Microfinance in action: Savings group empowering Ugandan women

World Vision staff member Mark Harwood recently went to Uganda, where you sponsor a child. We thought you might be interested in what he saw there.

It seems so easy to complain about banks these days. At times I find myself questioning their excessive interest rates and astronomical profit announcements each year; but globally, accessing a formal financial institution is a luxury affordable to very few.

Try to imagine your life without banks. If, like me, you were born in the 80s, you would need to remember back to your pre-Dollarmite days in early primary school when you kept your pocket money in a shoebox hidden beneath your bed, out of harm’s way from curious siblings and a hungry labrador named Tumble.

Other than a shoebox, where would we store our savings? Would we be disciplined enough to save if we used an entirely cash-based system? Imagine if you were paid each month in cash, there was no direct debit, credit cards, or internet transfers! And from whom would we access credit in those times of need?

In many of the areas where World Vision works, there is a lack of community access to banks due to geographic remoteness or the high cost and perceived risk of operating a formal institution for the very poor.

Recently I attended the inspirational weekly meeting of a women's savings group taking place in the World Vision Australia-funded Area Development Program (ADP) known as Kalongo in the Nakasongola region of Uganda - a very bumpy four-hour drive out of the capital city of Kampala (especially in a two-wheel drive).

The World Vision Saving Group model focuses on savings as accumulated capital, generated by the group members themselves. It is not credit provided by someone outside the group at an interest rate that usually significantly exceeds the ones we are so quick to complain about here in Australia. Such a group within a community facilitates savings, insurance and credit services, in a small-scale and sustainable way to members who are traditionally outside the reach of formal financial institutions.

This small group of proud and empowered women from the Ugandan village of Kalongo ranged from young mothers in their 20s through to great-grandmothers in their 70s. The Chairwoman told me how they had already saved a total of $500 USD in three months. They couldn’t stop smiling as they explained that already their individual savings exceeded anything else they had saved previously and some shared with me their individual visions for how they will invest their savings in their family's future such as children’s schooling, improved nutrition and household repairs such as roofing and flooring so their children wouldn’t get sick as often.

As part of the model, the group’s savings can be lent internally to members with interest to earn additional income. Members can also request an interest free ‘welfare loan’ if the group collectively agreed the need warrants it. One woman was quick to raise her hand and explained how her children needed school books and she was embarrassed that she couldn't provide them. The group members agreed to provide a welfare loan to this woman – I noticed the flicker of a proud smile for just a second on her face.

Later, other members took out small loans from the kitty at a previously-agreed interest rate for investment purposes to expand their small livelihoods by purchasing additional seed or fertilizer to increase yields.

The process is well-documented, from where each participant sits at each weekly meeting, through to how much interest will be paid on internal loans and the repercussions for not repaying a loan.

For these women, this savings group is so much more than just their community bank – it provides them and their families greater choices in their day to day lives and an opportunity for a brighter future. It was remarkably refreshing for me to hear from the savings group members how thankful and appreciative they were of their ‘bank’. It’s something I am certainly going to be more mindful of next time I am tempted to bank bash!

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