Savings Groups: An Inclusive Emerging Economy, With Africa in the Lead
Monday, December 1, 2014
At a time when news about Africa has been dominated by Ebola, it’s worth observing that a highly encouraging change has been quietly spreading across the continent. Over the past five years, the number of Africans — mainly women — who have joined village-based savings and loan associations has soared to more than nine million. These groups are now operating in 40 countries in Africa. Globally, it’s estimated that 10.5 million people are members of formally trained savings groups in about 65 countries. (PDF) The big story about these groups, including their surprising success and emerging importance in development, comes from Africa.
“A giant informal economic system is emerging invisibly,” said Jeffrey Ashe, a micro-finance pioneer and co-author of the book “In Their Own Hands: How Savings Groups Are Revolutionizing Development.” “We can think of it as the amoeba model of microfinance. It’s financial inclusion without financial institutions — and each group has the DNA within itself to self-replicate.” (PDF)
The story dates back to 1991, when a Norwegian, Moira Eknes, working with CARE in a remote part of Niger, found that village women needed ongoing access to savings and credit, but had few options. In West Africa, as in many parts of the world, locals had long participated in traditional rotating savings clubs (locally called tontines, generically known as Roscas).
Eknes helped the women develop a simple methodology that allowed them to transform the groups into a self-generating, self-managing form of microfinance suitable for their basic needs. The approach became known as the Village Savings and Loan Association (V.S.L.A.) model and it began to spread.