Five Worst Savings Group Ideas of 2013
At the end of the year, it is traditional to make Best and Worst lists. Here’s my take on the five worst ideas I’ve seen this year. Many of them are old ideas that just won’t die. Maybe this will help! They go from 5 to 1, saving the worst for last…
5. ROS as an indicator of group health
One of the metrics in the standard MIS is “Return on Savings”. It is assumed by some that groups are successful if they make a lot of loans and pay a lot of interest into the common fund, so that they get a lot of money back at share out. It’s fine to do that, of course, but it is equally okay not to do that. It’s all the members’ money, whether they save through savings, or save through interest payments. Groups can do no borrowing at all, and be perfectly successful.
4. Fee-for-Service run amok
Fee-for-service, the idea that groups support their trainers financially, is okay, but it is a grave error to assume that cash payments are the principal motivator of trainers. And when agencies recruit trainers who are primarily motivated by money, and measure success by how much money they make, they open the door to bullying and conning groups into buying services they don’t need. If you don’t think this happens, you’re fooling yourselves.
3 Wholesale Credit Linkages
What will it take to drive a stake through the cold evil heart of this terrible idea? Making wholesale loans to savings groups has created conflict, discouraged savings, changed the nature of the groups, driven members away, and siphoned savings into the coffers of MFIs and banks in every country where it has been tried. Have its proponents ever actually seen this in action in the field, or read this report?
There is an epidemic of thinking that savings group members who borrow are better than those who only save, and that the purpose of savings groups is to take a loan to invest in a business which will produce an income stream and “alleviate poverty”. As a result, some programs systematically pressure all members to take loans. If this possibly applies to you, please read this post, or this one. Thank you!
1 Corporate Sponsorship
Some would believe that on Monday, Barclays Bank is one of the corporate holdouts supporting the apartheid regimein South Africa; on Tuesday it manipulates the interbank LIBOR rate, one of the greatest cases of corporate fraud ever; on Wednesday it creates opaque derivatives which end up driving thousands of people from their homes; on Thursday they pay themselves ginormous bonuses; but, on Friday, we can forget all that, because they are pro-poor, and want SG members to build strong groups. Beware when the T-shirts of your trainers advertise corporate criminals! Please see here, and here.
Well, I hope you enjoyed that. Now read the five best ideas of the year!
Reader Comments (2)
Paul thanks for reminding us of the checkered past and present behaviour of multinational banks. We are in a period of development in the savings groups movement where funding can be hard to find and alliances with big, fat partners seems attractive. Being aware of how these behemoths became fat and what toll they may exact on our movement is important. Women in villages who need loans only go to the most greedy and usurious money lenders when there are no other options. If a savings group exists the loan sharks become irrelevant. If we scale up the savings group movement, heck even develop our own northern versions of Sgs we will be well on our way to making the Barclay's of the world irrelevant.
Wed, January 1, 2014 | William Maddocks
I disagree with you on fee for service Paul. OK. No doubt people who make money from serving groups will tend to favour those that can afford to pay, but it doesn't at all follow that payment, per se, leads to people being bullied into doing anything. What causes field staff to bully groups is when projects tell staff that the value of loans outstanding and RoS are God. If they said, au contraire, that loans outstanding and RoS don't matter at all, but savings was the only thing that really counted, do you really think they would be pushing loans? I'm sure if a project rewarded people who showed up dressed as a 3-lock box (that's what I feel like when I travel through Düssseldorf airport), a plurality would do so, but if such behaviour was sanctioned, it would stop in a trice.
You say, "....And when agencies recruit trainers who are primarily motivated by money, and measure success by how much money they make, they open the door to bullying and conning groups into buying services they don’t need..."
Maybe I'm being dense, but how does the one follow from the other? Surely it depends on how a programme defines positive and negative behaviour - and attached a price tag. Making money from being a trainer doesn't by itself make you a pusher of dud services, unless you are told that a salary continuation depends on it. I suspect you are citing Zanzibar here, where the issue wasn't fee for service as such, but ensuring the survival of a rather cumbersome apex.
All I can go with is the limited evidence that I have. Where programmes have a mixture of volunteer and group-paid VAs (in the same project), the evidence seems to suggest that savings rates are higher and so are nominal returns. There is also anecdotal evidence that rates of personnel turnover are higher amongst volunteer VAs. The downside is that somewhat fewer members benefit from loans, but not by a large margin.
Money isn't everything, but whenever the notion is proposed that cash incentives are not all that important, I always ask if people in whatever meeting I'm attending are there as volunteers (no-one ever is, unless paid an honorarium to attend as non-employee of the month). I also ask if people would be happy to work as volunteers and they usually express great willingness to do so - but regret that the need for income takes priority. So, yes, other things count, but not in such a compelling way, and, I think, with a number of problematic side-effects. Don't forget that the great volunteers of history were usually possessed of independent means, or do you think that Lord Shaftsbury would have taken on as much as he did without being well-heeled?
Mon, January 6, 2014 | Hugh Allen