Two birds with one stone; building resilience and community through savings groups

Ugandan money

Among the most powerful insights I’ve gained through my fellowship with Village Enterprise so far is an understanding of the complexity of what it means to live in extreme poverty. CGAP, the Consultative Group to Assist the Poor, says this about the extreme poor: “Food insecurity, unreliable incomes, and a lack of assets and land ownership are shared features of extreme poverty. Beyond “measurable” household characteristics, family dynamics with high dependent/earner ratios, poor access to social networks, and lack of self-confidence tend to mark the difference between the extreme poor and those somewhat better off.” Graduation programs like ours that offer a series of interventions delivered in an intentional sequence have been recognized as successful because they specifically address the needs of those living ‘at the very bottom of the pyramid’. Our Uganda country Director, Winnie Auma, frequently says that people in the demographic we work with do not need “light-touch” solutions — they need transformative and holistic interventions.

One of the interventions included in most graduation programs is encouraging a culture of savings. However, the mechanism used by different programs varies. Village Enterprise works with our participants to form self-managed Village Savings and Loans Associations that we call Business Savings Groups (BSGs). After nearly four months of meeting with our business owners — listening to their stories of transformation — I cannot imagine our program without this essential component. The capital, both financial and social, available to program participants through their BSGs is consistently cited as the most beneficial part of the Village Enterprise program.

A Village Enterprise Business Savings Group in Orkweswa Village

A Village Enterprise Business Savings Group in Orkweswa Village

Industry experts and program participants alike agree that two of the most challenging aspects of living in extreme poverty are an inability to weather crisis and a lack of social capital. Savings groups provide a solution to both. The savings that group members contribute each week are pooled in order to provide loans to members. This loan system provides families with access to funds needed to weather uncertainty. For example, one participant in Dokolo recalled a time when his child was sent home from school because he was unable to pay school fees during planting season when money was scarce. Because he was a BSG member, he was able to take a small loan and pay the fees immediately, which allowed his daughter to remain in school without causing financial disruption to his family. However, the value of the group goes often goes beyond financial risk management. “Being in a group has also brought unity to our community,” explains Ambrose, a business owner in the same group. “In case of an emergency we unite and take care of it as group.”

African children reading

Many of our business owners use their savings to pay school fees for their children.

This practice is not unique to Ambrose’s group. I recently met with a savings group in Okwangai village that continues to meet three years after having graduated from our program. “Even at a personal level, when a child is sick, it ceases to be a household’s responsibility,” one group member explained. “It becomes a group responsibility. Our group mobilizes and makes sure that the child has access to medical treatment.” Another group member adds, “Now we have a real community bond. There is love between us! There is friendship and there is sharing, all as a result of being in this group.”

The ability to weather financial vulnerability and gain access to community and social capital are deeply connected. The stronger the interpersonal relationships among group members, the more durable the safety net that the group provides. Cohesive savings groups will last longer and save more. The BSG I met with in Okwangai is now saving double what they saved in their first year of operation. That means twice the capacity to empower families to overcome crisis and improve their livelihoods.

We believe that strong savings groups are crucial to the financial success of individual members. To test this, Village Enterprise is completing a Randomized Control Trial (RCT) through Innovations for Poverty Action, which is measuring the marginal value of Business Savings Groups. While the RCT will provide essential concrete evidence on how much savings group contributes to overall success, I have been increasingly convinced that the true value of our savings groups to our members is immeasurable. There is a component of unity and love among our savings group members that transcends the realm of our program. By providing a functional solution, we are simultaneously investing in a social network, the benefits and value of which will last long after we exit a village.

When I think about the time I spent in Dokolo, Okwangai, and Koch Goma attending BSG meetings, I am inspired by the fact that long after I say my goodbyes and Village Enterprise graduates a new cohort of entrepreneurs and moves onto a new village, Ambrose and his group members in Dokolo will continue to meet each Tuesday afternoon. Every Friday, as the sun starts to set, a savings group in Okwangai will announce their weekly savings. And every Wednesday morning in Koch Goma, a community fostered by our program lives on. Now, that’s an exit strategy.

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