Savings Groups: What Are They?

This paper explores the nature of savings groups (SGs) and the different approaches that facilitating agencies (FAs) and projects use in Africa.

SGs have emerged as an alternative, decentralized, non-institutional savings-led approach in response to widespread financial exclusion. They have evolved specific technologies in which members provide their own savings and credit services at negligible cost, while retaining earnings and capital within their own communities. SG projects:

• Consist of members who save together, lend their savings to each other with interest and share profits;
• Are simple, transparent and autonomous;
• Often complement existing regulated formal financial institutions services;
• Reach people who have been completely excluded from access to financial services;
• Are catalysts for enhanced social capital, improved gender relations, womens leadership, and community social and economic development;
• Have consistently demonstrated the power of saving;
• Are achieving rapid growth and increasing in number and scale.

In the future, the sector will be exponentially larger, perhaps more sophisticated, and probably less standardized than it is at present. Many savings groups will offer a more varied set of products, and be increasingly involved in inter-institutional relationships and social action.