As I read CGAP’s piece on “International Funding for Financial Inclusion,” I was excited by the report of $31 billion invested in financial inclusion in 2013. That is 6% from 2011! It’s definitely a step in the right direction but there was no indication of how much financial inclusion this 31 billion could ‘buy.’ I did some rough calculations. If just the grant funding for 2013 (2.9 billion of the 31 billion total) was invested in savings groups, the world could see:
- 200 million of the world’s poor, most of them village women, would have a safe and convenient place to safe and easy access to small loans. (@$15 per group member) The total outreach of microfinance is about 200 million.
- There would be 10 million new savings groups in place in 2 million villages and thousands of slum communities – that’s every village in 133 countries the size of Mali without counting the massive outreach into urban slums. (@ 4 groups with 80 savings group members per village of 1,000 inhabitants.)
- On reaching this objective these groups would mobilize at largely distribute 10 billion dollars every year of which 30% ($3 billion) would be the profits from lending the group fund to members over the one year cycle which would be returned to members.
The outcomes? A Gates funded RCT and anthropological study of savings groups in Mali indicated that after three years when only 40% of the eligible women had joined groups there was a village wide (not only group member):
- Reduction in chronic hunger with the greatest reduction among the poorest.
- Building assets (largely in the form of livestock) that could be cashed in when cash was scarce.
- A 1/3 increase in savings from all sources – including traditional savings clubs (ROSCAS)
- A substantial spread of the methodology to the control group villages with no outside training
- Increased social capital.
Simply stated; increased resilience for 2 billion people at a cost of a little more than a dollar per villager.
Spurred by a $44 million investment from the Gates Foundation, savings group membership increased from 1 million in 2008 to 10.5 million by 2013. Today there are savings groups in place in 133,000 villages in 70 countries and the methodology and institutional capacity is in place to massively expand savings group outreach. These objectives could be achieved in 10 years or less.
Savings groups have shattered myths about improving financial services for the world’s poor:
- The poor can save.
- There is enough saving capacity among a group of twenty to take care of most of the smaller needs of the members. Not everyone needs a loan at the same time.
- Groups will self-replicate at no additional cost to the program.
- Groups will continue to function and grow without outside support.
It works because savings groups catalyze the capacity of the poor to achieve their own financial inclusion when provided a simple structure and a bit of training to do so.