The Savings Groups Revolution Financial Inclusion without Financial Institutions

What if it were possible to achieve financial inclusion without financial institutions? This paper explores how small groups save and make loans to each other without the involvement of microfinance institutions, banks or credit unions. Thus the title: “Financial Inclusion without Financial Institutions.” The surprising finding is that while 190 million clients receive financial services directly through financial institutions, between the Self-Help Groups of India and the Savings Groups of Africa, more than 100 million villagers access financial services through groups trained by local NGOs involved in fields as diverse as health, agriculture and literacy— not finance. And since the NGO’s task is to train groups until they can operate independently, the difficulties encountered by MFIs in terms of managing and securing funds, operating according to regulation, controlling fraud and recovering loans, become irrelevant as each group administers its own fund. The second part of this paper shows how Savings Groups can serve as platforms to transform village economies at minimum cost through their empowered members taking the lead in development initiatives. In Africa, as in most of the developing world, microfinance reaches few of the hundreds of millions who live in villages, except for densely populated Bangladesh, India and Indonesia. Yet, in just six years, Saving for Change (SfC) in Mali is serving 388,000 women living in more than 4,500 villages, nearly half of the villages in the entire country. This program is witness that financial inclusion at national scale is possible even under the difficult conditions of rural Mali. SfC members in Mali are illiterate, most live on less than a dollar per day, and many walk more than an hour to reach a paved road or a market.

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