Savings Groups: Financial Services that People in Poverty Can Manage by Themselves
Jeff Ashe was the person who introduced me to microfinance 35 years ago. I was in grad school and we had to do a Spring Exercise with a local organization. I chose ACCION and ended up working with Jeff.
Jeff has been a pioneer and trendsetter in the microfinance and financial inclusion areas. He popularized group loans in the 1980s, then set up a US microfinance organization (Working Capital) in the 90s. In the early 2000s Jeff investigated and promoted Self Help Groups, and more recently he has been an evangelist for Savings Groups and created the Saving for Change program at Oxfam. I’ll let him explain what Savings Groups are and how they can provide financial services for people in poverty that are too poor or too remote for banks and microfinance agencies to reach. This comes from his book on Savings Groups called In Their Own Hands.
“Savings groups … reach the village poor by … training small groups of community members to manage their own mini financial institutions. Members save what they can weekly in a communal pot and loan their growing funds to members. Annually, timed for when money is scarcest, the pot is divided according to how much each member saved plus each member’s share of the interest. Every cent saved over the cycle plus interest is returned to the members.
The principal reason why membership in savings groups has grown from one million to ten million in just six years is that instead of depending on institutions, savings groups tap into the vast, underutilized potential of smart people to solve their own problems. Through the discipline of weekly saving, community members now have a useful sum of money in hand when cash is scarcest. With their end-of-year payout, they buy food during the “lean season,” before the harvest puts food on the table. They may pay school fees, purchase medicine, stock a business, grow more food, or buy a goat or two to fatten and sell. Benefits are not only financial; now that members have their own money to spend, women (most of the group members are women) have gained a measure of independence and benefit from the growing solidarity and mutual assistance among members.
… A member of a savings group can take out a loan when and in the amount she wants, as she saves the amount of money she can. Interest is charged on the loans, and fines are levied when members miss meetings or do not pay a loan on time, so when the fund is divided, members receive more money than they saved. More flexibility comes at a cost: the need for better record keeping. Better record keeping is the focus of savings group training and the major task of the local nongovernmental organization (NGO) staff who train these groups.”
Recently Jeff organized some research on Savings Groups in Guatemala for Oxfam. He passed on to me the following story about a woman whose dedication to community organizing led her to starting 20 Savings Groups.
Tell us a little about your life.
Good day. My name is Eleazar Timotea Castro, but everyone calls me Tita. I was born in Tejutla, San Marcos, in the Western part of Guatemala, but I live in Sololá now. I am 39 years old and I am a mother with four children, three sons and a daughter. I’ve been working to improve the community since I was 18 years old.
How did you get started in your work in the community?
I was just a little girl when I first got interested. In my community there were always a lot of meetings. My grandfather always took me. He said, “Come with me because I don’t know how to read and write.” He could write, but this was his excuse to have me come with him. He started taking me to these meetings when I was only seven years old. It was because of my grandfather that I started primary school. In this time not many families were sending their children to school.
My community was terribly affected by the war. Many “disappeared” and there were so many widows and orphans. No one knew where the soldiers took them. Some of them were part of the La Unidad Revolucionaria Nacional de Guatemala (URNG). The war went on until they signed the Peace Accords in 1996.
I returned to my community and I started teaching, but I didn’t like it. My relatives set up an interview for me with the Consejo de Asociaciones Mayas Tekum Umam. Fortunately, they hired me and that is where I started my work with women. I worked with the Consejo for five years.
In 2007 I started working with IEPADES. (IEPADES is the Guatemalan NGO carrying out the community savings program.) During my interview, my jefa, Noelia, asked me what I could do. And I told her about my work with women for the Consejo and she hired me. Something that has always helped me is the confidence I have in myself. I know that I can do what I say I will do. My first job for IEPADES was promoting home gardens and raising chickens in fifteen communities around Sololá. But then I had the chance to work with Oxfam on their feasibility study for the community savings project, “Ahorro Comunitario.”
Sololá wasn’t an area where Ahorro Comunitario was going to be launched but, seeing how interested I was after the working on the feasibility study, Noelia asked me if I wanted to start some savings groups as a volunteer. I said: “Yes! Yes! Yes! There are so many poor women in Sololá. It would be a challenge. I had my doubts. I was afraid that Ahorro Comunitario wouldn’t work because there were so many microfinance institutions that we would be competing with. Noelia sent me to El Salvador to be trained where Ahorro Comunitario had been launched a few years earlier. In 2010 I trained four groups as a volunteer.
What was it like training those first groups?
What made it hard was that that I had I had to explain to the women that were not bringing them anything; all we were providing was a methodology for how they could save their own money. A few women said they were interested, but the rest said muchas gracias, but no. I remember that in the town of Novillero we invited all the women to hear about Ahorro Comunitario. About 60 women came to the meeting. When I started explaining about how they could save in groups they started leaving one my one until only five women remained. By the end of that meeting my head ached.
When I got home I told my family what happened. I said: “Ayayi this has been a difficult experience but I am going to do this. I can do this.” My family said that if I wanted to train savings groups they would help me. Later, at another meeting we formed a savings group with ten women with the help of the Catholic Church and this group still continues to save.
In 2011 funding for Ahorro Comunitario was approved for Sololá and I was hired as a group trainer. This gave me the chance to reach many more women. But then the manger of BanRural (a microfinance institution) told me: “Look, you are organizing women and working with them and you are taking away our customers.” I said, “That may be true but the women like saving in their groups because we don’t take even one penny from what they save and what they earn on their savings.” By 2011 I had trained twenty groups with 420 members with the help of seven volunteers.
In 2011, Milagro Marvilla (the coordinator for Ahorro Comunitario for El Salvador and Guatemala) carried out an evaluation of our work and this encouraged me to do even more. By 2012 another trainer and I were promoted to be supervisors. I started as a volunteer, then I was a trainer, and now I was a supervisor. You can tell that I am convinced that this is a good program because I am a group member myself.
For me the most important part of Ahorro Comunitario is what the women learn by being part of the group. When they join their groups the women are timid and not organized and now they are telling each other their problems and helping each other. After the financial part of the meeting is over they start talking about what is important to them.
Let me give you an example. Six months ago one of the group members, Doña Gloria from the community of Chujomil, had problems with her husband. He told her she shouldn’t be going to these savings group meetings. She gave in to his demands even though he lived in the United States. Doña Gloria cried and cried; she couldn’t stop crying. So the entire group went to talk to her in laws to explain the situation.
Her friends told her that she had to call tell her husband that the savings group is an opportunity. She and her children spoke to her husband on the phone. Now her husband is convinced and he sends her money to save in the group. Now thanks to the support of her friends in the group she was able to overcome this problem. This is only one example. There are many more.
Now some of the group members are part of the municipal government. Women have been elected to be representatives of the municipal government.
This sounds good, but are there difficulties?
The disintegration of the groups has been frustrating. Sometimes they say that they don’t want to continue but this only happens rarely.
How many groups are savings in Sololá today?
As of 2013, between 55 and 60 groups are in place in Sololá with approximately 1,300 women members. Of these groups, twenty have been trained by volunteers. .
Thank you for your time.
No thanks to Oxfam that has made it possible for us to continue working.
All photos of Guatemala Savings Groups on this page come from Oxfam.