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THEME: Systematic savings by women's groups is essential for making sure that such groups become sustainable and for ensuring good loan repayment rates.
An IFAD project in Nepal had foreseen that women's group savings would serve two important purposes:
- savings would encourage cohesion among the women group members
- savings would serve as a reserve for repayment of loans from financial institutions.
The
IFAD mid-term evaluation carried out in 1996 found that total group savings
had increased almost fourfold over a period of a year in the project area.
However, this was at least partly, if not largely, due to the very rapid
increase in the number of credit groups during that period and the recent
nature of savings promotion. Some of the findings of the study about why
women save, and the use of savings, were surprising.
Even though the group members were poor, women in about half the existing groups were found to contribute a fixed amount of savings on a regular monthly basis. The amount saved by each woman ranged between NRs. 5 to NRs. 30 per month. Most women felt that savings was an important and useful activity of the group. However, the emphasis on savings was not uniform among the groups. Also, the extent of savings decreased over time among women savers. A major cause of the decline was the disintegration of the majority of groups once they have repaid their first loan.
The evaluation also found that that the motivation for savings was not as expected:
- Savings were motivated by the administrative requirement for savings rather than by any interest in saving for loan repayment, or, a desire for establishing a capital base for future investment.
- The interest rate did not provide an incentive for savings: interest earnings from group savings deposits were 7-8% whereas the rate of inflation at the time of the evaluation was 12% and interest rates on the informal market were at least 36%.
- Half of the women did not even know the purpose of the group savings scheme.
- Only half of the group members knew that they could borrow from their group savings.
- Very few women had actually withdrawn group savings in practice.
- When women had drawn on savings, they spent the funds on emergency consumption needs or on social occasions.
- Very few of the women use such savings for repaying their loans in spite of most loans being in arrears.
- Field staff did not encourage women to invest their pooled savings in productive activities.
Clearly these factors demonstrate both a poor understanding of group savings and a lack of appreciation of what could be done with savings. It would be unfair to blame women group members since it was the project responsibility to make sure that women were provided with such information. The IFAD evaluation recommended that, in the future, two of the selection criteria for assessing credit worthiness of groups, should be regular member contribution to group savings (for at least 10 out of 12 months), and willingness to borrow from group savings, prior to seeking formal credit.
Systematic savings by women's groups is essential for making sure that such groups become sustainable and for ensuring good loan repayment rates. These are areas where improvement was very much needed. Regular savings is also valuable in developing an informal rural financial system which can be of great benefit to women. Such group funds can supply emergency consumption needs, without their resorting to high-interest moneylenders, and provide women with a source of funds for making small investments in production activities. While savings potential has been demonstrated, the activity has clearly suffered from lack of field staff support and from inadequate provision of information for women group members.
Adapted From:
IFAD/OE, Production Credit for Rural Women: Interim Evaluation, Main Report, Rome: IFAD, February, 1996.
