How can 20 million Savings Group members be wrong?

Could MSD and adaptation to crisis push 20 million Savings Groups (SGs) members to 400 million?  

SGs are one of the most widespread economic empowerment initiatives, with estimates of over 20 million members across 75 countries. They are powerful.

I have been working with SGs for over 20 years, in more contexts than I can count. I have been supporting markets, and those who work within them, for just as long. These market actors include refugees - and people and communities affected by disaster, crises and involved in humanitarian responses. In all these cases SG members always tell me how grateful they were (and are), and how much it made things “not as bad as they could have been”.  More and more research is echoing these members’ words^₁.

The role of SGs in market systems development 

We all agree (at least I hope we do) that savings-led financing is critically important to supporting pro-poor financial inclusion and market systems access for people often shut out of more profitable markets. A simple and powerful example of this is smallholder chickpea farmers in Tanzania. Participation in SGs addressed many of their challenges and helped them better engage in this market system in the Lake Region. SGs not only filled the key gap of access to finance - in the right amount, at the right time, in the right place - but also supported the structures and collaboration that allowed them to better collectively market and achieve higher prices and yields.

There is huge demand for savings-led financing (whether you call it VSLAs, SLICs, SGs, Self-Help Groups etc.) Recent studies have shown demand by women in sub-Saharan Africa for savings and SG services at 125 million -  and the potential market worldwide may be as large as 400 million individuals^₂. Experts agree that population growth in sub-Saharan Africa alone will double, adding a billion people by 2050 - and so this need will exponentially increase^₃. The MSD approach needs solutions for market actors - at all levels - to have appropriate access to finance. In the thin markets, rural areas and urban slums of developing countries, SGs are an important part of the solution. 

At the same time, emergencies, conflicts and disasters strike these fragile communities all the time. They are at high risk of shocks and stressors. Market actors in crisis can be made more resilient with SGs, even in the poorest communities. They can provide access to: money when and where needed; the group’s emergency funds; links to others for support; and, in some cases, provide conduits to deliver aid/cash transfers. I firmly believe that member-led, savings-led financial services is the original 'facilitation' approach for pro-poor sustainable finance - and that SGs should be key partners in all humanitarian responses. 

MSD approaches to support SG scaling

If the demand for SGs is there, and the importance of these kinds of financial mechanisms in MSD work is clear, how can there be more? While there are tens of millions of SG members around the world, most were initially, and still are, supported by development actors. Is there a path for SGs themselves, using MSD approaches, to multiply and reach this potentially thirsty market of almost 400 million?

For this to work, as with all MSD work, it would need the commitment of a very diverse group of players – and strong facilitation approaches. Development actors, governments, donors, financial service providers and financial regulators would have to agree to a process that would, in the words of a colleague, “work towards a future that does not include them”. 

There are massive benefits to opening SGs up to becoming integrated parts of the market systems their members work within, and we can see parallels with the growth of the microfinance sector. However, there are also very real and significant risks, both to SG members and the model itself. Early learning has shown that when SGs become separated from the development actors and SG facilitators, who often provide strong guidance and consumer protection, they open themselves up to undue financial risk and burdens on members as they enter the commercial credit markets– a logical endpoint of the MSD approach. Many SGs have failed when members, or the group itself, become linked to formal financial services and access commercial loans that are poorly suited to their needs. But the risk, and acceptance of it, may be worthwhile for the growth of SGs. 

This is by no means accepted wisdom, and there is still much learning to be done. Many in the SG community see huge dangers in the MSD approach and the adaptations it would require. Even the 'who does/who pays' exercise can raise hackles, fearing that the 'secret sauce' that makes SGs so powerful will be adapted away if commercial actors take over SG support – and may move away from the self-led, savings-led, cooperative principles they are built on. 

If SGs in emergencies can adapt, can they scale?

In addition to the sheer numbers and demand for pro-poor, savings-led finance, the context that SGs are working in is increasingly less stable. Emergencies are becoming more frequent, not least with the impact of climate change. The idea of a ‘stable context’ is no longer a reality for most.

If we go back to our chickpea farmers in Tanzania, they face reduced rainfall, soil erosion and increasing temperatures. These smallholder farmers are experiencing climate change first hand, with regular failure of the staple maize crop. The World Bank and others are working with the Tanzanian government to find ways forward in this new and disaster-prone reality^₄. The SG model, crucial to the success of smallholders in the chickpea market, needs also to adapt to future emergencies. 

To be ready for this, we must revisit some of our approaches and assumptions around supporting SGs. We (a multi-agency, multi-sectoral learning group^₅) developed a set of resources and guidance to help agencies, governments and other system actors do just that.  

We asked ourselves three questions:

1. In emergency settings, which SG standards must be retained? What can change?
2. How can SGs and CVA programming best work together in emergency settings?
3. In unstable environments, how can we support social cohesion within – and through – SGs? 

We developed learning products and guidance to help answer these questions - a learning brief and slide deck on Savings groups in emergencies 
providing actionable guidance to organisations to promote or work with SGs in emergency settings.

I hope these resources can help expand the use of, and support for, SGs to help meet the growing demand for appropriate financial services - and ensure their integration in disaster response and market systems resilience programming.

If an MSD approach can work with SGs, and ensure they remain the powerful and protective force they are for their members, the development and humanitarian community will have to keep revisiting and adapting the model, for emergencies or market forces, carefully and consciously.

Where there is adaptation, there is always the danger that what makes something so special and workable will fade away, but as the need is so great, now may be the time to be brave. 

^{_{1 https://www.care.org/news-and-stories/resources/savings-and-solidarity-in-crisis/
2 http://insights.careinternational.org.uk/publications/briefing-paper-to-the-un-high-level-panel-on-women-s-economic-empowerment-working-group-on-financial-digital-inclusion-and-property
3 https://www.imf.org/en/News/Articles/2021/10/20/na102021-seven-charts-that-show-sub-saharan-africa-at-a-crucial-point
4 https://climateknowledgeportal.worldbank.org/sites/default/files/2020-06/CSAIP_Zambia_1.pdf
5 We are a cross-organisational learning group, composed of Savings Group and humanitarian specialists across 8 organisations – CARE, Catholic Relief Services, GOAL, the International Rescue Committee, Islamic Relief Worldwide, Mercy Corps, the Norwegian Refugee Council, and the United Nations High Commissioner for Refugees. With support from the Sall Family Foundation and USAID’s Bureau for Humanitarian Assistance.}}