Savings Groups help easy access to credit

| Updated Sep 08, 2017 at 5:54am


Mr. Hugh Allen, Chief Executive of VSL Associate taking participants through a session


Mr Ishmael Otchere, CEO Microfin Consult leading a session
A microfinance group in one of their meetings
The establishment of Savings Groups has been described as a dynamic source of microfinance which acts as a major economic empowerment tool for marginalised people in developing countries. This is because the savings groups promote a savings culture among poor people and also enable them to readily access credit to meet their financial needs.

In Ghana, the savings mobilisation of about 18 thousand 600 Savings Groups is estimated at 35-point- six million dollars. The groups have a total membership of four hundred and 88 thousand. For West Africa, there are about 100 thousand Savings Groups with a total membership of two point four million people.

This came to light at the opening of a capacity building session on Sustainable Microfinance and Development Programme for Managers of Saving Groups from eight African countries in Accra.

Economic and Social Development Experts have over the years encouraged the formation of Savings Groups to help mobilise the marginalised to be economically active. The workshop on Sustainable Microfinance and Development Programme with support from Master Card Foundation has participants from Ghana, Sierra Leone, Nigeria, Cote D'Ivoire, Rwanda, Uganda, Zimbabwe and Mozambique. It is being facilitated by Hugh Allen, Chief Executive of VSL Associate in Germany and Ishmael Otchere of Microfin Consult, Ghana. In explaining the importance of the sector, Mr. Allen who has been associated with Saving Groups for more than 20 years said "Savings Groups instead of receiving outside finance from the bank or from a donor, mobilise their own savings and they use that to give each other loans and they charge interest on these loans. They decide what the interest rate will be and at the end of the one year cycle, all these money is paid back”. He added that “they share up the money among each other in proportion to the amount each one has saved”.

Citing the Ghanaian case, Mr. Allen added that “we find that the average group is earning above twenty per cent on the money that each member is saving. It is far more profitable than putting the money into a bank”. The individuals involved become economically independent as the system promotes self-confidence. They are also well-placed “to take advantage of the services of regulated financial institutions".

The Chief Executive Officer of Microfin Consult, Ishmael Otchere stressed the need to avoid bureaucracies which discourage the poor from dealing with the formal financial institutions. He said "in Africa alone, there are about twelve million savings Groups. These informal savings groups are able to mobilise almost one hundred and sixty two million US dollars every year. The challenge has always been that because they are more informal, they always find it convenient to do their own banking. This is because they find it difficult to go through the bureaucracy of the formal financial institutions”.

Mr. Otchere further pushed for “technology to be explored to enhance the financial inclusion of the poor.

Participants in the programme will be taken through basic training modules for field officers on Savings Groups, introduction to
performance management, programme design and linking Savings Groups to formal financial institutions.

Story: Bright Agamah