The New Microsavings: Community-Driven Lending

While microfinancial institutions in developing countries tend to fail without outside volunteers, microsavings groups owned and organized by the communities that use them are on the rise.


| November 2014



Nepalese craftswomen

For women in hard-to-reach villages, the ability to save money and take out flexible loans can be the difference between running a successful business and going hungry.

Photo by Fotolia/Aleksandar Todorovic

The need for a better system of saving and lending in developing countries is readily apparent—but microfinance continues to reach only a small fraction of the world’s poor. In Their Own Hands (Berrett-Koehler Publishers, Inc., 2014) is Jeffrey Ashe and Kyla Jagger Neilan’s illustration of how microsavings groups, formed and operated by their members, can answer that need. More than a financial benefit, microsavings groups offer political and social empowerment to the women who organize them, giving them greater autonomy as well as a way to save money and provide for themselves and their families. The following excerpt from chapter 3, “Dependency is Not Empowering,” describes Ashe’s first experience with microsavings in Terai, Nepal.

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It was the year 2000, and I was attending a microfinance conference at Brandeis University. After I gave my talk about a program in Burkina Faso that I had just evaluated, Marcia Odell, at the time the director of Pact’s Women’s Empowerment Program (WEP) in Nepal, walked up to the podium, and with a voice filled with passion told of a dramatically different approach to financial services for the poor. Pact’s WEP initiative made it possible for small groups of village women to pool regular savings into a usefully large fund they managed themselves. They could borrow from that growing fund as they needed. A better way to save and borrow was being delivered in a simple, low-cost, replicable, and (as I was to learn later) self-replicating package. Marcia’s talk was the beginning of my journey of transformation from microcredit to microsavings, and I never looked back.

I felt compelled to evaluate Marcia’s program to better understand its approach and impact. One hundred and thirty thousand women saving and borrowing in a year—how was this possible? I pulled all the networking strings I could, and with support from Pact, USAID, and Freedom from Hunger, I finally secured the funding I needed. I had been a consultant to Freedom from Hunger for years, and they, like me, were interested in savings. Lisa Parrott, Freedom from Hunger’s technical advisor in microfinance, also joined me in conducting an evaluation of WEP’s savings group model in Nepal. Lisa and I visited Nepal three times, devoting a year of our lives to learning about and critically understanding savings groups. I had found my calling.

Pact’s Women’s Empowerment Program in Nepal

We first arrived in Katmandu during the monsoon. Driving out from the city to the lowlands on the border with India, we watched out the window of the car as we descended down treacherous Himalayan roads into the open wetland valley—Nepal’s Terai region and its thousands of villages. Our process was simple. Pact’s senior leadership in Nepal introduced us to the local NGO staff that directly trained villages on the savings group model. We visited WEP groups each day, and Lisa and I, with one or two of Pact’s staff to translate, observed the WEP groups’ regular meetings. After the meetings, Lisa and I spoke with the groups and asked questions.

We interviewed two to three groups per day, in school buildings, on porches, or in courtyards of houses of better-off group members or community leaders. Each night, Lisa and I and the small WEP team traveling with us reviewed what we learned over sweet buffalo-milk tea, momos, and dal. From these visits, we learned the basic process group members used to collect savings, ask for loans, and record transactions. Sometimes we dropped into villages by surprise and pulled together meetings to ensure that we did not just see the preselected, cherry-picked groups. It was encouraging that these groups also worked quite well and operated by the same principles.