Plan Reaches One Million Savings Group Members
In December 2013, Plan International crossed the one million members mark in its worldwide program of Savings Groups.
Marking the milestone, Plan has commissioned a report by prominent economist Dean Karlan about the role NGOs have to play in the microfinance sector. The report: 'Financing the Needs of the Poor’ looks at the role of non-profit organizations in reaching those people with little or no access to finance.
Plan has long upheld the vision that helping girls and women form Savings Groups will empower them to create their own businesses, allowing them to generate their own sources of money and improve household well-being.
Nigel Chapman, CEO, Plan International, said: “This is a really exciting landmark for Plan’s work with Savings Groups. The system works with people who, for some reason, microfinance institutions won’t work with – they could be too rural, too poor or too young.
“While it might be theoretically possible for some of those people, particularly the older ones, to work with microfinance institutions, in fact they don’t. It might be that the institution is too far away or that they don’t like the products or the terms; or that they don’t even want to borrow. So what Savings Groups do is provide an array of services that are close to the people who use them, simple – it’s easy to be a member of a group - and therefore appropriate for large numbers.”
Savings groups assemble self-selected group members who make regular, often weekly savings that are used to provide short-term loans to members who request them. Members get back their savings plus a proportionate share of the interest earned from these loans – called a ‘share out’ – at the end of a predetermined cycle. Members can also contribute to ‘emergency’ or ‘social’ funds from which grants or interest-free short-term loans can be provided to members in emergencies.
Plan runs Savings Groups programs in 26 countries worldwide, with 97% of these operating in Africa. Groups operate in nearly all Plan’s program countries across the African continent. Programs also run in Columbia, Vietnam and the Philippines. Plan intends to increase Savings Groups programs in the Americas and Asia and throughout the world and integrate them with other parts of Plan’s development programs.
Beneficiaries include a female entrepreneur from Tanzania who set herself up as a brick merchant; a tailor from Niger able to buy materials to make embroidered sheets; and a widow educating her five children by starting a cassava trading business. In Ethiopia, mothers are supporting their families single-handedly by running businesses selling candles or ice lollies to school children.
John Schiller, Savings Groups advisor at Plan International, said: “What we will be doing over the next few years is applying the savings group methodology increasingly to children and youth – youth as we define it is under 24 years. We’ll focus on that particular part of the population, as we’ve learned working with 82,000 children and youth in West Africa that Savings Groups are an effective, low risk way of teaching financial management and can serve as a ‘starter system’ to give youth experience with regular savings and credit.
Savings groups differ from the classic microfinance model, which is based largely on micro-credit disbursed from formal institutions, giving people loans and encouraging them to stay in the system so they take successive loans.
Schiller explained: “The formal microfinance institutions focus on credit and savings products. They’re making increasing use of technology to help them reach out to the poor and eventually they’ll probably be successful in expanding their customer base. But that’s going to take time. The question is, what do we as an NGO with a presence in tens of thousands of poor communities do in the meantime? We could wait until this magical transformation takes place, or we can do something very practical that we’re good at, because it’s a very simple methodology. So we do Savings Groups which, for the foreseeable future, help to fill the gap.”
Schiller said the paper by Dean Karlan helps to situate the work of Plan’s Savings Groups initiative in the context of the wider financial inclusion movement.
“It puts Plan’s work into context, can inspire us to greater effectiveness by creating awareness of other opportunities and puts us in the mainstream of organizations working to build financial inclusion.”