In recent years, the potential of microfinance as a tool for poverty alleviation has been increasingly recognized. Hundreds of millions of the worlds poorest need access to financial services whether to access loans or to safely save small amounts of money. However, mounting evidence from the field has shown that too much focus on the provision of credit has led to excessive debt burdens and repressed growth. As a result, many governments, donors and NGOs are now advocating a more balanced approach to financing poverty alleviation efforts that places savings and other financial services in the forefront of credit.
Critics often say that the poor are too poor to save; yet empirical data contradicts this point-of-view showing that everyone saves, including the poor. Though not always apparent, the poor save in many different forms, in kind and in cash, to meet their daily food consumption, education, and health care needs or to invest in small businesses. However, the poor frequently have more difficulties in accumulating capital than the better-off since they are more vulnerable to risks from bad weather or poor health, and have limited access to markets and safe saving facilities.
Group saving approaches have had notable successes when they are responsibly managed, and when the savings are felt as an asset by their members. Many of these successes have occurred when women have been significantly involved in their constitution and management, as has been seen in the case of the Grameen Bank experience in Bangladesh. By providing a means to safely pool their savings, these approaches can help the poor and disadvantaged accumulate productive resources more efficiently. Group savings also help build solidarity among members and provide a safety net against exploitative moneylending. Ample evidence of this exists in the widespread use of informal and formal group saving approaches around the world: rotating savings and credit groups, savings clubs, village banks, credit unions, and so on. The fact that they must be essentially self managed, gives the opportunity to generate group self-confidence, the first step towards sustainable poverty elimination.
We hope that this resource book on group savings will prove useful to those engaged in strengthening the self-help capacities of the poor, and by doing so, help the poor build a better future for themselves, their families and their communities.
FAO Rural Development Division