Savings & Credit Groups

Now this is an initiative that I think is highly effective and makes a huge difference to the people right at the bottom. Micro-credit schemes are available all over developing countries now, but loans this way normally are still bound to too rigged regulations and high interest rates for the very poor. So this is where savings and credit groups are able to fulfil in their needs.

People pay a fee to join the group (roughly £10) and then every month they ‘save’ a certain amount (in the order of 10 to 20p). They can take out a loan with an interest rate of 5% to fund resources which will help them to increase their earnings. The interest paid is then distributed to those with savings as their interest earned. The group together decides whether they will grant a loan to a person and because they belong to the same community and realise that their money is used by others, they hold each other accountable for using the loan responsibly, running business activities effectively and repaying on time. Such loans enable the poorest to get off the ground by for example buying two pigs and then selling the piglets to make profit, which could be invested in buying more animals. One person started this way and is now able to rent more land in order to increase his farming activities to the point where he is able to produce more than his family needs and therefore earn income.

More than the purpose of enabling loans, this activity also encourages people to save for future needs where they would have spent their cash immediately upon receipt in the past, and therefore fosters responsible use of money. I’d like to see every person in the poorest communities belong to such a group within the next two years.