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More technical assistance needed to better harness savings groups

More technical assistance needed to better harness savings groups

​​BRUSSELS, 8 June 2016 – WSBI member banks in Africa require more technical assistance to effectively build and manage agent networks to help bring more people into the financial mainstream, say association members from Africa looking for pathways to financial inclusion by working with savings groups. 

Held on 1 June as part of the WSBI Africa Regional Group Meeting in Madagascar, WSBI African members  - drawn from the island nation and joined by members from Uganda, Lesotho, Senegal, and Zimbabwe - to review their individual strategies for partnering with "savings groups".

​In depth discussion on savings groups

Discussion points during the one-day meeting formed around the value proposition that savings groups provide to linkage banking, exploring whether savings groups are worth partnering with. Seeking to adjust their own approaches to make partnerships work for the banks and the underserved, they also looked at products developed around savings groups and whether they are a right fit for these pool-based groups of up to around 15 people.  Discussion also moved towards whether banks' focus on savings groups for the long term or short term. The session closed out with exchange on emerging opportunity for partnership.

Attendee discussion bore fruit, with member banks seeing a need for technical assistance to build their capacity in partnering with savings groups and financial assistance to develop suitable products, training material, implementation, and monitoring around them. Member banks additionally see a need for affordable capital for savings group on-lending - when a bank or organisation lends money that they have borrowed from another organisation or person.

​Attendees from five African countries

Participants dove into the savings groups challenge, allowing for a careful look at current practice in member banks. Analysis and discussion were weaved into the programme, notably around the suitability, affordability, usability, and accessibility of various bank-led products and services offered to savings groups, and recommendations for improving partnerships with the underserved and financial inclusion impact.

WSBI's Laurie Dufays, who helped organize the meeting, said: "Much has been done by banks in this realm, and it is time to look into the financial inclusion picture not just as numbers brought on board, but as boosting access to and ratcheting-up financial services use. We can by more effectively bringing usable, affordable, easy-to-access financial services, designed for the long-term, to poorer communities."


Challenges member banks face working with savings groups


Area

Savings groups

Banks

Products & Services
Need for short term savings products
Need low cost loan products
Need high interest on savings
Need cost less/ near costless transactions
Need tailor made products and training
Desire long term savings/ deposits
Desire higher percentage of income from loans
Offer low interest on savings
Need to defray high operating and investment costs
Offer generic products to all customer segments
Relationships Require significant levels of 'hand holding'Little investment in relationship building with 'low value' customer segments
Communication and TechnologyHave little or no access to mobile phones and internet​ Offer mobile and internet services to reach the unbanked
Documentation Keep ad hoc performance reports Require detailed reports and business plans
Consumer protection Lack of consumer rights knowledge when partnering with banks Inadequate consumer protection policies and savings group knowledge
Marketing Need tailor made/ face to face interactionOffer generic 'above the line' marketing on e- media, audio visual channels in which the savings group may not have access


Why it is important

Savings Groups are one of the fastest means to reach individual excluded from the traditional financial services. According to the World Bank Group Committee on Payments and market Infrastructures, over 2 billion people worldwide are excluded for financial services offered by a bank or a non-bank authorized provider. At the Marrakech declaration, WSBI pledged to reach 1.7 billion customers and 400 million new transaction accounts by the end of 2020 as part of their contribution to the World Bank Groups strategic goal of Universal Financial Access by 2020.

About Savings Groups (from CGAP)

Savings groups are basically an improved form of the traditional ASCA (Accumulating Savings and Credit Associations). They provide members a secure place to save, the opportunity to borrow in small amounts and on flexible terms, and affordable basic insurance services. Savings Groups are normally composed of 15 to 25 self-selected individuals who meet regularly and frequently to save; amounts are based on each member's ability. Groups then pool the savings to make loans on which they charge a relatively high service fee or interest rate which in turn increases the loan fund. Member's savings and loans are recorded in individual passbooks or one central ledger (some use memory-based systems that require no paper records at all).

​Groups generally operate in nine to 12 month cycles. At the end of every cycle, the accumulated savings and interest earnings are shared out amongst the membership thus providing useful lump sums to members. After each share-out, groups immediately begin another cycle of saving and borrowing. Members may decide to make an exceptional savings contribution right after share-out to re-capitalise the loan fund. This allows the loan fund to grow to fairly substantial amounts (in the thousands of dollars).

Many groups also have an insurance fund (sometimes referred to as a social fund) that serves a variety of emergency and social purposes, according to rules set by the group. The insurance fund is kept as a separate fund and contributions are normally the same from each member. Any member may request a grant or no-cost loan from the insurance fund; approval rests with the group and funds may be disbursed immediately.

Of the 5.5 million members the Savings Group movement counts in 200,000 groups worldwide, about 4 million of these members are in Africa where the movement is centered and has its greatest influence and momentum. Countries in Africa with the largest numbers are Tanzania, Kenya, Uganda, and Mali. Conservative estimates suggest there are at least another million members in Savings Groups promoted by local NGOs that have adopted the training materials either from the internet or other NGOs, and promoted savings groups without any technical or financial support from international agencies.

 

>> WSBI Training programme page

>> WSBI Doubling Savings Account site

>> Report: WSBI's journey in smaking small-scale savings work (.pdf)

>> See WSBIs commitment to Universal Financial Access (UFA) 2020

>> Learning paper on linkage banking

Financial education; Financial Consultancy; Financial inclusion; Training and Consultancy; Training courses; Training the Trainers