Banking on Change Helps the World’s Poorest Save $34m

By Laurie Lee, CEO, CARE International UK

Banking on Change Helps the World’s Poorest Save $34m

More than 5,000 informal savings groups have been linked to formal banking sector

Six years ago CARE undertook a pioneering partnership called Banking on Change with Barclays and Plan UK that has since helped more than 758,000 people, who typically live on less than $2 a day. In the past 3 years, we’ve supported 400,000 people (of whom 73% are women and 44% are aged under 25) to mobilise an astounding $34 million in savings.

Banking on Change took a savings-led, rather than credit-led, approach to microfinance. I saw first-hand in Kenya how it helped to establish community savings groups where members can save and lend together, while also providing in-depth skills training to provide members with the skills they need to manage their finances and start small businesses. As a result, the partnership has been able to reduce poverty, increase social equality, and encourage sustainable economic growth in communities across seven countries: Egypt, Ghana, India, Kenya, Tanzania, Uganda and Zambia. It is the first partnership between a global bank and international NGOs to successfully link informal savings groups to the formal banking sector, bringing societal and economic returns for all involved.

Throughout the partnership all three organisations worked to create really robust monitoring and evaluation systems that really sought to measure the impact of the programme. As such, we’re able to say that as a result of the skills learnt through Banking on Change:

  • Group members typically increased their weekly savings by 31% after their first year in the savings group
  • Since 2009,
  • Over 116,000 new businesses have been established, more than half by young people
  • Over 5,000 savings groups – representing approximately 125,000 individual members – have linked to formal banking products. At December 2015, groups had over $1 million in savings deposited in bank accounts.
  • Women and young people have said they feel more respected and valued, and are now able to influence community and household decisions
  • Members have been able to go on to open and maintain personal bank accounts, showing that savings groups provide an effective path to full financial inclusion
  • Group members experienced falling levels of poverty, increased profits from small businesses and improved access to education, healthcare and food

The partnership has broken down the barriers to financial inclusion, a problem faced by an estimated two billion people worldwide, including two-thirds of adults in most developing countries. Crucially it has clearly demonstrated that regardless of background, no one is too poor to save. Across the world there are 11.5 million people actively participating in informal savings groups which, if given the right tools and support, represent a stable and secure springboard from which poor individuals can start their journey to financial inclusion.

The savings revolution which has taken hold in millions of saving and loans groups across Africa has been proven as a viable poverty fighting approach to tackle the problem of financial exclusion which traps so many people on the margins of society (as noted in a recent staff paper at the IMF). It has been led by women, who have shown that weekly savings of pennies can lead to impressive savings that can kick-start someone’s future.

The crucial next step is ensuring that those who have taken huge strides to demonstrate they can accumulate savings and start businesses are appropriately supported by financial institutions to take the next step to formal banking. That’s why Banking on Change pioneered the Linking for Change Savings Charter.

The Linking for Change Savings Charter sets out international principles to enable financial institutions to effectively and responsibly link informal groups of savers to formal banking products and services. Already signed by 30 organisations, including Airtel Money Africa, Barclays, Fidelity Bank Ghana and Visa, the Charter calls on leading organisations to support or adopt the principles and to inspire further action by banks, governments and NGOs that increases access to financial services.

Ensuring the Banking on Change reached young people was also a crucial goal for us. We’ve seen that young people want to save for their futures; they simply need the right tools and encouragement to do so. The youth savings group model sets out how the tried and tested savings group approach can be adapted to work for young people. Our hope is that the youth savings group model will serve as a tool for practitioners to scale up financial inclusion for young people. Don’t believe the myths – young people can save, and youth savings groups can help them prepare for their entry into the global economy.

The legacy of the Banking on Change partnership can be seen through the flourishing of products and services that are now available to group savers. Insights from the new State of Linkage report tell us there are now 106 savings and credit products offered by 95 financial service providers across 27 countries. The Banking on Change partnership commissioned this report, in order to understand the scale of linkage and to support the Linking for Change Savings Charter. It is heartening for the partnership to see this progress flourish beyond their own work, as banks and micro-finance institutions embrace the business case for providing services to informal group savers and continue to grow their products to meet this market segment.

Banking on Change made a lasting change for those on the ground who went from saving their own tiny sums of money to supporting their families in a lasting and a sustainable way. But it also undoubtedly changed the business we partnered with too. Based on Banking on Change, Barclays Uganda decided to make saving and loan groups part of their target customer market and develop a commercial strategy to reach them, and by adhering to principles promoted in the Savings Charter, we are confident that this will allow those who have taken fledgling steps out of poverty to reach the crucial next stage of financial inclusion.

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