Informal savings mechanisms, often known as village savings and lending associations or savings groups, are used as a means to create safe places to save and borrow in areas that are typically not served by banks, including remote rural areas. Savings groups are self-owned and meet regularly to make deposits, which are then lent out, in whole or in part, to group members. Members receive regular dividends on their savings. Groups receive initial training in financial literacy and group management either from NGOs or volunteers from established savings groups, and become completely self-managed after the initial 8-12 month cycle.
Because of their simplicity, savings group models can be adapted and implemented by a variety of organizations and can serve to complement other types of programming, including health and nutrition, education, and economic strengthening. They are not limited to those with expertise in financial matters.
The primary difference between adult and youth savings groups lies in the types of training provided. Adults tend to receive only financial education, but the youth models show a broader range of training topics¾for example, life skills including health, gender, and communication¾as well as youth-oriented financial education. Youth savings group participants also tend to borrow less frequently.
Since the savings group model is simple and easily replicable, it can be implemented by virtually any type of organization either in the initial phases of a program or when a youth-serving organization (YSO) training program is under way.
Partnerships with savings group NGOs generally are short-term (less than one year), where the NGO provides initial capacity building to the YSO partner, who will then be tasked with adaptation, testing, implementation, and monitoring of the youth savings group model.
Due to their informal nature, savings groups are largely the domain of NGOs rather than typical private sector partners such as banks or microfinance institutions (MFIs). Plan Canada, Catholic Relief Services (CRS), Care, and Save the Children have all adapted savings models to fit the needs of youth, including rural youth and orphans and vulnerable children. These organizations partner with well-qualified local Christian-based organizations, YSOs, and NGOs, using a training of trainers (ToT) model, to build up capacity to adapt and replicate the model and provide facilitation/support to savings groups during their first 8-12 month cycle.
Aflatoun,a Dutch NGO, partners with schools, YSOs, and MFIs to deliver its Child Social and Financial Education (CSFE) program. Similar to the savings group model, the Aflatoun curriculum combines social and financial education together with different models of savings, including individual piggy-bank saving, group or school-based savings, and linkages to banks. Aflatoun uses a ToT model to train local trainers to both adapt and implement curricula.
All of these organizations are looking for strong, local partners who share the commitment to increase children and young people’s access to appropriate financial services. In most cases, these partners are looking to provide capacity building but often do not possess the funding to adapt and implement. As such, they rely on the local partner to provide funding and logistical support for both adaptation and implementation.
Savings groups have many advantages. They are simple and easily replicable and can be adapted for both literate and illiterate market segments. They provide communities without access to formal financial services with a safe means to save and increase their income. They are low-cost, generally requiring start-up training and one year of group facilitation and monitoring. They also help to build leadership skills, providing members the opportunity to manage their own savings groups and to establish interest rates and internal lending and collection policies. In some cases, they can also serve as a stepping stone to accessing formal financial services from banks or MFIs.
Savings groups may have a few disadvantages as well. Because they are self-managed, the success of the group savings and lending activities depends on the quality of training received and the group’s commitment to savings. Challenges include poor group management and insufficient savings for meeting the credit needs of group members.
Please see the Resources section to find useful tools and publications that provide practical guidance based on the experiences of the NGOs mentioned in this section.
In contrast to partnering with a bank or microfinance institution where the financial products remain under the control of the financial service provider, savings group methodologies are meant to be directly adapted and implemented by the partner youth-serving organization (YSO). This requires YSOs to possess the necessary capacity to adapt the methodology as well as implement and monitor it over time.
Young people, as the primary beneficiaries and managers of savings groups, should be involved in the design and adaptation of the model. This includes participation in focus groups to discuss financial habits and preferences as well as to review and test the model prior to roll-out.
In order to generate adult and community-level buy-in for youth savings group models, YSOs must involve parents, caregivers, and community leaders. This entails sensitizing adults to the importance of young people learning to save and involving these adults as active contributors to the design and implementation of the youth savings groups. Sequencing is also critical: It is important to generate buy-in from adults prior to involving the youth in the program.
In most cases, NGO partners offering capacity building for youth savings group models do not have funds for implementation and scale-up. As a result, partners should work together to seek funding to support these activities.
Please see the Resources section to find useful tools and publications that provide practical guidance on implementing the best practices mentioned in this section.
Making Cents International designed seven courses to support the development of YFS. These courses include useful tools and resources that can help a microfinance institution or youth-serving organization as it researches the youth market and adapts or designs a financial product for youth. The courses also address key challenges, including staffing for effective delivery of YFS.
Catholic Relief Services (CRS) published a guide for implementing its SILC methodology. It is not specifically tailored to youth, but it does contain a section on adapting the model for orphans and vulnerable children (OVC).
This CRS case studyshares its experiences adapting its SILC methodology to the needs of OVC participating in its Support to Replicable Innovative Village Level Community Efforts (STRIVE) program in Zimbabwe.
This case studyfrom Catholic Relief Services highlights lessons learned from its work providing an adapted SILC model for OVC graduates of a vocational training program in Rwanda.
Making Cents International published a case study with Save the Children highlighting lessons learned from implementing a savings group methodology as part of the Kishoree Kontha (Adolescent Girls’ Voices) project in Bangladesh. You can also visit the Innovations for Poverty Action (IPA)website to read an impact evaluation recently conducted for the project.
Making Cents International’s State of the Field 2010 in Youth Enterprise, Employment and Livelihoods
This 2010 State of the Field publication highlights lessons learned from different youth savings group models on pages 60-63.
This interview with FamariBarroof Plan USA discusses Plan’s experiences in adapting the village savings and lending associationsmodel for youth in Niger.
This Care Ishakavideo highlights success stories from participants in the Care Ishaka program in Burundi.
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