Some recent research (more on this in subsequent posts) showed that in a large sample of savings groups, about 5% of members said they had had their money “lost or stolen”. That’s one out of twenty members.
Now, quick, before you read further, please take a moment to answer this question to yourself: Do you think this is a good statistic, or a bad one? That is, do you think it shows that savings groups are a good place to save because only 5% of members lost money, or do you think that shows they are a bad place to save because so many people say they have lost money?
I think the way we answer that question will largely determine whether the Savings Group movement grows and makes a contribution in resilience, autonomy and empowerment to the lives of hundreds of millions of people, or whether the savings groups will fade away, becoming another interesting development fad, like Cooperatives or Integrated Rural Development. And your answer also indicates how committed you are to the possibility of Excellence in Savings Groups.
I am convinced our standards are way way way too low. 5% of members losing money is completely unacceptable. Let’s compare this failure rate to another industry: aviation. I looked up the statistics for airline crashes. Interesting: as of 2004, Boeing 737’s, one of the most popular planes, had had 47 fatal accidents out of seventy-six million flights. That comes out to a 0.00006% accident rate, or a rate 80,850 times lower than those who lose money in savings groups.
Okay, I know that comparing airline crashes and savings group failures is weird, but I do it simply to show that some sectors have very high standards, much higher than the Savings Group sector. Not only airlines, but surgeons, professional musicians, actors, engineers, and many other professions have very high standards and very low tolerance of failure, and those who fail have to leave the profession.
You might say, “A poor lady in a remote village losing her savings just isn’t the same as an airplane crashing”. Okay, but both can do great harm not just to the person involved, but to family and loved ones.
Do you think it is fair to say that most projects have fallen short of excellence? If so, let me suggest that we can strive for excellence, and attain it.
I firmly believe that practitioners can take simple measures that will greatly reduce loss and make savings groups much safer. And, if we don’t do that, we might as well give it up as an industry and go do something else altogether.
These measures start with better measurement, fine tuning incentives, tougher accountability, and consistent delivery of Critical Messages to savings group members. We talk about all of these elsewhere on Savings Revolution.
Originally published 18th January by Paul Rippey
Reader Comments (2)
This is a pertinent question, since one of my savings groups recently lost their box. I have helped form 130 savings groups in the Dominican Republic since 2012 and so far we have 2 thefts reported. I think this is an alarming figure and some better way to protect the money should be invented. I also noticed that when the group gets too creative, they tend to disregard the rules and problems start emerging. Here is the list of the rules I find essential for the group to observe at least in their first year.
1. Loans should not exceed 3 times of the savings: Many people approach the group only to get the loans, without much interest on savings. They tend to stop attending the meeting after taking loans.
2. Keep the record booklets inside the box: A group who allows its members to take the booklets into their homes, recently had a problem during share out.
3. Share-out every 12 months: Groups distributing savings in 6 months did not seem to do better.
4. Loans should not be given 3 months before share out: I saw groups who were forced to delay their share out because they did not stop giving loans with time. At least 3 months before the share out, the group should stop disbursing loans.
5. Do not open the box out of meeting: Some groups allow the committee members to open the box out of meeting in emergency, but this provoked suspicion and distrust debilitating groups. It's OK to wait and the savings groups cannot solve all the problems of the community.
6. Change the committee every year: "Power corrupts and absolute power corrupts absolutely" However competent they may be, it is necessary to change the committee members every year for the long term health of the group.
7. The role of the committee should be clearly divided: In some groups, not all the administrative committee members perform their role properly. The role should be divided and each person should take their role seriously. If not, the group may fall into the hands of one or two powerful committee members. To avoid this elite capture, Floresta, a local NGO in the Dominican Republic, calls the president as a coordinator.
8. The saving in one meeting should be restricted to 5 shares: Many groups confuse savings groups with banks or cooperatives. They hate the idea of limiting to 5 shares and want to save as much as possible. I think it potentially debilitates group. I saw one group member saving 80 shares while another save 1 share in one meeting. The amount of saving in that group was not particularly high compared to other similar groups. On the other hand, where there is a strict limit of saving up to 5 shares, I saw an increase in the amount of saving in general: one of group formed by Floresta limits their shares up to 5 and their share costs 1.25 USD. This group of 34 reached to save USD 16,000 in a year.
9. Do not give loans out of group: I know a group who no longer disburses loans to even their members. They got an external fund to manage from UNDP and started lending money out of the group, most of which was not recovered and the group decided to stop disbursing loans until all the loans get paid.
Tue, February 4, 2014 | Jong-Hyon Shin
Bad stuff happens. It can't be prevented. But it CAN be minimised. One of the things that drives me crazy about lots of savings group programmes is how negligent we can be. Not in terms of showing up at the meeting and following the training modules and supervision schedule, but how little Field Officers actually DO when they are there and how often they simply don't notice when things go wrong. I would say that about 50% of the groups that I visit with a Field Officer or Village Agent have some pretty obvious stuff wrong with their records, but, as someone once said to me, "The numbers don't matter: the people are happy with their group." (Yup, a genuine quote). Au contraire, It DOES matter, but often implementation and tracking is focussed on whether or not someone completed an activity (as nominally as possible), and hardly ever on the result in terms of efficiency, safety, transparency, procedures, systems and very high standards of basic expertise. Implementing organisations don't have bottom lines, so a pathology of 'it's good enogh' emerges, because there are targets to meet, innovations to be tried - and limited consequences (for the staff) if group quality isn't that good and if supervision is pro-forma.
Another reason why I think that quality (and therefore safety) suffer is that a collective preoccupation with cost seems to have the industry by the throat (I don't know why. Banks would kill to only spend $20 per client, so trying to get it down to $10 is to focus on exactly the least important thing). When you realise that good groups spin off another couple of groups within two years (at no cost to a programme), spending enough to do it right in the first place (and knowing what that means) is far more important than turning on the afterburner and crsiping everything to the rear. There is a sweet spot where cost and efficiency are optimised, but until I know where that is I'd rather visit a couple of times too many (and spend the time effectively while I'm there) than save the cash because I have a LoP target to fulfil.
I'm probably being unfair to say this, but as someone once remarked to me, 'It's really hard to mess this up, however hard we try."
Wed, July 9, 2014 | Hugh Allen