Where the Benefits Come From
While even a negative experience with microcredit can benefit savings groups, the same isn’t true of a history of handouts (standard practice in development programs). In fact, the more communities have been given free stuff – fertilizer, grains, food assistance, new homes, - the less they’re able to benefit from savings groups.
Saving in quetzales on USAID grain bags
Nowhere was this more apparent to me than in visiting the communities of San Marcos, Guatemala. With a long history of violence, discrimination and a burgeoning opium trade, the indigenous communities surrounding San Marcos have one of the highest rates of malnutrition in the world. The region qualifies for Title II food assistance from USAID, and HOPE*, the same organization promoting savings groups, distributes a year’s supply of corn, rice and cooking oil to pregnant women and mother’s of children under four.
In order to reach more women efficiently, the savings staff at HOPE decided to teach the mother-child food assistance groups the savings methodology rather than forming new groups.
While this is a great strategy for rapidly increasing outreach numbers – each nutrition group has upwards of 60 women, it is an abysmal strategy for creating effective savings groups.
With 50 to 60 women per group, meetings take approximately three hours for everyone to save, far too long for mothers of babies and small children. Most groups have decided to meet just once a month and members contribute an average of 2 quetzales(.25 cents) each meeting.
Mothers and children, Cua Guatemala
With each group we visited in the windswept altiplano, the comments were too often the same: “savings are a waste of time.” Many argued that their meager savings wouldn’t make a difference, and asked when real project benefits were arriving.
And they’re right: 25 cents is virtually insignificant even in rural Guatemala, and some members were spending more to travel to the group meetings than they were saving. It was pretty clear that as a financial strategy, savings groups weren’t working. So why were 50 women continuing to save? While some women did drop out, others perceived the savings groups as a tax necessary to gain more enticing benefits, such as free food or fertilizer.
A child sleeps through a meeting in El Suchay, Guatemala.Even so, a few groups in San Marcos are beginning to recognize the potential of savings, and are now saving meaningful amounts and making small loans.
But misdirected incentives are a risk in any program that combines self-help (savings groups) with giveaways. As one frank woman pointed out when I asked about the benefits of membership:
It is good to work with HOPE - that is where the beneficios come from.
* Organization name has been changed.