Women Savings Groups Can Enhance Financial Inclusion
Women can indeed lead the national savings agenda in Zimbabwe. Not only are women better savers, they are also proving to be better borrowers, despite having lower access to formal financial services compared to their male counterparts.
Most local studies and development programmes indicate that Zimbabwean women have gone quite ahead with savings mobilization, with women’s groups coming in various forms, such as Round Tables, Rotating Savings and Credit Associations (ROSCAs), Credit Co-Operatives, Internal Savings and Loan Schemes (ISILS) and so forth.
On the other hand, savings-led group lending models are one type of group lending arrangement that are being implemented by various women’s groups in Zimbabwe, with positive social and economic outcomes. The savings are being accumulated in informal mechanisms but a significant portion of the savings are now being kept in formal accounts with banking institutions. The funds , once accumulated are then lent out to qualifying members in accordance with pre-agreed rules.
How Significant are Women’s Savings Groups?
Savings led micro-finance have been very active in both rural and urban areas in Zimbabwe for almost two decades now. Some of the oldest groups date as far back as 1998.
Quite a number of these groups have been set up with the help of development partners, government departments and donor agencies involved in the promotion of Women’s Savings Groups.
The stated objectives of financial inclusion are to bring as much of the population under the ambit of formal financial services, by increasing access to financial services, improving financial knowledge and literacy and the overall financial capability of citizens.
Micro-finance has been traditionally identified as being able to enhance the lives of the poor and vulnerable, particularly women, by giving the access to ﬁnancial services, that are currently not yet available to them.
There is considerable evidence that women have less access to credit, however expensive it maybe, through the informal money market. The same is true for savings facilities that can be used by women.
Women and women’s groups thus have been forced into informal sector means of credit and savings such as Round Tables, Rotating Savings and Credit Association Schemes(ROSCAS), and Self Help Groups amongst others.
In other parts of Africa, the range of available formal market instruments for saving, with lucrative returns, is more limited.
Besley(1995) for example cites the case of “susu men” or informal bankers used by market women
in northern Africa. The women who deposit their savings with them ”earn a negative rate of interest in exchange for safekeeping.”
Therefore the traditional institutions like Rotating, Saving and Credit and Associations
(ROSCAs) which allow the women to save, can be harnessed to drive savings and also create opportunities for credit. The problem, has however, been the lack of universal access to these institutions by the majority of women. ROSCAs, for instance, are not as ubiquitous as the informal money management systems. Women therefore need to be encouraged to work together in groups , in order to create the capacity and scale required to mobilize a higher pool of savings.
These groups are usually modeled against common interests such as Church, trading markets, communities, villages, or women’s clubs or a trade association.
Successful examples such as burial societies or some other co-operative savings groupings are also being successfully used in Zimbabwe.
However, options for saving, with returns comparable to cost of borrowing in the informal money management structures remain limited.
How can these be improved ?
The question to be addressed is what interventions can be made by stakeholders such as banks, government ministries and women themselves to ameliorate the problems of access to financial services.
There are two obvious ways in which an intervention can improve the lives of women and the financially excluded. The string point is for innovation in the financial sector to bring down the cost of ﬁnancial intermediation associated with women and the marginalized.
Secondly, structures need to be created that allow women and the poor to obtain real returns from the process of ﬁnancial intermediation, particularly savings.
Practically, this would entail, not just giving the women access to credit, at rates lower than the informal money market rates, but also giving them options to save in the formal system, whilst earning returns comparable to the cost of borrowing.
What Are The Long Term Benefits of Group Lending Models
The current body of literature in microﬁnance suggests that institutional innovations, like lending to jointly-liable groups, has allowed women and the poor to get access to credit at favourable terms.
This allows them to invest in a greater range of socially viable projects, smoothen their consumption, and to a greater extent allows their overall incomes to rise.
However, the studies and literature, hitherto, has overlooked the obvious benefit of involving savers in group lending. Every person is a potential saver and there are distinct advantages our women folk in their role as savers in the economy. Apart from the obvious advantage of improving their welfare, there is, as we see in what follows, because of the organised nature of women’s groupings, the additional advantage of using them to solve the information assymemtry problems associated with lending to the poorer segments of society.
Women in many instances, often have no collateral to offer against their borrowings and, for obvious reasons lenders may feel that they bear very little liability of failure, when they borrow. Hence this has been put forward as one of the reasons why access to credit by women is generally lower.
Group lending methodologies resolve these problems by giving “the peers” ie group members, the requisite incentives to solve the informational problems associated with this kind of lending.
Conceivably, the sharper the incentives peers have, to screen, monitor and audit the borrowers, the easier it is to solve the informational problems. This is the foundation of peer group guarantees or social collateral.
Savings led group lending models are therefore a proving to be useful lending tool being implemented for the benefit of women’s groups in Zimbabwe. Under this model, the women members have dual roles as both borrowers and savers. The groups’ regular savings can be pooled in a savings account with a bank, and then subsequently lent out to qualifying members in accordance with agreed rules. The advantage of placing the accumulated savings with the bank before they are lent out is that the members will eventually be able to negotiate with the bank for additional funds, depending on how well organized they are and how they are managing their group or association. Leveraging these women’s associations or groups can certainly influence the growth of savings in the economy and boost the availability of credit services to deserving women.
Clive Mphambela is a Banker. He writes in his capacity as Advocacy Officer for the Bankers Association of Zimbabwe. BAZ expressly invites all stakeholders to give their valuable comments and feedback related to this article to him on firstname.lastname@example.org or on numbers 04-744686, 0772206913