Mifos and DreamStart team up on Commitment – And they’re looking for a partner!

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Mifos + DreamStart logos
Join the Mifos Initiative and DreamStart Labs in a new, bold, and momentous initiative. They are collaborating on a joint Campaign Commitment that embodies the spirit of the 100 Million Project with its measurable approach and global outreach for the financial inclusion of the world’s extreme poor.

These two Commitment Makers will begin by providing a sample of savings groups from various countries with software to manage their financial records. Working in the lean startup method of “build-measure-learn,” they will adjust and fine-tune their software to meet the needs of the extreme poor. Not only will the software empower families and communities to become part of the formal financial services system, but more importantly, it will provide crucial data that will improve product design and the lives of the families who receive them.

BECOME PART OF THIS INITIATIVE. Mifos and DreamStart are looking for a partner to roll out this platform. The ideal partner for this project will be a highly motivated, committed organization with a global network of saving groups. The Mifos Initiative and DreamStart Labs hope to welcome this partner by the end of the month and announce this exciting new Commitment at the 18th Microcredit Summit in Abu Dhabi this March 14-17.

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The 2015 State of the Campaign Report in a nutshell

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An African farmer is linked into the financial system via her mobile phone.
In his presentation today at the Inclusive Finance India Summit New Delhi, Larry Reed featured Mapping Pathways out of Poverty: The State of the Microcredit Summit Campaign Report, 2015. The report is now available online. We will also publish the full report in French, Spanish, and Arabic in early 2016. You can also read previous reports online, just select the year of interest from the drop-down menu “Previous Reports.”

At our 2013 Microcredit Summit in the Philippines, we focused on the partnerships required to deliver financial services to those living in poverty. At our 2014 Summit in Mexico, we focused on innovations in microfinance with a demonstrated capacity to reach those in extreme poverty. This year, we use the report to explore, in more detail, our six financial “pathways.” Each pathways has a chapter, and each chapter does the following:

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Community-based financial inclusion: Sarah’s story

Sarah Chikuse standing in front of her pigsty

Sarah Chikuse standing in front of her pigsty. She is proud to be one of the few women encroaching into this previously male dominated agricultural territory. Photo courtesy of Alex Dalitso Kaomba.

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>>Authored by Alex Dalitso Kaomba, development consultant and freelance writer

At 39 years of age, Sarah Chikuse’s health is visibly better than the other women in her village. A single mother of two, she lives in Kang’oma village on the outskirts of Lilongwe’s Area 23 in Malawi. Her day starts at 4:00 AM when she usually wakes up to the din of her neighbors’ jerry cans and water tins at the only borehole in the village.

Sarah starts by lighting up her charcoal burner so that it gathers heat while she fetches water at the borehole. Next on the routine (if it’s during school term) is preparing her daughters for school. Once she bids her daughters goodbye, she tends to her newly acquired livestock.

Sarah Chikuse_with pigsty

Sarah in front of her pigsty. Acquiring a pig is one highlight on her growing list of achievements. Photo courtesy of Alex Dalitso Kaomba.

Owning livestock is not only a symbol of status for the privileged but also an envied source of income in Malawi, which has one of the lowest livestock herds per family in Southern Africa. Sarah is proud to be one of the few women encroaching into this previously male dominated agricultural territory.

Acquiring a pig is one highlight on her growing list of achievements. Sarah counts herself a success in being able to afford three meals a day for her family and providing her children with a basic education. She has paid their school fees and provides their books, uniforms, and lighting for evening homework.

Two months ago, her daughter contracted malaria, and for the first time, Sarah managed to hire a car and take her to a private clinic where she got rapid, quality care. The hospital bill was US $12, and she managed to pay it in full.

Life before inclusion

Life has not always been so comfortable for Sarah and her family. After a bruising divorce, she was left with less than $4 tied up in her wrapped skirt, and she struggled to make ends meet. She could hardly afford a single meal for her children. She started selling vegetables at a local market, but her family’s daily expenses were much higher than her profits and the business did not grow.

Sarah desperately wanted to get a loan but did not possess any tangible property except the roofing sheets on her two bedroom house. One institution agreed to use the roofing sheets as collateral for a micro business loan, but after careful consideration, she could not accept the offer. She had seen people in her village having roofing sheets confiscated after defaulting on payments, and she was not ready to risk such humiliating consequences.

In January 2015, she joined a self-help group (SHG), a concept championed by a local NGO, Global Hope Mobilization (GHM), which is supported by a $150,000 two-year grant from Vibrant Village Foundation. The doors of opportunity for Sarah started opening then. (GHM’s self-help groups are basically savings groups.)

As a vegetables vendor, Sarah could make $2 a day from which she would have to provide for her family daily needs. However, the SHG she joined required that she contribute $0.20 a week into the pooled funds. She struggled to keep up for two months until her turn to borrow the funds came up. She used all the money she borrowed to buy a variety of vegetables for her fresh produce business.

Photo courtesy of Alex Dalitso Kaomba.

Sarah feeding her livestock. Photo courtesy of Alex Dalitso Kaomba.

Life after inclusion

Sarah showed me a tiny pigsty with one mother pig and eleven piglets, the first time in her whole life that she has owned livestock. In a few months, she expects to sell and collect over $500. This was possible because she joined an SHG from where she accessed loans totaling a little under $100 over a 3-month period. She pumped this money into her fresh farm produce business by ordering a wide variety of vegetables and fruits which her customers had always asked her to stock. Her business revenues increased rapidly.

I asked her what her most outstanding benefit from the SHG was. With a very wide smile and beaming face, Sarah had this to say:

“I was a pauper with no hope, but the SHGs taught me the importance of saving from the little I get and how to access low interest loans. Today I can feed my family good meals every day, I have a piggery project that will soon start bringing me revenues. I intend to diversify into selling kitchenware which brings me higher profits than vegetables and even if I stock more kitchenware it is not perishable.”

Anne Chiudza from Global Hope Mobilization says, “We are aware that the marginalized, poor, and unbanked population has its own means of survival, and from the little they get they can change their lot in life by using their numbers to pool funds together. Our organization believes in facilitating improvement of livelihoods through community owned strategies and the self-help group concept is one such strategy.”

A measure of how these groups can advance community development is a borehole which the women are planning to have drilled in a year’s time at a cost of $4,000 without any donor funding.

Sarah’s story is just one among many in her 20-member group. They have managed to improve the lot of their families by building or improving their homes, by improving their families’ nutrition, and by consolidating their economic independence through self-help groups. There are 15 more groups in surrounding villages, and evidence is clear that the women’s hard work and commitment is bearing fruit for the betterment of Kang’oma community’s standard of living.


More about Global Hope Mobilization’s self-help group model

Global Hope Mobilization’s (GHM’s) self-help groups are savings groups whose sole aim is to provide a low-interest pool fund from which members (and only members) of the group can borrow to inject into their businesses. Members can save through loaning out the savings over a period of four weeks.

The groups loan out the money from the very first meeting. No funds are kept in a box of any sort because soon after contributions have been made, a borrower must take the money immediately. The funds are only deposited in the bank when they have multiplied and no members are ready to borrow that week.

Question: How does GHM create the groups?

Answer: At the beginning of the project last year, Global Hope Mobilization trained four Community Facilitators who were all drawn from the catchment community. Their role is to spearhead the formation of the groups and act as resource persons for the groups on behalf of Global Hope Mobilization.

The SHGs are self-replicating because the roof limit for each group membership is 20 members only. To date GHM, is supporting 100 groups with a total of 2000 members, all of whom are women. There is, however, an emerging demand from men in some villages to join the groups.

Q: Are the SHGs self-sustaining or are they reliant on GHM for ongoing support / hand-holding?

A: The SHGs are self-reliant. GHM only facilitates their financial literacy training and monitors their early growth stages, providing guidance and advisory [services] where needed.

Q: What training does GHM provide to the SHG members? Do they offer other sorts of capacity building like financial literacy, health, women’s empowerment, etc.? Do they try to link SHGs to other services like government social protection services?

A: The flip side of [GHM’s] concept is to provide women with a platform and confidence to identify and demand social services from government departments like water, health, etc. Every group meeting ends with a social discussions segment. All issues are recorded for future reference and actioning. Using the SHG as a nucleus for change, GHM facilitates health talks and [sexual and reproductive health] SRH awareness campaigns.

Q: Do all SHG members take out a loan? Or, do some just use the SHG to save? What is the interest rate on loans (if there is interest) and what is the savings interest rate (if there is one)?

A: Around 75 percent of members take out loans at an average interest rate of 10 percent per month. The loans period is 4 weeks maximum, depending on the loan size and specific group by-laws. Interest [on] savings is 10 percent.


About the author

Alex KaombaAlex Dalitso Kaomba is a 35 year old Malawian rural development consultant and freelance writer. He lives in a village on the outskirts of Lilongwe the capital city of Malawi. He works with International and local NGO’s in Malawian villages in the areas of access to energy for maternal health and education, HIV and Aids, education and environmental interventions. Alex has a passion for development work and the African stories of self-sufficiency and sustainable rural development. His favorite pastime is reading, watching sport and playing cricket.

alex.kaomba[at]gmail.com | @AlexKaomba | https://www.facebook.com/kaomba


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CGAP’s take on household resilience in Burkina Faso

Marie and Child

“A resilient household is able to find solutions to the various crises it encounters by making good choices in their income-generating activities. A non-resilient home fails to solve crises encountered.” — Marie, a 35-year old first wife of a polygamous family who lives in the Passoré province of Burkina Faso

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>>Authored by Barakah Ibisomi, Microcredit Summit Campaign Program Intern

Landlocked Burkina Faso is one of the poorest countries in the world with 44.6 percent of its population living on $1.25 or less per day. A recent CGAP publication draws on “resilience diaries” of 46 women in rural households in the northeastern zones of the country to determine how different financial services contribute to and affect household resilience.

Twenty-five women are members of village banks with the Reseau des Caisses Populaires du Burkina Faso (RCPB) while 21 are members of savings groups with the Office de Développement des Eglises Evangéliques (ODE). The seven-month project was conducted by Freedom from Hunger.

The diaries were used to understand the following:

  1. The strategies poor households employ to manage economic, environmental and health shocks that disrupt their financial lives.
  2. The roles formal, non formal and informal financial products play in improving household resiliency and building assets.

Freedom from Hunger Resilience Framework

Burkinabé households are highly influenced by their country’s seasonal and agricultural calendar as it determines how they make a living — specifically, how land is put to use, the degree to which households depend on livestock, and other non-agricultural sources of income. The time just before harvest in September is financially difficult, with income and savings at a low point and borrowing and expenses at a high point. There is a need for additional or specialized financial services to help households better manage the season.

The most common coping strategies used to respond to shocks are first using savings at home, then reducing food consumption, selling grain, selling small livestock, purchasing on credit and lastly, borrowing from a savings group. Borrowing from financial institutions, family and friends is less preferred. As resources become available to them, the women re-prioritize the way they manage any particular shock. For example, after harvest, more sell grain and fewer reduce food consumption, make purchases on credit or borrow from friends and family.

Very few households in Burkina Faso have access to formal financial services so the women’s use of formal financial products is very limited and their demand for it is widely unmet. When asked whether they had all the financial products and services they need, only 17 percent felt they had. There is a strong demand for additional financial products and services, with an emphasis on microcredit, savings products and agricultural-related grants. However, when they do have access, they use formal services to cover costs incurred from shocks. The most common formal products or services used are RCPB loans and remittance services.

The more commonly used non formal services are savings groups which are used to save money for purchasing livestock, paying health expenses, school fees and for food and income generating activity (IGA) expenses. For informal services, the women borrow from friends and family, make purchases on credit from local merchants and, as mentioned earlier, receive remittances often by hand-to-hand transporters. The women reported using non formal and informal financial services significantly more than formal financial services.

All these services help improve cash flow but it is difficult to determine the extent to which they are helpful in building resiliency.

Other key findings from the studied households:

  1. The most common shocks encountered by those studied were illness and injury, loss of livestock, death of family members and poor harvest, all These shocks affected both income-generation as well as food supplies. Other semi-regular shocks included droughts and famine, political crisis, and health threats.
  2. Women play a significant role in the household economy, but are limited byResilience Quote gender norms, time, and resources to pursue more profitable IGAs. The most common IGAs for the participants were the growth and sale of cash crops and petty commerce.
  3. Food insecurity dominates all of the households’ lives.

The concept of resilience is in itself a work-in-progress because of its novelty and multi dimensionality. The RM-TWG defines resilience as “the capacity that ensures adverse stressors and shocks do not have long-lasting adverse development consequences.”

Based on this definition of resilience, it is difficult to consider many of these households resilient because when shocks occur, they use negative coping mechanisms that increase food insecurity, such as reducing daily food consumption and selling grain stocks and livestock meant to be. These strategies solve an immediate problem but can have long-term, long-lasting adverse development consequences.


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The Puzzle of Poverty: Embera Puru Edition

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>>Authored by Kristin Smith, Program Intern for the 100 Million Project

jjjjJust a few weeks before joining the Microcredit Summit Campaign team, I traveled with Global Brigades to teach financial literacy workshops and provide microenterprise consulting to small business owners in an indigenous community in Panama.

The program, founded in 2003, sends university students from the United States and select European countries on a series of brigades to Panama, Honduras, Nicaragua, and Ghana to “strengthen the health and economic development of communities” by meeting a certain aspect of their “holistic model.” Learn more.

Their holistic model attempts to assess and address the most dire needs of developing communities in an intentionally sequenced process to help them achieve a state of sustainable self-sufficiency.

Panama holistic model

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Under the holistic model developed specifically for Panama, the process begins with Global Brigades employees researching the region and evaluating the community through a process of “integrated community development” to understand its most pressing needs.

Initially, the program sends medical and dental brigades — passionate volunteers working to mobilize positive social change — to the communities to provide mobile medical and dental clinics. Community banks are then established by a group of community members with guidance from Global Brigades staff to encourage saving for health needs and emergencies. Once established, the community banks begin distributing loans to community members for environmental projects and new business developments.

My brigade, composed of my colleagues from the University of California-Berkeley and others from Arizona State University, was excited to complete the Global Brigades puzzle (that is, the holistic model). Our role was to teach financial literacy and perform business consultations in the community of Embera Puru.

Embera Puru is an indigenous community of some 250 individuals in the Darien Province. Located in Eastern Panama near the Colombian border. Embera Puru is an Embera community, one of the largest indigenous groups in Panama and Colombia. The community members’ main source of income is agriculture, producing crops such as plantains, yucca, rice, and otoe (a local root vegetable), and creating artisan handicrafts.

With guidance from Global Brigades, the community established a caja rural (community bank) to encourage savings and loan making within the community. Embera Peru’s caja now has 21 members with 21 active savings accounts, but there are still many among the 266 inhabitants without this means to save.

Comparable to a savings group, a caja rural is a group of men and women who pool their funds to create a solid financial base, providing savings and loan services for themselves and for the entire community. Despite the initial contributions of Global Brigades, the caja is entirely owned and operated by members of the community.

Because the indigenous communities of Panama are predominantly closed economies, community groups eschew money from the outside and make weekly savings deposits into the community bank to begin their work. Group members manage the fund themselves, make decisions about who can receive loans and under what terms, and hold each other accountable for loan repayment.

As part of our business consultation work, we met with representatives from the community’s “Environmental Committee,” a group of farmers producing beyond self-sufficiency for distribution within the community, to ask simple questions to best understand the level of business assistance they needed.

The president of this group, a man by the name of Marcelino, also happens to be the treasurer of the caja rural, as well as a community teacher. Through conversation with Marcelino, we learned that his bookkeeping records won their bank a prize for “Caja with the best bookkeeping management” at a board of directors microfinance workshop in Panama City.

Analyzing the business’s books and records, we found a very thorough system and were stumped on how else to proceed with our consultation. (Aside from our recommendation that they include an inventory management system in preparation for increased production.) Not long into our conversation with these experienced committee leaders about potential business obstacles, we found ourselves confronted with an irritated committee leader and community elder who expressed his frustration with the focus of our questions and our work.

He argued that the group’s record-keeping strategies were highly insignificant in comparison to the group’s utter lack of inventory. It turns out that there was a community water shortage resulting from a collapsed well and a series of unfinished agricultural projects throughout the farm.

“Money,” he said. “We need your help on the farm, we need more crops, and we need money.” My observation was that the present infrastructure severely lacked sufficient capital to support a self-interacting and self-sustaining community.

As I sit now at my desk here in Washington, D.C., far removed from this man and his community, I face the internal debate of whether our work and efforts in microfinance are indeed meeting the direst needs of these people. My short time in Panama reinforced my understanding that development is a puzzle that we do not always equip ourselves to solve. Regardless of the practicality of the services we were working to provide, if other pieces of the complex puzzle are not fully in place, the outcomes in general are undermined.

Increased financial access serves as the window of opportunity for many entrepreneurs throughout the developing world, but without the proper environment and sufficient infrastructure, access to money is rather trivial.

Prioritizing the views, aspirations, and goals of clients or other program beneficiaries is critical as well. As economist William Easterly often argues, no matter how well-intentioned our efforts, without proper feedback from those receiving the assistance, how are we to measure the effectiveness and progress of our efforts? Under my interpretation, Global Brigades was not responsive to the needs and aspirations of its clients.

While the Embera Puru puzzle remains unsolved because the other pieces were never correctly and fully placed, I am glad to know that the industry and many of its institutions are making great strides towards increased attention to feedback from clients and beneficiaries as well as accountability of institutions to deliver on their objectives. Despite the puzzle’s sheer complexity, we have all the pieces and the ability to work with the poor to solve it.

I encourage Global Brigades to join the Microcredit Summit Campaign in making a specific, measurable, and time-bound Commitment on their efforts to end extreme poverty.

Related reading

Ultra Poor Graduation

PRA

Photo credit: BRAC

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>> Authored by Shameran Abed, Director, BRAC Microfinance Programme

Shameran Abed, BRAC’s Director of Microfinance, joined the Microfinance CEO Working Group in January. He and BRAC are welcome to additions to this collaboration. He joins the Working Group’s efforts to support the positive development of the microfinance industry and brings tremendous insigShameran Abedht into the discussion around pathways out of poverty.

This month, the results from six randomised controlled trials (RCTs), published in Science magazine highlighted a model of development that is an adaptable and exportable solution able to raise households from the worst forms of destitution and put them on to a pathway of self-reliance. The graduation approach — financial services integrated within a broader set of wrap-around services — is gaining steady recognition for its astonishing ability to transform the lives of the poorest.

These findings can be contrasted with the results of six RCTs published in January by the American Economic Journal: Applied Economics, which cited limited evidence of “microcredit” transforming the lives of the poor.

In many ways, that was not surprising. There is only so much that microcredit alone can do to address a phenomenon as complex as poverty, especially within the rather short, 18-month timeframe of a research project. This partly explains the diversification most financial service providers have made into savings, microinsurance, financial education, and other models of financial inclusion that integrate different development services.

While the transformative effects of microcredit alone — or even microfinance — remain up for debate, it is now clear that access to savings and credit provided together with other wrap-around services not only provides a viable pathway out of poverty for the poor, they do so for the very poorest!

Following 30 years of work in building livelihoods for the poor, largely through microfinance and agricultural extension, BRAC learnt the hard way that we were not making effective poverty reduction gains for those most in need. We were consistently failing to reach the millions of households at the very bottom.

Classified as the “ultra poor,” this sub-segment of the extreme poor, who live on less than USD 0.80 per day, fail to meet their daily energy requirements, are chronically ill, and live on the fringes of society. In these circumstances where basic needs are unmet, microfinance alone can do little to provide a pathway out of poverty.

In 2002, BRAC developed a model designed to create livelihoods for the ultra-poor in a way that also addressed the other dimensions of abject poverty creating barriers to their development. Capitalising on our previous social safety net programme experience, BRAC’s Targeting the Ultra Poor programme (the basis of the graduation approach) combined asset transfer with livelihood development and social support.

GradBlogGraphic

For two years, clients receive an integrated package of cash stipends, an asset (such as a cow or chickens) with training, and basic healthcare. Early into the programme, clients cultivate strong savings behaviour, and learn the basics of financial management. The programme also includes a large social component: regular household visits from our staff and integration in the community.

Notably, the model in Bangladesh does integrate microcredit for some clients; 70 percent of the graduates in Bangladesh actually received their assets as “soft loans,” which they repay over the course of two years.

The results have been remarkable. Since 2002, 95 percent of the 1.4 million clients who have come through this programme have graduated from ultra-poverty. The programme is costly in one sense, because it’s grant-based and financially unsustainable, but the social returns are high and extend well beyond the end of the intervention period.  An RCT has shown that even years after members graduate, most continue to experience growth in their household income and well being.

The achievements of ultra-poor graduation are even greater because this is not a success story limited to Bangladesh. An initiative led by CGAP and the Ford Foundation sought to test the replicability of the BRAC model by piloting it in several contexts internationally.

The RCT results published in Science, which covered pilots in India, Pakistan, Ethiopia, Ghana, Honduras and Peru, show definitively that they were successful. In all six of the countries studied, all treatment households witnessed significant improvements across a range of indicators that continued beyond the end of their programmes. Today, the graduation approach is continuing to break ground with a range of other actors that include microfinance providers, multilateral agencies, NGOs (e.g. Fundacion Capital, UNHCR, Concern Worldwide) as well as governments looking to improve costly social safety net programmes that protect the poor from destitution, but fail to put them on a ladder out of poverty.

As a sector that has come under fire for failing to make conspicuous reductions in poverty, the success of ultra-poor graduation carries notable implications for the role that financial services can play in putting millions onto pathways out of extreme poverty.

One is a lesson to microfinance providers that, actually, the extreme poor can be extremely credit worthy – once the initial investment is made. Indeed, some of BRAC’s most reliable and disciplined microfinance clients are graduates from our ultra-poor programme. Microfinance institutions may not be the ones to make that investment, but they can help ensure that “graduates” of such programmes have a bridge that transitions them from ultra-poverty into mainstream microfinance.

Secondly, this model shows that financial services, when integrated within a broader set of wrap-around services, is unquestionably transformational, even for those in the most desperate forms of poverty.

Critics will likely ask, which are the most crucial elements? Is it financial access that is making wrap-around services transformational, or is it the wrap-around services that make financial access transformational?

The answer is most likely some combination of the two, but so long as this interaction is producing these results, I am satisfied in knowing that access to financial services remains a vital ingredient in the solution to extreme poverty.


Shameran Abed is the director of the BRAC microfinance programme, which serves more than five million clients in seven countries in Asia and Africa, and has total assets exceeding USD 1 billion.

Starting its work in the early 1970s, BRAC was one of the earliest known organisations to use the modern microfinance model of lending small amounts to groups of women. Working alongside several other development programmes, the success of the microfinance programme supported BRAC in its growth to be the largest development organisation in the world in terms of staff numbers.

Mr Abed also serves on the boards of BRAC Bank’s mobile financial services subsidiary, bKash, and Guardian Life Insurance. Additionally, he sits on the Microfinance Network Steering Committee and the World Economic Forum Financial Inclusion Steering Committee. Prior to joining BRAC, Mr Abed was a journalist and wrote primarily on political issues.

Mr Abed is a lawyer by training, having been made a barrister by the Honourable Society of Lincoln’s Inn in London, UK. He completed his undergraduate studies at Hamilton College in the United States, majoring in economics and minoring in political science.


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Building resilience for the world’s poor: The $1.50 challenge

Jeff Ashe_savings group women count money

Savings group women count money
Photo courtesy of Jeffrey Ashe

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Pathway

Savings groups (aka village savings and loans associations)


>> Authored by Jeffrey Ashe, Fellow, Carsey school of Public Policy, University of New Hampshire; Research Fellow: Global Development and the Environment, Tufts University

I read the recent World Bank News Flash entitled “International Funding for Financial Inclusion” [1]. In 2013 a total of $31 billion was invested in financial institution building, but what if just the grant proportion if this amount, $2.9 billion, was invested in training savings groups?

  • 200 million of the world’s poor (equal to all the microfinance borrowers today) would have a safe and convenient place to save and easy access to small loans (@$15 per group member).
  • There would be 10 million new savings groups in place in 2 million villages and many thousands of slum communities (@ 4 groups with 80 savings group members per village of 1,000 inhabitants).
  • These groups would mobilize and largely distribute $10 billion every year of which 30 percent ($3 billion) would be the profits from lending to members (@ $1,000 distributed per group of 20 per year) without outside funding.

This is possible since savings groups are able to:

  • Reach those that microfinance is not designed to reach profitably. Even the most motivated micro-lender cannot make money on $0.50 savings deposits and $30 loans.
  • Require a fraction of the staff. Saving for Change in Mali, a joint venture of Oxfam America, Freedom from Hunger, and Stromme Foundation, reached 450,000 women organized into 19,000 groups with 209 trainers. To reach the same number, a typical microfinance institution (MFI) would require a permanent staff of 1,500 [2]. Only a handful of trainers are monitoring Saving for Change groups in Mali today, with few signs that the groups are faltering.
  • Be promoted by local NGOs. Savings group promoters introduce a simple structure while the groups do the creative work of saving, lending, collecting, and record-keeping.
  • Virally self-replicate. The leaders of established groups train new ones at no additional cost.
  • Be profitable for very poor people. When the fund is divided at the end of each cycle, members receive on average $1.38 for each dollar saved [3].
  • Survive independently. A panel study of 331 groups in 6 countries over 5 years indicates a 90% survival rate [4].
  • Serve as a platform for other development inputs. Members launch their own projects, and disciplined groups with financial clout serve as platforms for government and NGO development initiatives and linkages to financial institutions.
  • Promote societal change. In Guatemala, savings groups banded together to elect women mayors. In El Salvador, ex-trainers are assuming roles in municipal governments.

Jeff Ashe_In their Own Hands_book coverWhat is the potential outcome? A randomized controlled trial and anthropological study of savings groups in Mali [5] funded by the Bill & Melinda Gates Foundation found that when only 40 percent of the eligible women had joined groups, there was a village wide (not only group member) effect. The findings included the following:

  • Reduction in chronic hunger with the greatest reduction among the poorest.
  • Increased assets, largely in the form of livestock that could be cashed in when money is scarce.
  • A one-third increase in savings from all sources, including traditional savings clubs (ROSCAS).
  • The substantial word-of-mouth spread of the methodology at no cost to the program.
  • Increased social capital.

Simply stated, the grant funding from a single year of financing financial inclusion could be translated into a modest increase in resilience for 2 billion of the world’s poorest at a cost of one dollar per villager: 2 million villages @ 1,000 inhabitants per village.

Savings groups work because they 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. They represent a crucial component of a strategy for financial inclusion that also includes savings, credit, insurance through institutions, programs targeting the ultra-poor, and conditional cash transfers. This, in addition to the informal means the poor have long used to manage their finances.

Related resources


Sources

[1] Estelle Lahaye and Edlira Dashi, “Spotlight on International Funders’ Commitments to Financial Inclusion“. CGAP, 25 March 2014.

[2] David Roodman, Due Diligence: An Impertinent Inquiry into Microfinance. 2011

[3] SAVIX panel study of 331 randomly selected groups. http://savingsgroups.com/

[4] Ibid.

[5] Karlan, Dean, Jonathan Morduch, Mamadou Baro. “Final Impact Evaluation of the Saving for Change Program in Mali, 2009-2012“. Innovations in Poverty Action, Bureau for Applied Research in Anthropology (BARA), University of Arizona, April 2013.

Tackling poverty by combining saving, training, and microcredit

Martha Kimuyu Kinai, 68, started a woman's group when she was 18. She has 4 grandchildren and teaches her community how to make charcoal clay using wood charcoal and soil mixture. Martha is an example in Mumandu 15kms from Machakos near Nairobi, and has learned more business skills from Hand in Hand training.

Martha Kimuyu Kinai, 68, started a woman’s group when she was 18. She has 4 grandchildren and teaches her community how to make charcoal clay using wood charcoal and soil mixture. Martha is an example in Mumandu 15kms from Machakos near Nairobi, and has learned more business skills from Hand in Hand training.
Photo courtesy of Georgina Goodwin for Hand in Hand International

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>> Authored by Josefine Lindänge, CEO of Hand in Hand International

Decades of microcredit have shown us that while it is a powerful tool in the arsenal of international development it is not, as the World Bank Forum on microcredit in February made clear, a magic bullet to tackle poverty. Over the years there have been many studies into the effects of microcredit, most recently by Innovations for Poverty Action (IPA) and The Abdul Latif Jameel Poverty Action Lab (J-PAL) which concluded that small, short-term loans generally do not lead to increased income (American Economics Association). But, is this a reason for the sector to discard microloans all together?

On the contrary. At Hand in Hand, our experience in the field has taught us that access to finance is vital in the fight against poverty. But on its own, it will not transform a microenterprise from loss to profit nor will it transform a small scale farmer eking out a living on a small plot of land into a micro-entrepreneur. In order to achieve our ambitious objectives we need to understand our clients, as the World Bank Forum in February highlighted.

Microcredit is more effective when supported by non-financial services like financial and business training.

We have been providing a package of business training and credit to more than one million people in some of the world’s most deprived countries since 2003. As a result, they have created 1.4 million micro-enterprises which provide jobs and incomes for 2 million people.

Of course millions of microentrepreneurs already exist in the informal economy where, the World Bank (World Development report 2013, page 48) estimates, more than 3 billion people are working, nearly half of whom work in farming, small household businesses, or in casual/seasonal day labor, earning a poorly paid and often vulnerable living. Rather than seeing this as a problem, we should ask ourselves what these people need to establish or transform their small, unprofitable enterprises into thriving businesses.

The power of microcredit +

Of course, combining group savings and skills training with microcredit is not unique. But most NGOs focus just on one or two of these elements. At Hand in Hand we combine all three and even add a fourth by connecting entrepreneurs to larger markets.

Firstly, we create community groups who support each other, save together, and learn together. Then we train the group members to discover and develop small businesses that make use of their skills and potential; the training includes bookkeeping, profit and loss, creating a basic business plan and marketing. Members have to complete these first two steps before we provide access to microcredit. Finally, we help scale up their businesses by facilitating access to larger markets and advising on the production of higher value products rather than commodities.

Zacharie Itegekaharmde, a mobile phone agent (Kayonza District, Rwanda)

Zacharie Itegekaharmde, a mobile phone agent (Kayonza District, Rwanda)
Photo courtesy of Hand in Hand International

We work with our members for up to three years, and it is only after they have completed all the training modules, can demonstrate high attendance rates at meetings, good repayment on internal lending, a required level of savings, and submission of a solid and approved business plan that they qualify for credit — either from our own microfinance facilities or from partners.

Saving: the key to financial success

There are two dimensions within our program to facilitate financial inclusion: access to savings and then access to credit.

Saving is an important component of financial education and one many in the developed world take for granted. But, the question is, do the poor have any “spare” money to save? Surely that is exactly why they need microcredit?

Among the many entrepreneurs I have met and talked to over the years, saving is always mentioned as the most important skill they have learned. The change to spending what they need and saving the rest for “a rainy day” is transformative and, I think, best explained by one of our successful entrepreneurs in Rwanda, Rahabu: “You know what it is like. You go to the market because you need salt. But when you are there, you see some nice tomatoes so you buy those as well. I don’t do that anymore. I have learnt to buy what I need and save what is left.”

Rahabu Mukampenda, Retailer, Rwanda.
Photo courtesy of Georgina Goodwin for Hand in Hand International

Our members start out in saving groups before receiving microloans. The savings enables them to buy the first stock, equipment, animals, or crops they need to get their microenterprise off the ground. Once they have met all the requirements I mentioned earlier, then they are able to apply for microcredit. The credit history they have built up as members and within the internal saving-loan-repayment system of our savings groups is crucial to securing that first microloan.

Group members wishing to borrow from the group savings fund are required to present a basic business plan to the group. It is then up to the group to decide whether or not to invest, how much to invest, and what the rate of return should be, which demonstrates a clear understanding of some fairly complicated financial transactions, auguring well for future debt repayments.

Members are selected for credit or linked to microfinance institutions (MFIs) when they meet the criteria I have described and we are confident they are fully prepared to take on the risk of a loan because our training focuses on the meaning of debt, importance of repayment, as well as the opportunities presented by a loan. Although we do not recommend particular MFIs to our members, we do make them aware of the various financial institutions or banks that exist, their different requirements, and what to look for or avoid. Since 2003, we have overseen the dispersal of more than US $240 million in microloans.

These partnerships with microfinance institutions are essential for our microentrepreneurs to take the next step on their journey. An independent review of our work in India in 2012 found that over 95 percent of loans were used for productive purposes and the repayment rate is 99.8 percent.

In short then, a symbiotic approach between access to finance and non-financial services like Hand in Hand’s support is needed to tackle the root cause of poverty.

About the author

JosefineJosefine began her career at the United Nations Department for Economic and Social Affairs, Finance for Development section. After working a number of years in the private sector, she joined Hand in Hand in 2008. Josefine played a decisive role in establishing Hand in Hand Eastern Africa, and was promoted to Chief Operating Officer of Hand in Hand International in 2011. She holds a B.Sc. and M.Sc. in Development Economics and International Economics from Lund University in Sweden and studied strategic leadership for microfinance at Harvard Business School.

Relevant Resources

Six learning opportunities for the “Six Pathways”

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>>Authored by William Maddocks, director of the Sustainable Microfinance and Development Program (SMDP) at the University of New Hampshire’s Carsey School of Public Policy

New scrutiny has focused on what microfinance can’t do, and the evidence is growing that microfinance, de-linked from a social change paradigm, is simply another way to provide basic financial services to people historically excluded by the market. The new theme for the Microcredit Summit Campaign for 2015 of “financial inclusion to end extreme poverty” and the Six Pathways show promise in getting us there and can succeed in challenging extreme poverty if social change and equity are embedded as core values by those who fund, design, and implement these strategies.

These six pathways promoted by the Microcredit Summit Campaign touch on many of areas of the Carsey School of Public Policy’s current work. Using each pathway as a prompt, we will take a brief look at these themes and how you can get involved and learn more.

The Six Pathways

1) Mobile money linked with agent networks in low-income communities and other technological innovations

The SMDP New Hampshire Certificate 2015 in June will feature a session facilitated by Joyce Lehman, formerly with the Bill & Melinda Gates Foundation on branchless banking and the Digital Revolution. If the infographic from Kenya tells us anything (below), it’s that digital financial services are growing exponentially beyond just transfers and remittances to group savings & loans, agricultural inputs insurance, water services, off-grid lighting, and more. Come to New Hampshire, USA, this summer to learn about this exciting frontier of financial inclusion from the unique perspective of a former donor who worked on the ground floor of paving the digital finance highway.

Infographic: Kenya's journey to digital financial inclusion

Kenya’s journey to digital financial inclusion (by Simone di Castri and Lara Gidvani – July 2013)
Source: GSMA

2) Ultra-poor graduation programs

Jan Maes, who has worked in designing graduation programs with Trickle Up and other organizations, will present findings during the SMDP New Hampshire Certificate on the effectiveness and challenges of using these strategies to move the ultra-poor into self-sufficiency.

3) Microfinance savings and/or borrowing groups linked with health education, health financing, and health product delivery

Kathleen Stack, vice president of programs for Freedom from Hunger, will make a virtual presentation at the SMDP NH on Microfinance and Health Protection (MAHP) initiatives that they are implementing with our friends, CARD MRI in the Philippines and the Microcredit Summit Campaign, and in other locations. Read more about the project, Healthy Mothers, Healthy Babies, and how these three organizations, with the support of Johnson & Johnson, are helping address maternal and child health needs.

Photo courtesy of the Carsey School of Public Policy

Photo courtesy of the Carsey School of Public Policy

4) Agricultural value chains that reach to small-scale producers

Understanding markets is more than just knowing about products. The field of inclusive market development is moving from the linear value chain approach, to applying a systems approach that looks for, and adapts to, feedback from the system. Carsey has just launched SMDP Online and one of our first courses, “Understanding and Adapting to Complex Markets” will help practitioners understand complex adaptive systems and apply these concepts to their current work. SMDP Online course facilitator Mary Morgan, with more than 20 years of experience in development, promises a challenging and very practical learning experience for market development professionals.

5) Savings groups (aka village savings and loans associations)

One of the most promising strategies for reaching people that commercial microfinance has failed to reach are savings groups (SGs). Today more than 10 million people use SGs for saving, lending, building financial security, and social capital. Carsey has been a leader in savings groups training and learning events for several years and continues to expand opportunities to learn about this growing area of financial inclusion.

The SMDP Online will offer a blended course, “Savings Groups: Building Scale and Impact through Adaptation and Experimentation,” facilitated by Nanci Lee. This course will meet online for several months and then face-to-face in Lusaka, Zambia, during the SMDP Zambia, which occurs right before the next global gathering of SG practitioners, donors, researchers, and others at the SG 2015 conference also in Lusaka from November 10 to 12.

The lock box of a savings group in Africa

The lock box of a savings group in Africa
Photo courtesy of the Carsey School of Public Policy

6) Conditional cash transfers (CCTs) linked with mobile delivery and asset building

Reaching as many as 129 million people worldwide, CCTs work at a scale that few other anti-poverty programs can reach. Governments working with visionary partners like Fundación Capital can roll out programs that provide support, change social norms, and make a measurable impact on improving the lives of poor families. In the Dominican Republic, Fundación Capital has partnered with the Government’s ProSoli program and Banco ADOPEM and Banco Pyme BHD to connect savings groups with a CCT voucher program and bank linkages.

You can learn about this exciting pilot program by watching Jong Hyon Shin, Fundación Capital’s country project coordinator for the Dominican Republic, and her former professor (and Carsey Fellow) Jeffrey Ashe. (Watch the SEEP Network’s Taking Savings Groups on the Road Webinar Series.)

Relevant resources

Esteeming the beauty of the savings group

Photo courtesy of Paul Rippey

This savings group in Malawi runs their meeting following an austere and beguiling ritual
Photo courtesy of Paul Rippey

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>> Authored by Paul Rippey, Co-Founder and Editor, Savings Revolution. This article is also being published in Savings Revolution

In his EvangelIi Gaudium (Apostolic Exhortation), Pope Francis says that ethics “calls for a committed response which is outside the categories of the marketplace.” What a wonderful phrase!

The categories of the marketplace that Francis is referring to are things like profit and loss, return on investment, market share, business cases, and financial inclusion.

We have, maybe unknowingly, maybe indifferently, often let these categories become the sole points of reference for discussions of what is important in microfinance. They have become the criteria for decision-making and the measures for evaluating our actions. They have largely pushed other values out of the way — values like truth, beauty, harmony, integrity, virtue, and mindfulness.

I thought about this when I visited a beautiful savings group in Malawi last month. I don’t mean it was beautiful in some abstract sense, like “they followed their procedures beautifully.” I mean that it was beautiful because of the way it looked. The members — who had invested in similar outfits, white shirts and green chitenje clothes, all spotless — sat in a circle, taking a moment to adjust their positions so the circle was as perfect as they could make it. They ran the meeting following an austere and beguiling ritual: each member coming forward in turn and kneeling in the center, conducting her affairs with the group and then returning to her place before the next member came forward.

That beauty seems to have arisen spontaneously from the members. It was the value they added to the cash-management and meeting procedures they had carefully learned. I can’t quantify the added value of the beauty, because it is in a different category from the familiar averages and ratios — amounts saved and lent, attendance, and portfolio performance.

What if we could predict with reasonable confidence that a certain development investment would likely encourage people to lie or might reduce trust between people or could make the world uglier? Would we still want to support it, even if it raised incomes of poor people? Would we at least take those other factors into consideration, along with ROI (return on investment)?

I believe that some of the resistance many people have to turning savings groups into adjuncts to banks, or helping people enter the consumer society, or putting great emphasis on financial inclusion over other values — this comes from the fear that we are giving up non-marketplace values in the process. I don’t know how to solve the equation of balancing marketplace and non-marketplace values, but I am confident that both are important and that the beauty of the savings group I saw in Malawi makes the world a better place — even if we can’t put a price on it.

Related resources

The 2015 Listening Tour: Mapping pathways for ending extreme poverty

Photo credit: by Geoff (originally posted to Flickr as Pilgrim’s path) [CC BY 2.0], via Wikimedia Commons

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“Wars of nations are fought to change maps. But wars of poverty are fought to map change.”
— Muhammad Ali

After the success of Generation Next: Innovation in Microfinance, our 17th Microcredit Summit (Mexico in 2014), the Microcredit Summit Campaign conducted a Listening Tour to identify how this next generation could contribute to ending extreme poverty (those living on less than $1.25 a day) by 2030. The theme that emerges from this consultation will be reflected across the Campaign: in the 2015 State of the Campaign Report, the 18th Microcredit Summit, and Campaign Commitments.

With the post-2015 development agenda under negotiation, the financial inclusion and microfinance sectors have an opportunity to assess our role in shaping the international development framework and reflect on the impact we can have on the lives of millions of the world´s extreme poor. Our Listening Tour was the first step in surveying our coalition of partners to see what our role in this endeavor should be.

The Listening Tour was our time to listen — and your time to speak — on the issues that the microfinance and financial inclusion sector face and served two purposes. First, it was our hope to find out how our audience (you) felt about the World Bank’s goal of eradicating poverty by 2030, and equally important, we wished to consult you in identifying the topics that were most pressing and urgent.

We collected your feedback through an online survey where we received 151 responses from participants from around the world representing practitioners, advocates and support organizations, funders, investors, policymakers, and regulators. We also conducted phone interviews with 27 leaders in the microfinance and financial inclusion sectors. Below are some key findings from our Listening Tour calls and survey.

A client of Fundacíon Capital wiht her daughter Photo credit: Fundacíon Capital

A client of Fundacíon Capital wiht her daughter

Photo credit: Fundacíon Capital

1. Ending extreme poverty.

Our members believe that our main objective should be to end extreme poverty, but they acknowledge that microfinance and financial inclusion actors need to be mobilized around this objective. We need to take a leadership role in re-focusing the microfinance sector on a pro-poor mission and helping the microfinance community build confidence in a system that protects and benefits those who we serve. In order to accomplish this, we need to galvanize new visionaries and champions for the movement.

2. Universal financial access, financial inclusion, and ending extreme poverty.

The strategy for achieving both universal financial access by 2020 and the 2030 goal must be clear, and clear linkages should be created between these two goals. In addition, we need to clarify the definition of financial inclusion, especially in how it relates to ending extreme poverty. We cannot get to full financial inclusion unless inclusive financial systems are created that serve the extreme poor.

3. Defining roles.

It’s unclear what role each stakeholder plays in achieving these goals. Our challenge is to create a unified voice in support of this agenda among a diverse group of microfinance stakeholders, who sometimes have divergent priorities. How do we design a strategy and create a sense of responsibility to provide the appropriate products and services that help people move out of poverty?

4. Pushing innovation while maintaining client protection.

Innovation is key, and technology will need play an important role in reaching full financial inclusion. The microfinance community tends to copy successful ideas but hesitates when it comes to new methodologies. While we need to do away with this risk-averse culture when it comes to innovation, we need to make sure there is adequate regulation and client protection practices in place where our clients could be vulnerable.

Organizations that made a Campaign Commitment are recognized on stage at the 17th Microcredit Summit in Mexico.

Organizations that made a Campaign Commitment are recognized on stage at the 17th Microcredit Summit in Mexico.

5. Financial inclusion to end extreme poverty: six pathways.

Finally, we saw an emphasis on six topics that we have framed as our “pathways out of poverty;” these are financial inclusion strategies that reach people living in extreme poverty and facilitates their movement out of poverty:

  • Mobile money linked with agent networks in low-income communities (for example)
  • Agricultural value chains that reach to small scale producers (for example)
  • Savings groups (aka village savings and loans associations) (for example)
  • Conditional cash transfers linked with mobile delivery and asset building (for example)
  • Ultra-poor graduation programs (for example)
  • Microfinance savings and/or borrowing groups linked with health education, health financing, and health product delivery (for example)
Dignitaries who attended the 1997 Microcredit Summit.

Dignitaries who attended the 1997 Microcredit Summit. From L-R: Tsutomu Hata, Former Prime Minister, Japan; H.E. Pascoal M. Mocumbi, Prime Minister, Mozambique; H.E. Alberto Fujimori, President, Peru; H.M. Queen Sofia, Spain; H.E. Sheikh Hasina, Prime Minister, Bangladesh; Hillary Rodham Clinton, First Lady, United States; Prof. Muhammad Yunus, Managing Director, Grameen Bank, Bangladesh; Elizabeth de Calderón Sol, First lady, El Salvador; Ana Paula dos Santos, First Lady, Angola; H.E. Dr. Siti Hasmah, First Lady, Malaysia; H.M. Queen Fabiola, Belgium.

Let’s take a quick ride down memory lane. In February 1997, we convened the first Microcredit Summit in Washington, D.C., bringing together more than 2,900 delegates from 137 countries. This event resulted in the Declaration and Plan of Action in which Summit delegates promised to work towards making the Campaign a “global effort to restore control to people over their own lives and destinies” [1]. Since 1997, the Microcredit Summit Campaign has been leading, supporting, and guiding the microfinance field to address failures in reaching the extreme poor.

Jump forward to 2015. We still have a lot of work to do, but the will of our community to map out a better future together is evident. This is a time for change and transformation in the global development sector, and we must be bold in setting our goals.

We have taken it upon ourselves to make sure that the microfinance and financial inclusion movement is included as a tool in ending extreme poverty by 2030. Financial inclusion needs to serve the bigger purpose of helping people in poverty mitigate vulnerability, build resilience, and take advantage of opportunity. But, to reach the ambitious goal of ending extreme poverty by 2030, we need to draw a map of how to get there. We need to show how digital payments, savings groups, conditional cash transfers, agricultural value chains, and graduation programs intersect with other sectors like health, education, housing, and nutrition to build pathways out of poverty. We must map out pathways for how these different interventions, stakeholders, and initiatives can work together to achieve our shared goal.

We share responsibility for promoting microfinance and financial inclusion practices that put clients at the center and show progress toward poverty eradication. At the World Bank’s 2015 Spring Meetings, the Campaign made a commitment to support the World Bank Group’s goal to reach universal financial access by 2020 (UFA2020). Through our commitment, we have joined a global coalition of partners that includes Visa, Mandiri, the State Bank of India, the World Council of Credit Unions, WSBI, the Microfinance CEO Working Group (a group of 10 international microfinance networks), Telenor, Ooredoo, Equity Bank, and Bandhan.

We know that the hardest part of reaching UFA2020 will be to ensure that financial services reach those living in extreme poverty, and the Microcredit Summit Campaign will work with its reporting institutions to help them expand their outreach by at least 53 million of the world’s poorest families, bringing the overall total of the world’s poorest families reached by microfinance to 175 million by 2020.

UFA2020 will be a stepping stone to achieving the post-2015 development agenda, and the Campaign will document what is being done well and disseminate those lessons far and wide through the State of the Campaign Report and our Microcredit Summits. The 18th Microcredit Summit will be an opportunity to learn about these six pathways and engage in a thoughtful discussion around the role each of us plays.

We invite you to join us and take part in leading this movement; start by organizing a breakout session for the 18th Microcredit Summit and making a Campaign Commitment. Submit your breakout session proposal for the 18th Microcredit Summit, and use our platform to inform our community about what you are doing to contribute to our common mission. You can also join our own coalition of Campaign Commitment makers by announcing specific, measurable, and time-bound actions that you will take to support our goal of helping 100 million families lift themselves out of extreme poverty. This is a key step in reaching the end of extreme poverty by 2030, and by focusing on our six pathways, we can design a better future and create a map of opportunity.

Financial inclusion to end extreme poverty

Related resources

Sources

Declaration and Plan of Action. Microcredit Summit Campaign. February 1997, Washington, D.C. http://www.microcreditsummit.org/resource/58/the-microcredit-summit-declaration-plan.html

Microcredit Summit Campaign joins World Bank’s financial inclusion efforts

Global Findex database, World Bank, Washington, DC.
http://www.worldbank.org/en/programs/globalfindex

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The Microcredit Summit Campaign issued a press release today announcing our commitment to Universal Financial Access by 2020. The Campaign joins the World Bank Group and a their coalition of partners — including MasterCard, Visa, Mandiri, the State Bank of India, Equity Bank, and Bandhan — in making a commitments to accelerate universal financial access. Financial access and inclusion are stepping stones to achieving the end of extreme poverty by 2030.

The Campaign will work with its reporting institutions to help them expand their outreach by at least 53 million of the world’s poorest families, bringing the overall total of the world’s poorest families reached by microfinance to 175 million by 2020. Read the full press release.

This commitment was announced on April 17th in Washington, D.C., at the World Bank Group’s Spring Meetings.

Related resources

E-workshop Takeaways: “How to Build Savings Groups and Other Breakthroughs in Financial Inclusion”

SfC Group in Mali_607x272

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As part of their 2014 Campaign Commitment, Carsey School of Public Policy co-hosted a learning event on Thursday, December 11th with us to share the value of starting and scaling up savings groups. William Maddocks (Carsey School of Public Policy) facilitated an engaging discussion, featuring Jong-Hyon Shin (Fundación Capital in the  Dominican Republic), and Jeffrey Ashe (The Carsey School of Public Policy).

We would like to thank the panelists as well as the E-workshop attendees, especially those who participated to the Q&A session. We invite you to comment on this post to continue the discussion about savings groups and other breakthroughs financial inclusion. Please click on the links below to explore the session content.


RESOURCES

Listen to the E-Workshop RECORDING

Have a look at the E-Workshop SLIDES

Review the E-Workshop QUESTIONS


Savings groups picture Eworkshop

A savings group replication agent trains a new group. She is using the all-oral curriculum which makes it possible for communities with low or no literacy levels to create and run a savings group with complete autonomy.

Summary of the E-Workshop

The E-workshop focused on two main issues:

  1. A 2-hour training method to create new savings groups
  2. The link between savings groups and conditional cash transfers.

Jong-Hyon presented her own experience in the Dominican Republic, and Jeff talked about the takeaways from his research in West Africa.

The live discussion with participants also touched on a wide range of topics, including the benefits and challenges of youth savings groups, the role of religious institutions in supporting the savings group movement, and the benefits of bank linkages for both the commercial banks and savings groups members. Check out the full recording of the session available here.


SG Eworkshop picture 2_602x338

A youth savings group in Mali. Photo courtesy of Jeffrey Ashe.

 Takeaways from the panelists

 

Jong-Hyon Shin (Fundación Capital) : Group quality: 2 hour vs classic VSLA?

Without doubt, the groups trained by classical VSLA enjoy higher quality than the groups trained in 2 hours. There are 2-hour groups saving as much as the conventional groups, but it is true that the group quality is not even, while the conventional groups demonstrate rather consistent performance. 2-hour training can get the groups to start saving, but it’s not enough to build a strong group. I believe that a group should have at least 3-5 subsequent monitoring visits in its first cycle. This is why I am working with PROSOLI, Dominican Republic’s CCTs, in which the group members will have a periodic visits from their trainers. Another measure to complement 2-hour training is to pay attention to the selection of members. When the members are sufficiently interested, and there is a mutual trust within the group, chances for subsequent intervention drops dramatically. In sum, it is ideal to have groups trained by costly and labor intensive conventional methodology, but if we are to achieve the scale, simple training may not be an undesirable option.

Jeff Ashe (Author of In Their Own Hands: how Savings Groups are revolutionizing development)

Two and a half billion people worldwide need a better way to save and borrow. Savings groups provide an alternative, safe and convenient place to save and easy access to small loans; an approach to mitigating poverty that is uniquely scalable because it is based on catalyzing the capacity of people to mobilize their own resources with only transitory outside help. The cost: a dollar per person and trending downward as what is learned in one village spreads virally to neighboring villages. Within ten years, savings groups with 100 million members could improve the lot of the poor in a million villages, at a cost of less than one percent of what these countries will receive in foreign aid. The extraordinary growth, success and durability of savings groups are due to following these principles:

  • Start with a vision of scale and design for viral replication – multiple groups in thousands of villages in a single country
  • Less is more, and the simpler the better
  • Build on what is already in place
  • Be sustainable – 89% of groups worldwide are saving and lending without outside support
  • No giveaways – giveaways keep control in our hands, not theirs
  • Keep costs low – the problems of poverty are vast
  • Insist on local control, the key to building skills and lowering costs.
  • Embrace learning and innovation

Are savings groups the silver bullet for eradicating poverty? No development effort can deliver on that promise – but savings groups are perhaps the best and most practical place to begin. The strategy of savings groups is based on an awareness that good ideas spread as they always have: through talking with neighbors and helping one another. We will judge ourselves successful when development passes from our hands to theirs.

SfC Savings Groups Mali (June 2010)

The map of the Savings for Change (SfC) program shows the rapid expansion of savings groups in Mali over the last 6 years. Red dots are groups 5-6 years, yellow is 3-4 years, and green are groups only 1-2 years old. SfC is a program run in partnership by Oxfam America and Freedom from Hunger.

To learn more about savings groups, we invite you to read Jeff’s book (In Their Own Hands) and Jong’s blog.


E-Workshops are hosted by the 100 Million Project of the Microcredit Summit Campaign and strive to feature the work of organizations who have announced Campaign Commitments to take specific, measurable and time-bound actions that demonstrate their commitment to the end of extreme poverty. 

Join Fundación Capital and the Carsey School of Public Policy in the global coalition to help 100 million families lift themselves out of extreme poverty. State your Campaign Commitment today by contacting us at mycommitment@microcreditsummit.org.

E-Workshop: How to Build Savings Groups and Other Breakthroughs in Financial Inclusion

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Photo courtesy of Jeffrey Ashe

Please note the date for this E-Workshop has changed to
Thursday, December 11th at 10:00 AM (GMT-4). 

Join us for an E-Workshop titled How to Build Savings Groups and Other Breakthroughs in Financial Inclusion

The Carsey School of Public Policy and Fundación Capital are co-hosting with the Microcredit Summit Campaign the next E-Workshop which will share insights on starting and scaling up savings groups. Both Carsey and Fundación Capital announced Campaign Commitments in 2014, and this latest E-Workshop will help microfinance and financial inclusion stakeholders to improve outreach and service with savings groups.
Register 2

What time in your country?

Join us for a discussion with Jong-Hyon Shin (Fundación Capital) and Jeffrey Ashe, which is moderated by William Maddocks (Carsey School of Public Policy). We will be discussing effective ways of forming savings groups and describe 2-hour trainings that Jong-Hyon led in the Dominican Republic.

The speakers will also share insights on linking savings groups and conditional cash transfer programs (see the recording of the Workshop titled Going to Scale: Savings Groups, Conditional Cash Transfers, and Financial Inclusion at the 17th Microcredit Summit), with the example of collaboration with ADOPEM and Fundación Capital in the Dominican Republic.

Through these valuable insights, you will gain a better understanding of the essential steps to start and scale up savings groups, and see how savings groups can contribute to financial inclusion and the end of extreme poverty.

Organization
Name
Carsey School of Public Policy
William Maddocks
Program Director, Microenterprise and Development
Moderator
Fundacion Capital
Jong-Hyon Shin
Country Project Coordinator
Carsey School of Public Policy
Jeffrey Ashe
Fellow
Co-Author of
In Their Own Hands: How Savings Groups Are Revolutionizing Development
Photo courtesy of Fundación Capital "What’s most significant about savings groups is that they are designed to be wholly managed by villagers themselves; by and large, they function as they are intended to function; and they reach impoverished people in remote rural areas who would otherwise go without any financial services, even microfinance."

Photo courtesy of Fundación Capital
“What’s most significant about savings groups is that they are designed to be wholly managed by villagers themselves; by and large, they function as they are intended to function; and they reach impoverished people in remote rural areas who would otherwise go without any financial services, even microfinance.” —David Bornstein, New York Times 


Join us for this exciting discussion to gain a deeper understanding of savings groups and hear from practitioners and researchers about their challenges, gains, and the practical applications! 


Follow this e-workshop and the Campaign’s 100 Million Project:

Learn about the 100 Million Project Project and Campaign Commitments.

A Comprehensive Approach to Helping the Poor Lift Themselves out of Poverty

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“Poverty is a complex matter. We need multiple solutions, synergy, leverageability, scalability; we all need to work together and do much more.” —Roshaneh Zafar, Kashf Foundation Español Français Continue reading