Many Savings Groups and their members want to open accounts with Financial Service Providers (FSPs), like banks, Credit Unions, mobile money providers, insurance companies, and MFIs. That can be useful for the group, and in any case, it's their choice. The trouble comes when the FSP sees the groups as a way to make money through group loans. If we could simply take that option off the table, we'd be happy. But, in fact, many FSPs care only about lending to groups, since that is how the FSPs see that they can make their money, and their NGO partners seem only too happen to introduce the SGs to the bankers, and in some cases pressure groups to sign contracts.
If you are considering promoting SG-FSP relations, we strongly recommend considering five documents before you get too deeply into this.
The first is a new document in late draft: A Typology of Savings-Group, Financial Service Provider Relationships, authored by me (Paul Rippey) and developed for FSD Zambia. (And, if you are really into this, check out the longer "Practitioners Guide"). Please remember that it is a draft - I'd appreciate any comments. It should help you and your partners think and speak clearly about SG-FSP relations.
Next, there are a couple of rigorous scholarly papers: Community-Managed Loan Funds: Which Ones Work? by Jessica Murray and Rich Rosenberg of CGAP. If everyone would read this paper, it would help. The conclusion of a review of every study that the authors could find was that self-financing groups work well, and externally-financed groups generally fail. It's quite remarkable to see the statistics here.
Outside Funding and the Dynamics of Participation in Community Associations by Mary Kay Gugerty and Michael Kremer. This tells the story of an accidental Randomized Control group Test in Kenya, where a donor program funding women's groups (not just financial groups but groups of all kinds) ended half-way through, having funded only a first, randomly chosen, sample of them. The results showed that men and more educated women tended to take over the groups that received outside funds, and poor women left. End of story.
Consultancy for Community Managed Savings and Loan Groups: Best Practice Development and Market Linkage Assessment/Pilot Project, Paul Rippey, Claudine Mutamuliza, and Charlotte Usanase. This study looked at and assessed several different ways that people who need to borrow more could meet their credit needs. It found that there are some things that can be easily and safely done in Rwandan SGs to make the groups better able to meet members' needs. Then, if outside financing is needed, it lists and assesses different ways that can happen. Finally - based on field work reported in the study - it ends with the conclusion that we should avoid asking all the members of groups to guarantee loans to only a few, since that creates stress within the group (as it would with you dear reader, or with me). The study suggests that Rwandan FSPs should be able to analyze a loan request without asking "the old lady sitting in the corner" of the group to put all her savings at risk to guarantee a loan that she won't benefit from.
Of course, check out the section on financial linkages in the SEEP Program Quality Guidelines for Savings Groups. They have some good advice in them, and links to other resources should you want them.