I want to take Larry Reed’s excellent advice at SG2013. Larry used nicer words than “Don’t believe your own propaganda”, but that was essentially his message to the Savings Group community.
So, in a spirit of revolutionary self-criticism, let me point out one area where I think we Savings Group people need to tone down our rhetoric. We frequently point to “high returns on savings” in Savings Groups. We claim that groups pay their members 30% or more annual interest, and then we sometimes ask tauntingly, “And what do you make at your bank?”
But, look folks: the only reason Savings Group members see their savings increase by double-digit percentages is because they voluntarily agree to charge themselves usurious rates on loans. Groups can brag that they earned 30% at share out only because the members borrowed at ten percent a month, and fined themselves when a cell phone rang during a meeting. Group members realize this, and some groups refer to the interest they pay on loans as “the other savings”.
In fact, savings groups are zero-sum operations. Supposing that no money leaves the group through theft or default, and supposing that no funds come into the group through a group business, or a team of visiting consultants leaving a little something in the box, then the amount members pay in is exactly the same as the amount they take out.
Rather than boast “members earn 30%”, we should be proud to say, “there is no drainage of money out of the village towards an MFI or a commercial bank”. Zero sum is great news! Saving and borrowing in a group is a much better deal for members than saving and borrowing in a bank, and we should be happy that we are providing that opportunity. We don't need to exaggerate.
First published 26th April 2013 by Paul Rippey