What's Good for Them is Good for Me and Vice Versa
You do not have to be poor to be in need of good financial services. In fact you can have a great job, a wonderful education, and still require a reliable way to save or borrow. This is exactly the situation in which Jude Jacotin found himself in Haiti. With a pedigree background that included working for reputable NGOs, Jude required a way to build up savings and help fund the business ideas of peers.
In 2009 Jude was meeting with several vibrant mutuelles (savings groups, Haitian-style)in Les Anglais, a town on the Southwestern coast of Haiti. During the gathering it dawned on him that after years of forming and advising mutuelles, these groups enjoyed better financial options than he did. Jude realized two things. First, he had not been walking the talk. He was advising mutuelles on multiple issues but was never feeling the impact of the advice he gave. Second, joining a mutuelle might be a good idea for him. Right on the spot he asked some of his professional colleagues who happened to be observing the meeting to join him in starting a new savings group. He did not get any takers, even after several rounds of emails and texts.
At least he did not get any takers right away. But, Jude was determined and his suggestion slowly took root. Over the next months twenty-four men and women, all working professionals, joined Jude in launching a new club called Impact Mutuelle De Solidarite (IMSO).
Jude now works for the British Red Cross as Livelihood Manager. His fellow IMSO members include current and former employees of Catholic Relief Services, as well as many newly-minted entrepreneurs. Some members of the mutuelle also participate in MFIs. Jude observes: “the services of MFIs are limited and cannot cover the savings, credit or investment needs of middle-class Haitians, nor can banks and credit unions. It became clear to me that to help myself I needed to practice what I preach. I needed to start a mutuelle.”
Officially formed in October 2009, IMSO has saved the equivalent of USD $37,500 in its main fund (called generically in Haiti, the green box.). Members contribute $62.50 per month to keep this pool growing. IMSO’s emergency fund, known as the red box, receives $6.25 per month from each member and now holds about $2,500.
All members live in the western part of Port-Au-Prince and meet on the last Saturday of each month. Meetings are run in a brisk, business-like manner with Jude at the helm. Almost 50% of IMSO’s fund is out on loans to members. The group keeps the un-circulated portion of the green and red boxes at Unibank. Loans range in size from $125 to $6,250.
Members borrow to launch their enterprises. For example, Judith Drouyard has opened a massage business that caters to high-end customers in a tonier part of Delmas, a neighborhood of Port-Au-Prince. Archedou Jean and Numa Jocelyn have each opened a vehicle rental business to take advantage of the recent demand for cars and drivers generated by the influx of post-quake aid workers. IMSO also lends to credit-worthy members who need a lump sum to pay their landlords. In Haiti, tenants pay rent once per year, in advance.
To date, IMSO has not made any distributions to its members. Its fiscal year ends on September 30 at which time the group plans to return its profits, derived from interest and penalties, to its membership. “We won’t return the savings,” says Jude, “because we need to keep accumulating our principal to fund new businesses that members have in mind. We want to keep the fund full to take advantage of opportunities as they arise. Closing out the fund closes out opportunities.”
This last comment brings to mind a recent post by Greg Pirie, Questioning the Cash-Out. Writes Greg:
“I understand that group members can start a new group on distribution day, but doing so only emphasizes the stop-start nature of the process. Even in a nomadic lifestyle, where homes are dismantled and rebuilt in a seasonal cycle, the need for a financial asset is constant. Or do savings groups not perceive themselves as facilitating the creation of an asset by its members — merely the short-term access to a loan?”
One must wonder if cashing out is a good idea. If Jude Jacotin who runs groups as part of his living – he is Livelihoods Manager for the British Red Cross after all – is reluctant to encourage his own group to regularly return its principal to members, should promoters of savings groups be so intent on cyclical distributions of interest and savings? Surely, practitioners like Jude who have “skin in the game” are the best judge of practices that really work. Yes, I know that groups should always make their own decisions, but let’s face it, groups are often shaped by the organizers who first inspire them. Are organizers encouraging annual cash distributions because they know for certain that it’s a good idea and have experienced the consequences of such advice, or because their trainers nudged them in this direction based on an aid-driven set of best practices? Curious as to what readers think.
Reader Comments (4)
Annual cash distributions are a way of reducing risks and accumulating lump sums that work for many groups and many members. They might not be appropriate for Jude's group, or others, and I don't assert that one size fits all.
Even though (I believe that) annual distributions are a good thing for MOST groups, I recommend them to ALL groups. Why that inconsistency? Because I don't know how to fine-tune my advice to the specific needs of each group (especially because the closest I have EVER gotten to training a group is training-of-trainers) so I work to reduce risk for the greatest number, even if that means less-than-optimal advice for the few.
Yunus and the Grameen folks used to recommend to their replicators that they follow the Grameen procedures by the book for two years, and then begin to add modifications after they had understood and owned the system. That seems like good advice for savings groups (and I wonder if anyone has ever said that to groups?)
The discussion of reducing risk reminds me of a wonderful satirical article from the Onion, entitled "Nuclear Energy Advocates Insist U.S. Reactors Completely Safe Unless Something Bad Happens":
WASHINGTON—Responding to the ongoing nuclear crisis in Japan, officials from the Nuclear Regulatory Commission sought Thursday to reassure nervous Americans that U.S. reactors were 100 percent safe and posed absolutely no threat to the public health as long as no unforeseeable system failure or sudden accident were to occur. "With the advanced safeguards we have in place, the nuclear facilities in this country could never, ever become a danger like those in Japan, unless our generators malfunctioned in an unexpected yet catastrophic manner, causing the fuel rods to melt down," said NRC chairman Gregory Jaczko, insisting that nuclear power remained a clean, harmless energy source that could only lead to disaster if events were to unfold in the exact same way they did in Japan, or in a number of other terrifying and totally plausible scenarios that have taken place since the 1950s. "When you consider all of our backup cooling processes, containment vessels, and contingency plans, you realize that, barring the fact that all of those safety measures could be wiped away in an instant by a natural disaster or electrical error, our reactors are indestructible." Jaczko added that U.S. nuclear power plants were also completely guarded against any and all terrorist attacks, except those no one could have predicted.
We're like that with groups: we know how to keep them safe, unless something bad happens like elite capture, theft, lack of transparency, bad bookkeeping, natural disaster, illness, death, incompetence, meddling by local officials, OR anything else that we haven't predicted!
Still, we do our best, and yes, annual distributions are an imposition from the outside, but it looks to me like, for most groups, they do more good than harm.
Fri, June 17, 2011 | Paul Rippey
We regularly tell our groups to follow the 'package' we train them on for at least the first year. Every meeting is a training. Then when they have graduated, they can tinker to their hearts content.
We also tell them that, although there are a few formal training sessions before they start, their training last a whole year!
We try to convince our groups to hold back a good portion of their savings at share out to 'kick start' their fund in the new year. In the first year, NO ONE does that. However, we have seen that some groups do so at their second share out.
I believe that the cash out simplifies things and enables the group to get rid of members they may not be able to get rid of otherwise!
Just my two cents!
Sun, June 19, 2011 | Jill Thompson (firstname.lastname@example.org)
I don't really know what I'm talking about when it comes to share out. I just believe (not the same thing) a) that it keeps a new and inexperienced system safe b) that it seems to fit people at the bottom of the pyramid rather better than people half way up it, because security is an issue and rural people often have a cyclical need for cash and c) People usually discover creative ways of having the system build capital post first cycle. In Zanzibar, for instance, in 2002 the annual share out averaged $1,500. Now it's $6,000 and a lot of money is rolled over. I've seen people leave profit in the system and pay annual dividends to the profit capital left in, to build up a core fund. So I am more comfortable leaving something behind that works, with all its limitations, and see what happens afterwards. What I am absolutely sure of is that if we start to develop standardised ways of keeping the money in the system, we will get it wrong and a lot of bad things will happen.
Mon, September 19, 2011 | Hugh Allen (Hugh@vsla.net)
First I would like to thank Kim for the post
Paul and Jill for the comments
My experience with the savings groups and mostly the MUSO, feedbacks from those groups members, make me say that the financial services are suppose to be adapted to the needs of people and not the people to the financial services and the savings is not the most important, but it’s why it use for also the savings can make you start plan for your future.
In Haiti, only people are making income generating activity have access to the MFI services, and, employees, farmers, people who make the livestock etc… don’t really have access to those financial services. There are some MFIs make product name “employee credit” , the rate is 24% and about 3% fees for files ect… in total 27 %, to higher for people with small income . Recently, before leaving CRS, World Vision and CRS we both visited “MUSO Tet Ansanm” at les Anglais we find people used their credit for many things: incomes generating activities, agriculture, livestock, school fees, mortality cases, disease cases, build or repairing their house, first communion, wedding etc, all those things need to be finance, it’s the reality and they are very satisfy about the methodology. They insure a good management of the group, the savings and the insurance funds. If they can’t find a credit from a MIF , Credit Union, Cooperative for their NEEDS, they will sale their plot of land, their livestock or other assets they should have for a affordable price what will make them more poorest.
With an accumulation of savings regularly, we can plan the future without problems and fill in security financially, give more credit to the members adapted to their needs, nonstop activities, realize projects. Members of those groups, call that savings “PENSION FUND”. In that way, MUSO members will be able to be consistent regarding the inflation rate because the profit will be add to their savings. Example: 25 members /$ 62.5 per*12 months *5 years = 93,750 us.