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More Than Just a Place to Save
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The Sweet Taste of Savings in Nicaragua
From Savings Groups to Bank Accounts
How Do Savings Groups Work?
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The Key to Sustainability
While not a magic bullet, a sturdy metal savings box with three keys can have a surprisingly profound impact. For Trickle Up, integrating all program participants into Savings and Credit Groups has been a highly effective way to address several key needs of the very poor:
In recent years there has been an increasing recognition that, like any other population, the very poor need financial services. These needs are not being met by most microfinance institutions. The poor need access to very small amounts of credit to help smooth incomes, meet predictable expenses, and cope with shocks and emergencies, although this is rarely available at reasonable rates. For example, quick access to a small amount of credit or accumulated savings to pay for a health emergency can enable a farmer to defer selling or pre-selling their harvest, instead of having to sell at a time when prices are higher. With more stability in their cash flow, people can make better choices about their health, education and nutrition, while also investing in income generating activities.
How do Savings Groups work? They are voluntary, community-based and self-managed groups of 15 to 25 individuals who meet regularly to contribute to their own savings. Savings are maintained as a loan fund from which members can borrow in small amounts. The group decides the terms by which members may borrow, and often set a maximum ratio of loan size to a member’s savings. Almost all savings groups charge a service charge (interest rate), determined by the members. Groups elect officers democratically, and rotate every few years. Records are kept in individual pass books or by a paid accountant, and participants earn between 10 and 40% a year on their savings. In some regions the savings groups open a bank account, although in others the cost and distance make this undesirable.
Savings Groups provide important financial services, but also have a powerful social impact. Participants take great pleasure in being part of a group, and receive the social and financial support they need to move forward in their lives. Seeing their own success and that of their peers, they are inspired to earn more, save more, and fulfill their dreams of providing food for their families, sending their children to school, repairing their homes, and taking control of their lives and their futures. It is a long-term, sustainable solution which plays a central role in the efforts of the very poor to improve and stabilize their livelihoods.
Trickle Up Savings Groups Quick Facts: