – extra cash, when in hand, can be deposited so that it does not

get spent, and it can be withdrawn when needed, when food for the family is in short supply or there is an

unanticipated household need. Even borrowing from the SG can be flexible. Within the group’s banking-cycle

parameters, a small amount may be borrowed for the length of time it is needed. The SG even may offer loans

at low-interest rates to help a member meet an emergency, which can be a welcome source of support.

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Johnson, S., Malkamaki, M., & Musoke, C. (2007). Village savings and loan associations: experience from Zanzibar. Small Enterprise Development, 18:1, p. 12.

Mayoux, L. (2008). Women ending poverty: The WORTH program in Nepal: Empowerment through literacy, banking and business. Valley Research Group, Pact.

_39324S962_1_1_1_1,00.html; Mugerwa, W. K. (2001). Sustainable food security for all by 2020. Available at http://conferences.ifpri.org/2020conference/

PDF/summary_kisambamugerwa.pdf. Lewis, K. (2006). Poverty Reduction. UNPD. Available at www.undp.org/women/docs/TakingGenderEqualitySeriously.pdf

(According to UNDP, women comprise more than half of the world’s population, but own only one percent of the world’s wealth.)

As in credit-led MF, it is common for women to dominate. Today nearly three-quarters of group members

are female. There are good reasons why facilitating agencies (FAs) that are promoting SGs, like their

MFI counterparts, focus deliberately on bringing women into their programs. FAs see this as a way to

create permanent social change. Women are a cornerstone of African economic development, providing

an estimated 70 percent of agricultural labor and producing between 78 and 90 percent of all food – and

they do so on subsistence and small land holdings, owning very little land or other productive resources.

According to the United Nations Development Program (UNDP) women comprise more than half of the

typically working 15 to 18 hours a day, twice as long as men, even though they often earn only one-tenth

as much as men. Women are guardians of their children’s welfare, with explicit responsibility to provide

food, nutrition, water, and health – a responsibility they take with the utmost seriousness.6

Within a MF framework, women are willing to work with the very small loans initially available from the

group fund, and over the years they have proved particularly credit worthy. Small investments made by

women often yield significant benefits in terms of family well being because that is where women invest

their earnings. The social and business case to be made for investing in women in MF is irrefutable. As one

observer noted, “The economic empowerment of women is not a women’s issue, it is a development issue.”7

But whether it is for women or men, SGs provide a secure and convenient place to save at very little cost.

A member may borrow on flexible terms at a level that is appropriate to a borrower’s needs and that can be

geared to the seasonality of the farming year. Members might use loans to shore up a household’s subsistence

existence, to meet other wide-ranging household needs or to invest in an income-generating activity (IGA).

Furthermore, because of their lending activities, SGs can generate a generous financial return on members’

savings, since many groups lend commonly at between 2 and 10 percent per month. This means that SGs

not only can help protect their owners/managers from external shocks, but they can help them build assets

too. In short, SGs can fill an important part of the financial services gap left by the credit-led MF sector and

become income-generating enterprises in their own right.8

No review of SGs would be complete without pointing out that SGs not only meet important financial needs

of poor people, but they are often structured to provide an informal form of insurance for members. Most

groups establish a “social fund” and decide what the regular mandatory contribution from each member

will be to capitalize it. Funds may be used for emergencies and other non-productive expenditures such as

medical bills or school expenses. Sometimes this support takes the form of a grant; at other times it is given

as a low-interest loan.

In addition there is evidence from across the continent that belonging to an SG has a social dimension

that many members come to value as much as its financial services. Members frequently turn to the SG as

a solidarity group, a place where they can come for counsel in stressful times. It is a place where women,

especially, can develop leadership skills and realize that amorphous concept of empowerment. The group

might also become an advocate for social change and community development. Altogether the SG provides

a social safety net from which members and non-members alike can benefit.

SGs do have shortcomings. Because, at least early in the life of a group, savings are small, the fund to lend

is also small. This means that the demand for loans may well exceed the capital available. Another drawback

of the model is that, after the fund has been shared out at the end of the banking cycle, which is usually 9

to 12 months, there is very little to lend at the beginning of the new cycle since there has not been time for

savings to accumulate. On a different front it is indisputable that attending group meetings and managing

group business takes time.

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6 UNDP. Overall status of women in Africa. Available at http://unu.edu/unupress/unupbooks/uu37we/uu37we0t.htm

7 Leipziger, D. (2007). Under-investing in women’s economic opportunity limits economic growth and slows down progress in poverty reduction.

World Bank.

The promotion of SGs as a mechanism for community-managed access to savings, credit and insurance

services began 2 decades ago in Niger, in a program implemented by CARE. Since then, CARE has focused

its SG development efforts on Africa because, as pointed out previously, it has the largest percentage of its

population both living in extreme poverty and unbanked. CARE’s Access Africa program to develop financial

access for Africa’s poorest through village savings and loans associations (VSLAs), to be discussed below, has

become one of CARE’s flagship SG development efforts. Today CARE has reached nearly 2.4 million people in

SG member caretakers being able to increase their income and from themselves being in groups and

receiving a holistic service package that might include food and nutritional support, shelter and care,

social protection, health care, psychosocial support, and educational and vocational training – all of

which improves their overall well being.

or, in the case of Rwanda (and perhaps other countries in the future), to pay their national healthinsurance

premiums; and within their groups they can learn about health issues when providers perceive

the advantage of delivering their messages to organized groups that meet regularly to improve their

economic and social circumstances.

managing a water-user group and handling the sensitive issues with which it must deal; group members,

as the financial benefits of SG membership accrue, can pay their water fees and help cover the recurrent

costs that inevitably arise in any water-management effort.

repatriation of individuals returning to a community after conflict ends.

limited; members of SGs are directly addressing the income issue and also can benefit from awarenessraising

efforts mounted by others to reduce the number of at-risk children.

able to tap into their own financial resources; members can apply their group management skills

to farmers’ groups; if a group wants to join an external agriculture-related production or marketing

entity, it is in a position to do so; and, of course, because of better cash flows, group members

have the potential opportunity to maximize profit from their agricultural products by selling at an

opportune time in the market.

members commonly achieve, it is possible for members to save when they have any extra resources and

then use those resources when they are needed.

have supported members to learn about school-related issues that affect the community and made

it possible for members to use their group to bring about reforms in their schools. Taking this one

step further, CRS has concluded that holistic development involving SGs makes possible holistic

community development.