Whither the Savings Groups?
In the introduction of a recent recruitment notice:
“…is proposing to set up a long-term Technical Assistance Facility in Sub-Saharan Africa that will support various financial services providers to extend financial services to the unbanked/underserved through innovative group savings mobilization products and other financial services, including credit, payments, and insurance, with the overall objective of improving household’s [sic] access to financial products and services. In particular, the Facility will focus on partnering with local institutions that utilize a number of financial products and innovative delivery channels to those facing the greatest financial exclusion, such as women, young people, small-holder farmers, and people living in remote areas.
“The Facility will support financial service providers (FSPs) as they design projects that include the following activities:
Development of new financial services targeted at savings groups and their members
Expansion of financial institution outreach in rural areas through new channels
Providing training to savings groups and their members
Overall capacity strengthening of partner financial institutions”
Is this the first activity to bridge the gap between the informal savings group and the world of the registered & supervised financial institution? Am I right in assuming this is a consequence of applying the concept of linkages to savings groups, initially to facilitate the group’s operations (e.g. by replacing a lockbox with a bank account)?
Will the targeting of new services to “…savings groups and their members” include those only relevant to the individual member? If so and if relatively successful, is this likely to threaten the cohesion of a savings group?
Perhaps more fundamentally, does this represent an important change in the relationship of the savings group with formalised market participants? As with a preceding phase amongst MFIs — in which creating commercial relationships with formalised financial institutions for services supporting their operations was followed by a widening of the range of products and services purchased by MFIs, which in turn was followed by the interest of the capital markets stimulating a pursuit of new legal forms for MFIs to better access capital, leading to the regulation and supervision of MFIs by mainstream market overseers — it may be argued the market may now begin to swallow savings groups in much the same way.
Of course savings groups must not be insulated or quarantined from the wider market within which they operate. To engineer such a segregation is patronising. Yet is there a risk of losing essential characteristics in the process of engaging with ever more market operators?
Reader Comments (1)
Thanks for a useful contribution to the conversation about the new, huge linkage initiative proposed by the MasterCard Foundation. I think many of us share your trepidation about how this giant experiment will impact individual Savings Groups and group members and the overall trajectory of the SG sector. To me the question as to how this process will positively or negatively impact SGs depends much on the intention of Financial Service Providers and their understanding of the basic SG model. By intention I mean do FSPs see SGs as a means only to promote their own products and services (the linkage) or do they see the intrinsic value of SGs to build social capital, provide a reliable savings and lending mechanism to members and serve as a safe platform for other development activities. I think this will be key to the survival and eventual success (or failure) of this initiative. If FSPs don't understand the very nature of how SGs build solidarity, independence, reliability and safety, by design, its doubtful the groups they form will have the resiliency and structural integrity to last beyond a single share out. The model won't scale and may adversely affect the reputation of SGs in the communities where these "linkage first" groups flounder and fail. Should FSPs truly wish to honor the core value of best in class SG design they will allow groups they form to have the ultimate decision on whether to link or how to link to external credit or other services. By forming SGs with this "fail safe" mechanism central to their design, FSPs can dramatically demonstrate that they respect members ability to make decisions, the integrity of the group, and the communities where they reside.This may be a challenge to institutions who may not always see poor people as possessing the capacity to be in charge of their own self determination. I guess we will see how this unfolds, and on a grand scale.
Sat, March 28, 2015 | William Maddocks