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Beyond Financial Services - The Permanence and Value of Savings Groups in CARE's COSALO Programme  Image

Promoting Inclusive Markets and Financial Systems

Beyond Financial Services - The Permanence and Value of Savings Groups in CARE's COSAMO Programme

Beyond Financial Services - The Permanence and Value of Savings Groups in CARE's COSAMO Programme


This study is one in a series being supported by the Aga Khan Foundation examining the use of Savings Groups (SGs) as platforms for other development activities as well as the linkages of SGs to other programmes or agencies. It is based on field work carried out among groups formed by CARE’s Community Savings Mobilisation project (COSAMO) in western Kenya, from March 8 to 16, 2010, by two expatriate researchers and a team of four young Kenyan interviewers with the support and participation of CARE/Kenya.

The COSAMO project, a component of a larger USAID project, covered six areas of Nyanza Province in western Kenya, which is one of the poorest regions in the country and home to the highest prevalence of HIV/AIDS. COSAMO lasted from 2004 until 2008, and then was effectively abandoned by CARE.

The study was originally designed to examine the development interventions brought to SGs that had been formed, trained, and then graduated from COSAMO, two years or more before the study. After the study’s design was nearly complete, a second objective was added: to shed light on the question of how well groups survive after they are left to operate autonomously. This survivability objective gained importance after a recent, still unpublished study of other COSAMO groups had found a high percentage of groups that were no longer functioning, or no longer following the SG methodology that CARE had taught them.

Instead of attempting a sample of groups scattered across a wide geographic area, the research team set the objective of conducting an exhaustive study of all 50 groups reported by CARE as having been trained in Rachuonyo District—a mostly agricultural area, with a significant minority of members earning their living from fishing. Rachuonyo is also among the areas of Kenya most strongly affected by the HIV/AIDS pandemic.

Since it was not known what sort of linkages or what levels of survival would be found, the researchers opted to use a structured conversation format for interviews so as not to prejudge or influence respondents who might be tempted to look for so-called right answers with a traditional formal survey tool.

In the course of studying group survival, researchers realised that the simple question of whether groups trained by COSAMO had survived was not sufficient to capture the complexity of all that had happened since COSAMO ended. Instead, the study was expanded to examine two additional questions: 1) whether group members continued to have access to financial services, even if their group dissolved or they had left the group and 2) whether the idea of SGs had taken root in the local culture.

Concerning group survival, and in contrast to the unpublished study mentioned above, the team found that all but one of the original groups had survived. While the team was not able to determine to what extent all of the groups were following the COSAMO approach, the researchers encountered a wide variety of variations on the theme of SGs, including a ‘regressive’ method of carrying out the annual distribution in which each member received his or her individual savings, plus all of the
interest that the member had paid on any loans taken.

The study also found that group members had gone on to establish a large number of additional groups in at least four ways: through (1) the fission of large groups into smaller units; (2) splintering, in which some members leave one group to form another; (3) social entrepreneurship, in which dynamic individuals, enthusiastic about the SG concept, create new groups; and (4) ROSCA upgrading, in which SG members who are also members of merry-go-rounds, or ROSCAs, teach the members of the latter to adopt SG practices.

The team found that value-added activities - the use of groups as platforms for other services, or the linkage of groups to other institutions - were widespread, varied, and held by many members as an important reason to belong to a group. For some, but not all members, the value-added activities appeared to be more important than the financial services; given that the expectation was that most value-added activities would be initiated by external agencies that saw the groups as convenient
ways to reach large numbers of rural Kenyans, the research discovered that the groups themselves had originated most value-added activities.

To understand the variety of activities in addition to saving and lending in which members are involved in their groups, the researchers classified groups as having added value through five ‘pathways’: 1) activities and benefits brought to the group by an external agency; 2) links to an external agency initiated by the group; 3) income-generating activities run by the group; 4) financial assistance or other social support offered to group members by other members, often in the form of a group-managed social fund; and 5) groups reaching out into the community to help others in need so that members move from beneficiaries to benefactors.

During the course of this research, the team uncovered evidence of the extent to which groups are important to members; some groups invest in activities such as purchasing group uniforms that are not immediately productive, but are designed to increase the value, identity, or permanence of the group itself, while many people have joined multiple groups to increase their social safety net or their business or social networks.

Since all of these activities were instigated by the groups themselves, there is a large diversity of initiatives and it is therefore difficult to draw sweeping conclusions about their impact. However, the researchers believe that the benefits of many of the activities, particularly group income-generating activities, lay more in reinforcing group cohesiveness rather than in the success of the activity itself.

These findings, particularly the social dimensions of group activities, have implications for on-going research and for training new and existing groups. While financial activities may an important component of group operations, this study demonstrates that there may be elements considered more valuable than merely saving and borrowing.

Brief also available.

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