You are currently browsing the tag archive for the ‘Savings Groups’ tag.
> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI, with contributions from Nathan Were, Program Manager, FINCA
Technology is revolutionizing the way financial services are delivered to low income clients. Though of course many questions remain about exactly how this will happen, how fast, and which technologies are the best. Setting aside these uncertainties for a minute, I would like to look at some of the (perhaps unexpected) implications that many financial service providers may be considering as they lean-in digitally.
What do we do with the branches? Brick and mortar bank branches have been a symbol for financial services for a long time. They herald trust and confidence among users of financial services. But with the growing prominence of new technologies, including mobile, point of sale merchant terminals, and internet-enabled banking, customers access service remotely. What will happen to the branches? It’s almost certain that branches will retain at least some of their traditional service functionality, but if the move to digital is as robust as expected, changes to branches will likely be robust as well. With iTunes, streaming services, and digital music, how many brick and mortar stores are still around that sell CDs? Here are some ideas for the future of bank branches:
Read the rest of this entry »
> Posted by Alex Counts, President and CEO, Grameen Foundation
Especially since the Global Findex report made headlines around the world with its finding that the number of financially excluded dropped from 2.5 billion to 2 billion during the period 2011-2014, I have been increasingly uneasy with equating account access as financial inclusion, and especially as equivalent to the essential concept of full financial inclusion as defined by CFI. The Center’s new publication “By the Numbers” does an excellent job helping people to digest all the publicly available data about financial inclusion, and make sense of them. It also reinforces my unease.
Despite the progress in account openings, the report makes it clear that the number of people actually using accounts is unfortunately not growing. Even more worrying, it argues that most accounts “are not really functioning as the hoped-for ‘on-ramp’ to financial inclusion.” The risk, as I see it, is that by adopting a stunted definition of financial inclusion that emphasizes account openings, we may be measuring and incentivizing the wrong things. The report wisely urges “caution regarding the value of mass drives for account opening, such as mandated no frills accounts…”
While the available data may overstate progress in some areas, the data may understate it in others due to the tendency to focus only on transactions at formal financial institutions. As the report notes, the percentage of people in low and middle income countries who save increased from 31 percent to 54 percent — quite a jump! — over three years, but this “is not reflected in a commensurate increase in saving in financial institutions.” Global surveys tend to miss savings groups and microfinance institutions, which in many markets play important roles. The alarming gaps in data related to access among vulnerable populations are also noted.
> Posted by Lisa Kienzle, Director, Mobile Financial Services, Grameen Foundation
The following post was originally published on the ImpactX blog of the Huffington Post.
Women are the backbone of the household in Africa — they manage the home, care for the children, are responsible for education and healthcare, and contribute to the household’s livelihood. Helping women helps the entire family. However, women continue to lag men in participating in the formal economy, including accessing financial services.
The Problem: The Poor — Especially Women — Are Excluded From Financial Services.
For the rural poor — especially women — accessing formal financial services is nearly impossible. Few have formal identification needed to open an account; others lack a stable job or collateral needed for a loan. Often bank branches are far from a rural village, making the trip to deposit or borrow funds too expensive and time-consuming.
Many of the rural poor have taken up an approach to support saving and borrowing by forming Village Savings and Loan Associations (VSLAs). Under this approach, 25-30 members of a community form a group. This group meets weekly and saves a fixed amount — at times, as little as 20 cents a week. The savings are lent out to members as loans. All money not lent out is stored by the group treasurer in a metal box secured with three locks and three keys, which are held by three separate key holders. It is, as some group members call it, the “Village Bank.”
> Posted by Center Staff
This edition of Top Picks features a post that offers a fresh framework for examining savings groups, a post that synthesizes recent research on payments in South Asia, and a post on the relative effectiveness of aid approaches.
Steering the conversation on savings groups towards foundational concerns, or at least towards more interesting matters than the oft-trodden territory of model and methodology specifics (e.g. passbooks versus ledgers), Paul Rippey in a new Savings Revolution blog post offers six questions for potential consideration. Here’s a portion of one of the questions: “How big is the gap within the program between what is said and written, and what is done? Said another way, the casual disrespect and bending of procedures makes management incredibly difficult and inefficient.”
In South Asia, domestic remittances are conducted much more than international remittances, and they’re carried out mostly in cash through informal channels. These are two of the big findings from a recent Gates Foundation survey, highlighted by Jake Kendall in a new Next Billion blog post. The post provides a brief overview of the importance of digital payment options for the poor and shares the big findings from the Gates survey, which interviewed individuals in South Asia (Afghanistan, Bangladesh, India, Nepal, Pakistan, and Sri Lanka) and Indonesia on their experience with payments. Another key finding from the survey, demonstrating a big potential market for digital payments, was that the majority of those interviewed – who represent the majority of a population of 1.9 billion adults – reported having sent, brought, or received a domestic or international remittance in the past 12 months.
What’s better?: an organization giving money to the poor with no strings attached, or an organization giving the poor productive assets which require higher expenditures that hinder the organization’s scope? That’s one of the big questions presented in a new post, “Cash or Cows?“, on the Innovations for Poverty Action (IPA) blog. It’s a question getting a lot of attention recently thanks to the increasingly talked-about organization GiveDirectly that gives money directly to the poor in Kenya, with no associated conditions, via M-PESA mobile money transfers. To put this approach to the test, GiveDirectly agreed to allow IPA to conduct a public evaluation (which is currently underway) of the effectiveness of their work. In addition to exploring this question, the post takes an additional half-step of comparing the net impact of conditional and unconditional cash transfers, drawing on IPA research.
Image credit: Ianf
> Posted by Joanna Ledgerwood, Senior Advisor, Access to Finance, Aga Khan Foundation
The following post was originally published in the Guardian Development Professionals Network DAI Partner Zone.
The microfinance industry has come under withering attack in recent years, pilloried among other things for its high interest rates and its coverage, which is often estimated to reach less than 10 percent of the population. But practitioners, the media, and the public should understand that microfinance is a broad term for a highly differentiated financial sector that is not without its successes. Each type of provider — from banks to savings groups — plays a particular role in providing the continuum of services typically needed to promote “financial inclusion” in underserved areas.
My recently published book, The New Microfinance Handbook: A Financial Market System Perspective, addresses the need to broaden microfinance’s reach to meet the diverse financial service needs of clients. For financial inclusion to increase, each type of institution must be deployed in the contexts in which it works best. Together, funders and governments must take a holistic, context-driven approach to improving financial services in poor areas — referred to as the market systems approach. While the commercialization of microfinance has had its successes, we need to consider the entire system, especially community-based providers, if we are to reach the rural poor with appropriate financial services.
The Mountain Societies Development Support Programme (MSDSP), an NGO set up and supported by the Aga Khan Foundation in Tajikistan, is a good example of a market systems approach where a variety of financial initiatives work collaboratively. Launched as a relief and humanitarian initiative, MSDSP transitioned to become a development organization, promoting good governance and local economic development. Recognizing that the legacy of distrust in the formal financial sector has been particularly damaging to people living in mountainous areas — already subject to isolation, marginalization, and deep poverty — MSDSP aims to address the lack of accessible financial services.
In the remote rural areas where MSDSP works, community-based savings groups (CBSGs) are at the heart of a successful effort to bring financial services to the poor, supported by a broad spectrum of financial and social institutions. Based on tested models in Africa and South Asia, CBSGs are simple savings and borrowing associations. Under the direction of elected leaders, groups of 15 to 25 members gather biweekly to manage their financial activities. After two months of training followed by approximately seven months of close supervision, CBSGs continue to operate, without external support, for many years. Members access loans and pay interest of about three percent per month, and all interest received contributes to increasing the loan fund which is periodically, usually annually, distributed back to members. No external capital is required, making CBSGs transparent and profitable for the members.
> Posted by Jeffrey Ashe, Adjunct Associate Professor, Columbia University and Visiting Scholar, Brandeis University
The following post was originally published on 100 Million Ideas, the Microcredit Summit Campaign blog.
Financial institutions cannot make money on a $50 loan or managing $0.25 savings deposits. Yet, tiny loans and savings deposits are the financial services that most villagers, especially poor rural women, need: a safe, convenient place to park their bits of spare change so they can grow to a useful sum or easier access to loans ranging from $5 to $100 that are useful for all purposes including—but not always—a business. It is too costly for microfinance institutions (MFIs) to reach this population.
This is not a criticism, just a reality.
Reaching villagers at appreciable scale, I believe, requires a fundamental shift from debt to savings and from building financial institutions to supporting freestanding savings and lending groups that are managed by member-leaders—not in a few villages but in villages by the thousands. Savings Groups are elegantly designed to provide tiny loans and a safe place to store savings. These groups are also profitable for members with all the profits returning to the members. At the end of the year-long savings cycle, each member receives what she saved plus her share of the interest on loans to members over the year.
I designed and led Oxfam America’s Saving for Change (SfC) Initiative through 2012. SfC has, since 2005, trained close to 600,000 savings group members. The most successful of these programs is our SfC program in Mali. Since it was started seven years ago, SfC in Mali (a joint venture of Oxfam America, Freedom from Hunger, and the Stromme Foundation) has grown to 460,000 women organized into 18,800 groups in nearly 5,000 villages. (Watch a video on Saving for Change produced by Oxfam America.)
> Posted by Dan Norell, Senior Technical Advisor, World Vision
Financial services and enterprise development practitioners often exist in their own separate silos—yet very poor producers need both increased access to markets and financial services in order to increase resilience and economic well-being. Financial inclusion advocates are missing the boat if they focus only on services to individuals and businesses without looking at the need for financing up and down the value chain.
Within the agricultural industry, a value chain approach means that very poor producers are able to increase their scope of economic efforts through improving commercial relationships with buyers, suppliers, and financial services providers—topics which are discussed in detail in SEEP Network sponsored webinars (see here and here). For example, small-scale producers may choose to form producer groups with others in their area. This allows them to aggregate supply with others, ensuring a higher price due to greater bargaining power. These linkages provide producers with other beneficial externalities.
One example is described in the Productive Safety Net Program Plus case studies found in the Integrating Very Poor Producers into Value Chains Field Guide. In this project, CARE Ethiopia established production marketing associations and trained recipients of government food aid in production skills; group organization and management; governance and transparency; and business, market, and financial literacy. These extremely poor households also received a productive asset and accessed loans from microfinance institutions for agricultural inputs. This holistic approach addressed challenges faced by the beneficiaries at all levels of the value chain.
> Posted by Merene Botsio, Financial Inclusion 2020 Project Coordinator, CFI
Happy International Women’s Day! I am pretty excited today because I get to wear both my gender and financial inclusion lenses. Year-in, year-out, on International Women’s Day I read posts probing universal progress in women’s political participation, engagement in the work place, and advancement in the boardroom, to mention but a few. Now, I wish to examine the state of women’s access to financial services globally.
Thankfully, the Financial Inclusion 2020 campaign recently launched the interactive Mapping the Invisible Market Data Explorer, so it is easy to put graphs together to examine women’s participation. My work is already half done! I won’t claim to be exhaustive in this post. What I offer here are snippets of cross-regional analyses on women’s access to savings, accounts, modes of payment, and other forms of financial activity.
Not surprisingly, high-income countries have the greatest percentage of women having an account at a formal financial institution, standing at 87.4 percent. The Asia-Pacific region comes in second at 52.1 percent. The bottom two positions are occupied by sub-Saharan Africa and Middle East/North Africa (MENA) at 21.5 percent and 12.5 percent, respectively.
> Posted by Sonja E. Kelly, Fellow, CFI
When we talk about “on-ramps” to financial inclusion, we are engaging with the idea that there are “entrance points” to the road that will take us to global inclusion, just as there are ways to access a highway to get people closer to their final destinations. We’ve already blogged about a number of different on-ramps: payroll loans, post office service points, savings groups, and mobile money, to name a few.
MasterCard’s Amit Jain and Gidget Hall explore another on-ramp: electronic bill payment.
I would venture to say that most people do not find bill pay exciting. In my house, the prospect of paying bills is a subject that tends to trigger groaning and deferral.
However, Jain and Hall observe that bill payment is a financial management exercise that is common among most people, including those with no existing banking relationships. They argue that of any potential on-ramp to financial inclusion, bill pay is the most common across the world. In addition, they note that bill payment is a regularly recurring process, which, if approached as an on-ramp to financial inclusion, could contribute to a habit of efficient and effective financial management.
From a supply-side perspective, electronic bill payment has the potential to benefit a range of players including retailers, banks, billers, and aggregators. Working together, under this logic, would benefit all of the parties. For example, billers could lower their costs associated with accepting payments at their physical offices, banks could engage and acquire customers, and the government could reduce the black economy and make transactions easier to track.