Savings groups aren’t promoted in a vacuum. Many if not most communities where groups are introduced have a long history of interventions, ranging from medical brigades, agriculture projects, child sponsorship programs, food assistance programs to microcredit. And the community’s past experience with assistance has everything to do with how they perceive and adapt to savings groups.
Let’s start with microcredit. In spite of its declining reputation, past exposure to microcredit helps savings groups. The groups I visited in Nicaragua, where microcredit reaches even rural and isolated communities and the movimiento no pago (no repayment movement) reflects clients disillusionment with credit, are quickly proving themselves to be competent lenders.
In El Mojon, Nicaragua, the promoter of the savings group Nuestra Senora de Perpetua Socorro (our lady of perpetual help) has been sleeping on a wooden beam since her bed broke two months ago, and the majority of the women in the savings group lack adequate housing and have no reliable source of income. Most of the member’s savings are earned selling eggs and sacrificing ‘luxuries’ such as soda or phonetime, but the group is quickly becoming the primary source of credit in the community. Each week, the group meets at a member’s house with the doors locked, and the clients (all men) line up outside. When the meeting ends, the clients are allowed to enter one by one to request loans at 10 percent monthly interest. One woman comments: The men are surprised that we – a group of women, many of us without land or a consistent income– have become the primary source of capital in the community. They don’t like it, but they want the loans.
In addition to earning interest on loans, the women have found a new way to profit from men in their community – throwing dances. Every couple weeks, the El Mojon savings group organizes a party, which they promote with posters throughout neighboring communities and radio ads. The group charges the men 75 cents to enter, but women get in with a smile. Once inside, loan clients can purchase beer and cigarettes on credit.
It might seem a little manipulative, but the clients love it – they are always asking about the next dance.
Although the women of El Mojon are unique in their role as community party planners, the impact of microcredit on the group’s lending savvy is standard. In my observations, groups with higher exposure to microcredit, lend a higher percent of their savings dispersed among many clients, and are more likely to lend to outsiders. They are also more comfortable keeping financial records. Another group in Nicaragua updates a giant balance sheet during every meeting for the members to copy.
While this is not necessarily all good – not everyone loves the moneylender and lending outside the group is risky – it’s clear that exposure to microcredit has a powerful influence on savings groups, helping them to recognize their savings as an investment and to start making a profit.
And few things are more empowering to rural women, than making the men wait outside for loans.
The savings groups I visited in Nicaragua were sponsored by Catholic Relief Services and the Howard G. Buffett Foundation in collaboration with FUNDESA, Caritas Matagalpa and Caritas Jinotega.
Originally published January 10 2011 by Suzanne Andrews