Under the overall theme “Balance for Better”, the 2019 International Women’s Day campaign affirms that “Balance is not a women's issue, it's a business issue”. No truer words were spoken about the complex network of connections that links microfinance, women’s empowerment and the wellbeing of entire communities.
Microfinance is known to be effective in lifting people out of poverty, but aggressive practices by some commercial lenders has led to distortions in the past. Since the early 1990s, Village Savings and Loans Associations (VSLAs) and other community-level savings groups have provided a balanced and effective path to financial inclusion. Members of these groups gather at regular meetings to contribute a fixed amount of money and the total pot is assigned in full to each member in turn. They can also decide to contribute more than the agreed minimum and can take a loan from the group without having to wait for their preassigned turn. These loans are charged an interest rate, so that the money deposited by group members can earn interest. Savings and loan repayments are kept in a group lockbox that can only be opened at group meetings and “shared out” among members at the end of a predefined cycle. Once they are established and are functioning well, savings group can “graduate” and access formal financial services provided by microfinance institutions (MFIs). These allow the groups’ financial activities to be brought to scale and provide much needed long-term stability and predictability.
Savings groups have been hugely successful, particularly with women. They have spread to virtually all developing countries and expanded their scope from savings and loans to insurance and even pension/social security for members. At institutional level, several countries recognised these groups as the primary mechanism to lift people out of poverty and mainstreamed them into national development policies.
Results from a large-scale study published by Yale University in 20171 show that the growth in financial inclusion leads to improved microenterprise outcomes and, critically, women’s empowerment. The study shows strong links between women’s increased access to financial services and their self-reported influence on household decisions, particularly in relation to food expenses for the household, education and healthcare expenses for the children, business expenses if the household operates a business, and the their ability to visit friends.
Furthermore, children of female savings groups members also reap the benefits, as there is an increased likelihood of full-time school enrolment and lower drop-out rates. Studies show that new incomes generated from microenterprises are often first invested in children’s education, particularly benefiting girls. Households of microfinance clients appear to have better health practices and nutrition than other households.
Through its network of partners in over 20 countries around the world, Opportunity International UK support female entrepreneurs and their savings groups through the provision of financial services and a range of educational and skills development activities. For Opportunity, balance is not a women’s issue – it is definitely a business issue.
Caroline, owns a fruit and veg stall in Kampala. Here she is with her granddaughter Grace and loan officer. After a large market fire burnt down her stall, Caroline was able to rebuild it thanks to the support of her savings group and Opportunity International. She can now also pay for her grandchildren’s school fees. (Credit: Helen Manson)
1Karlan, D., Savonitto, B., Thuysbaert, B., & Udry, C. (2017). Impact of savings groups on the lives of the poor. Proceedings of the National Academy of Sciences of the United States of America, 114(12), 3079-308