One of the weirder phenomena that I’ve experienced lately during visits to Savings Groups is IGA frenzy, or the idea that everyone should borrow for an Income Generating Activity, or IGA. Trainers assume that every member is raising chickens, weaving, planting cabbages, selling mangos, or doing some other activity that “needs a loan”, and that all they have to do is borrow from their group, invest in the activity, and then get rich. Sounds good, but it isn’t. Three reasons:
- While many many group members have small economic activities, there are some who do not. It’s silly to put pressure on them to borrow for an activity they don’t have.
- Not all economic activities need or can absorb capital at the moment when there is surplus cash in the box. The worst thing you can do to a business is lead it to take on debt it doesn’t need.
- Investing in the economic activity is not always the first priority of the member. Maybe paying school fees, taking a spouse to the hospital, paying off other debts, or burying Grandpa are more urgent.
Of course, small economic activities can be great things, and sometimes they need additional capital. But please don’t assume that everyone needs a loan all the time! That was one of the worst errors of the micro-credit craze. Let’s not make the same mistake with savings groups.
When people invest willingly, they are likely to make money. When they are pushed to invest when they don’t want to or need to, the loan is more likely to do harm. And that’s where ILAs - Income Losing Activities - come from. I have never heard savings group project staff even mention the idea that the loans they keep urging on their members could possibly lead to loss of income. But if we are honest with ourselves, we know there are IGAs and ILAs. If people decide freely where and when to invest, they will usually make good decisions. Trust them to borrow when they want to, and leave them alone the rest of the time.
Originally Published 12th December 2013 by Paul Rippey
Reader Comments (1)
These are great points. We seem to "learn" them over and over. This is the tragedy of development. Lessons are gathered, transmitted and learned by outsiders who have multiple agendas. Selected lessons get passed along to new outsiders to be filtered, selected and then passed on again. Some get ignored (like encouraging groups to collectively create an income generating activity).
I look forward to the day when insiders learn and transmit their own lessons.
Indeed that is happening and perhaps SR can feature more insider lessons versus outsider agendas. SR can only do this if blog viewers will help us pass those lessons along.
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