In November, DAI inclusive economic growth specialists Colleen Green and Kirsten Weeks attended the SG2015 Savings Groups Conference in Lusaka, Zambia, where approximately 350 practitioners from 44 countries shared experiences and opinions. Green and Weeks recently discussed savings groups and how DAI uses them across its programming with John Jepsen, DAI’s Global Practice Lead for financial services.
What was DAI’s new role for SG2015?
Green (above left): At the previous conferences in Arusha, Tanzania, and Washington, D.C., DAI led panel discussions; for SG2015, we were among the organizers—contributing to planning, event preparation, and panels on nutrition and vulnerable populations. The Financial Sector Deepening Zambia program, led by Joanna Ledgerwood, was also pivotal in the success of the event.
Why has DAI been focused for years on savings groups as a tool for development?
Green: Savings groups are crucial to communities where traditional banks don’t reach, and where people might not meet the rigid requirements set by formal or informal financial institutions. They provide what is needed by vulnerable, ultra-poor households, such as a way to save for children’s education. Savings groups also can play a role on the pathway to improved livelihoods, such as helping fund the purchase of basic tools or supplies.
Weeks (above right): Savings groups also appear to provide durable solutions. There is growing evidence that after donor-funded projects and direct support ends, savings groups remain, providing a self-sustaining safety net to help families withstand shocks and contribute to growth.
This infographic helps show on DAI’s work in savings groups. Where has DAI promoted them?
Green: Most recently, in a variety of programs, including ones funded by PEPFAR [President’s Emergency Plan for AIDS Relief] and the U.S. Agency for International Development that focus on economic strengthening of HIV-vulnerable households. This includes the IMARISHA project in Tanzania and Urban Gardens Program in Ethiopia. Others include agriculture and nutrition programs such as Feed the Future Malawi Integrating Nutrition into Value Chains and the Feed the Future Liberia Food and Enterprise Development project, and in Financial Sector Deepening programs in Zambia and Mozambique.
The connection between savings group participation and improved livelihood outcomes in Tanzania was subject to quantitative analysis. What did that show?
Green: Under the USAID/IMARISHA project, we promoted savings groups as a tool to support vulnerable households affected by HIV/AIDS. We trained and mentored more than 100 local organizations to facilitate local savings groups in more than 14 regions of the country. These partner organizations—ones that support orphans and vulnerable children—took up this model with great gusto, encouraging household members to join or start groups to save money. In addition to basic savings, these groups often set up special internal funds to support the most vulnerable local children or pay insurance premiums into the community health fund so a family could get health services. By the time IMARISHA ended in December 2014, our partner organizations had formed more than 4,100 savings groups supporting 100,000-plus members. Members had saved more than 17 billion Tanzanian shillings, or about $7.9 million.
This work was important to show the Tanzanian government the value of savings groups. We conducted a study of the USAID Pamoja Tuwalee project partners—civil society groups that work with orphans and vulnerable children—that showed how important savings groups were from an income standpoint as well as making impacts in nutrition, food security, and other areas.
Weeks: There appears to be a correlation between savings group participation and improvements in household food security, as well as increases in dietary diversity, which we shared at the SG2015 conference. In Tanzania, households that participated in savings groups were more likely to be food secure and have greater levels of dietary diversity. Beneficiaries reported that savings groups allowed households to access loans to withstand economic shocks during the lean or hungry season. They also helped households accumulate assets related to livelihoods—such as garden tools—to increase their income and potentially contribute to growing and purchasing more diverse foods.
How else does DAI promote savings groups in combination with other development activities?
Weeks: In some projects, savings groups are a financial platform. They create an environment for participants to exercise democracy, where members decide on how their group is structured and how funds are used. Savings groups develop leadership skills—particularly for women, who tend to lead these groups.
People came to SG2015 from all over the world. What was the most exciting person, panel, or presentation?
Green: One was the new research conducted by INSEAD and the University of Oregon on inclusion of poorer, more disadvantaged households in savings groups. It used a random controlled trial to show that groups with some vulnerable households have the potential to save and also change behavior of those poorer members. But it also showed diminishing returns: groups that have half or more their members from vulnerable, poorer households save less, ration credit to wealthier members, and do not benefit poorer members as much.
Also notable was to see the tools being developed to use information and communication technologies to record passbook and ledger at savings groups meetings. There are many technologies being developed and piloted by Grameen, CARE, CRS, and bank partners, among others. Smartphone-based technologies have the potential to capture savings and lending data that then allows groups to be banked (for deposit or credit services). Some of the technologies are complicated and sophisticated, though, and not accessible for less literate group members. Some are also being developed in partnership with banks, which begs the question, “Who owns the data?”
Weeks: And who owns the privacy. The ICT innovations are exciting but raise questions. There is a new MasterCard Foundation project seeking to identify new services and products to further bridge the gap between the poor and the formal financial sector. We need these types of products and services, but it was also good to be reminded that we need to scale up savings.
In addition to literacy, privacy, and data, what else is potentially concerning or lacking in savings group work?
Weeks: We still don’t know that we are reaching the poorest. And there are continuing challenges for groups who are illiterate and innumerate. There are large groups of people whose needs are not met, and for people in savings groups, it does not meet all of their needs for financial services. We need to not fear asking the hard questions and pushing each other to better understand the opportunities and limitations of savings groups.
How are you planning to continue engaging projects around this topic?
Weeks: I am excited to see how we can continue to expand savings within our work, but also how can we better document and understand what is working and what is not. I am particularly interested in better measurement of the nonfinancial benefits—and potential disadvantages—of savings groups for health, education, and gender outcomes. Do we need to add health, gender, and education messaging to savings groups to achieve these outcomes, or is that overburdening them and the outcome changes will happen as households have more security and assets without project add-ons?
We also need to find better ways to integrate with traditional savings groups not supported by outside donors and projects as well as with groups that struggle to help them identify solutions that meet their needs.
Finally, we need to better engage with local financial service providers about the benefits of savings groups and explore collaboratively the development of new financial services for individuals and groups to help bridge the gap for financial inclusion. It was great to see so many investors and service providers at SG2015 who were ready to engage and invest.