Savings Groups at the Frontier

Excerpt. © Reprinted by permission. All rights reserved.

Savings Groups at the Frontier
By Candace Nelson Practical Action PublishingCopyright © 2013 The SEEP Network,
All rights reserved.
ISBN: 978-1-85339-776-9


Contents
Figures, tables and boxes,
Preface,
Acknowledgements,
Acronyms and abbreviations,
Introduction Jeffrey Ashe and Candace Nelson,
1 Savings groups and financial inclusion Joanna Ledgerwood and Alyssa Jethani,
2 Savings group outreach and membership Susan Johnson and Silvia Storchi,
3 Making it happen: approaches to group formation Paul Rippey and Hugh Allen,
4 Thrift-led development Kim Wilson,
5 Pathways to change: the impact of group participation Megan Gash,
Annex: Savings group studies reviewed,
6 Performance monitoring David Panetta,
Search terms,

CHAPTER 1
Savings groups and financial inclusion
Joanna Ledgerwood and Alyssa Jethani

This chapter highlights how informal savings groups are an appropriate tool for financial inclusion of poor people, particularly in rural and remote areas. Countering claims that inclusion is defined by participation in the formal financial sector only, savings groups are presented as being at the core of the financial market system.
Financial inclusion has attained a dominant position on the development agenda of policymakers, regulators, multilateral organizations, and develop-ment organizations worldwide. Forums such as the Alliance for Financial Inclusion (AFI) and the G-20's Global Partnership for Financial Inclusion, as well as various industry associations and advocacy initiatives, are all discussing how to build more financially inclusive economic systems. With just over half of the world's population still 'unbanked' (Chaia et al., 2009), it is becoming evident that neither the early focus on microcredit nor subsequent investments in the broader microfinance field have fully met the challenge of financial inclusion. Embracing this goal has led many stakeholders to focus on financial market systems and how to make them work better for the poor. With an increased understanding of the financial market system and, more importantly, an acknowledgement of the diverse needs of consumers, the microfinance industry is reexamining its role in contributing to inclusive finance. 'Looking for major impact from a single product or institution type risks overlooking the inherent complexity of livelihoods and financial service needs' (Ledgerwood and Gibson, forthcoming).
Microfinance has historically focused on microfinance institutions (MFIs) reaching scale and sustainability with, predominantly, one product from one type of institution. The market systems approach, on the other hand, acknowledges that there are a diverse range of actors – some providing services directly to consumers, others providing support services to financial service providers themselves, and still others contributing to ensuring an enabling environment – all of whom, together, create the market system. Increasing access to financial services starts with recognizing that the financial market system is complex, and requires greater understanding of how the poor currently use financial tools, how better tools might benefit them, and their barriers to access and usage.
There is now broad consensus that a range of services is needed to meet the many and varied financial service needs of the poor. Stakeholders are also beginning to acknowledge that many of these needs are met by a spectrum of providers, from informal moneylenders and deposit collectors, to development-led initiatives such as savings groups (SGs) and self-help groups (SHGs), to local Savings and Credit Cooperative Societies (SACCOs) and MFIs, to, in some cases, regulated banks. Financial sector surveys such as FinScope, the Global Findex Database, financial diary studies, and others, are showing the significant role that informal and community-based providers play in the financial lives of the poor. Nevertheless, many stakeholders contend that ex