They Know How: My Introduction to Self-Managed Savings Groups

The following is an excerpt from a 5,000-word essay, “Deep Outreach Financial Inclusion” by Jeffrey Ashe, Director of Community Finance at Oxfam America.  

In the fall of 2000, nearly 20 years since I had an important role in launching the first microfinance projects in Latin America (more on this later), I folded my 6’4” frame into the economy class seat for the Air India flight from London to New Delhi then to Katmandu. I was chasing a hunch that there had to be a better way to deliver financial services to villagers. Arriving in Nepal, my research partner Lisa Parrott of Freedom from Hunger and I met Marcia Odell, the mastermind behind Pact’s Women’s Empowerment Program (WEP). Marcia’s lecture earlier that year had drawn us to evaluate her project. WEP had organized more than 120,000 women into 6,500 groups in little more than a year. I was astounded. No MFI had grown this quickly. And the loans— funded entirely through member savings?  Women like these living on the edge of survival do not have the capacity to save—or do they? And even if they could save what could they with such small sums of money? 

Leaving Katmandu in a torrential monsoon rainstorm our driver picked his way down the treacherous road to the steaming lowlands, the Terai that borders on India.  We visited WEP groups during the day. At night Lisa and I and the WEP staff reviewed what we learned over sweet buffalo milk tea, momos and dahl. These were the basics (see Ashe and Parrott (2001) PACT’s Women’s Empowerment Program In Nepal: A Savings and Literacy Led Alternative to Financial Institution Building for a full accounting). WEP was organizing women into several 20-person groups in each village. Each WEP group was a mini financial institution where the money loaned was the money they saved with the profits returned to the members, much like a credit union on a small scale and operating informally under the regulatory radar. There was no injection of external capital and no matching funds; the money they loaned was the money the women saved. They even purchased the kerosene they used for their evening literacy classes, the lock boxes where they stored their money between meetings and the forms they used to keep their records. Marcia was passionate about this: “Dependency is not empowering.” The outcome; instead of waiting for a handout they took charge and the program grew and was sustained long after the WEP staff had left.

WEP combined finance with literacy training and business development. The women leveraged what evolved into advocacy groups to launch campaigns against trafficking and abuse, alcoholism and child marriage. During a meeting of over fifty group leaders brought together for the evaluation, one of them told me, “We are more courageous when we are organized.” I was impressed at their sense of purpose; in the recently formed groups we visited when members were asked to introduce themselves they could scarcely stammer out their names as they covered their faces with their hands in embarrassment.    

Some of the group leaders took it upon themselves to train new groups. One woman proudly showed me her dog-eared WEP manual. “I formed 21 groups using that manual,” she said, though most had not trained other groups or had only trained one or two. I asked, “Since many of you are already training groups, why not make a business out of it?” They exclaimed loudly; “No!”  One continued, “We would not be trusted; our motivations would be suspect. We train groups because other women are asking for our help. How could we refuse them?”

At the end of the meeting I learned that some of the women at the meeting had previously taken out loans from MFIs but were no longer doing so, “Why did you leave?” “Why pay the MFI if we can pay ourselves?” one answered. Many had just received dividends from their Savings Groups and they saw that saving first – even if it took a little longer to receive a loan or that the loan might be smaller than they wanted right away (a limitation of Savings Groups)—made them money in the long run. But for most of the WEP members the difference between paying an MFI or to the group was hardly the issue. Few of the largely illiterate and mostly very poor members of the WEP groups had even thought of taking out an MFI loan - they had no assets for a guarantee or a business in which to invest. Yet, in their groups, they were already saving and borrowing.

WEP had an answer to my growing uncertainty about how microfinance could reach villagers in numbers that make a difference with services that meet the needs of villagers and the poor. This was effective financing for women in scattered villages where financial institutions are weak and money is scarce, but it was also something more—a member-managed, member-owned model that spread through the enthusiasm of its local leaders. How did it work? The answer was as simple as it was profound. WEP jettisoned the complicated and costly infrastructure that MFIs use to deliver their services, all the technical bureaucracy of securing capital, managing the flow of funds, making loans, collecting on them and preventing fraud. The task of the WEP staff and the some 250 NGO partners with which WEP collaborated was only to train groups to run themselves. The local partner and PACT staff costs per member averaged $28 over the life of the project including savings group training, literacy and training in women’s rights.   

The difference in approach between WEP that worked to train groups to operate on their own and a typical MFI that most often used groups to guarantee loans implies an entirely different stance on providing financial services. In Bangladesh I watched the staff of the microfinance and development NGO BRAC meticulously enter scores of transactions into a huge ledger book at the centers where their members met. These women’s groups had little role in record keeping even though they had been borrowing and saving with BRAC for years (much as I have with my own bank in Boston.)  In contrast, the WEP trainers helped only if the group’s secretary was not sure where to note a savings deposit or a loan payment. They intervened less at each successive meeting with the objective of leaving management to the groups and focusing on WEP’s literacy and empowerment agenda. As Lisa and I interviewed group after group in the sweltering Terai heat, each conversation shattered another of the microfinance myths I had heard for years: the poor can’t save, groups can’t manage themselves, loans must be the starting point, and the staff must control where the program expands. 

Pact provided a “they know how” mindset – pioneered by FINCA founder John Hatch – based on the assumption that groups quickly learn how to manage themselves if asked the right questions. They called it appreciative inquiry: What do you like best? What would ‘better’ look like? How could you achieve that? What will you do first? When? Who is responsible? How will we know that this has been achieved? Promoting Savings Groups is not about control.  It’s letting go and marveling at the outcomes but not until the groups have been solidly trained. What the Savings Group practitioners have mastered is a streamlined and efficient methodology for training strong groups that provide a good example for replication.