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Day One in Arusha: Common threads in financial services

by on Oct 5, 2011  |  posted in Savings  |  0 Comments
The first thing I wrote down at the Arusha Savings Groups Summit was this: “Financial inclusion can occur without financial institutions.” Throughout the day I got the impression that this quote was not new to many, and that it can be interpreted in several ways, depending on what you consider “inclusion” and whether “institutions” include the informal or just the formal.  By my interpretation, it reminded me of the idea I’ve always had that the best thing I could do in the development field would be to work myself out of a job. Megan Gash of Freedom from Hunger told me that over half of the savings groups that fall under FFH’s programming umbrella began as offshoots to groups that FFH had direct involvement in. That is to say that people liked them so much, they encouraged others to start their own savings groups without direct involvement from FFH.  How promising! Stuart Rutherford of “Portfolios of the Poor” fame (and other fame as well!) gave a great talk that set the stage for the rest of the week through his examples of people and groups he’s met with around the world.  I don’t want to call what he gave us a framework because to me, that word is just grad school theoretical mumbo jumbo—so I’ll call it an outline that provided some context.  He described three basic financial needs that everyone in the world has:

  • Managing day-to-day needs (i.e. food, clothing, shelter)
  • Dealing with future threats (i.e. emergencies, getting old, losing a job)
  • Accommodating large, known, future expenses (i.e. weddings, funerals, home purchase)
He then described what he saw as the four questions that can determine the effectiveness of financial programs:

  1. Does the program tool or facility help with turning small amounts of money into larger amounts of money?
  2. How well does the tool or facility help individuals to manage day-to-day finances (i.e. putting food on the table every day, not just on income-generating days)?
  3. Does or can the program provide assistance during emergencies?
  4. Does the program help build and provide access to large sums of capital for life cycle events (i.e. weddings, births, new homes)?
Stuart described a woman he met in Bangladesh who had no fewer than six financial schemes in her life—participation in a savings group, two microfinance loans, and provision to get loans from friends and family, among others. She was a planner; Stuart reminded us that many poor people are planners.  He reminded us that just because one is poor, it doesn’t mean their only thoughts are managing their day-to-day needs. Everyone faces emergencies, everyone has financial goals—or at least items or services that they hope to expend large sums on in the future. Later on in the day, I thought back to this tale—to this very poor woman, whose profession was ‘begging’ twice a week, but had a very complex personal financial management system. My initial impression of her situation was that the services providers in her area must be highly inefficient. But later as I was in a smaller group discussion, I looked around the room and considered the average number of financial instruments each of us must use. I am not a rich person relative to my surroundings; I imagine I don’t earn too much more (if anything!) than the average 32-year old living in New York City.  But after counting them up, I realized I personally have no less than 10 financial systems managing my resources, including student loans, credit cards, retirement accounts, insurance products, etc.  How complex is that?!  I also have no doubt that despite the fact that I am over-educated, I am much less thoughtful and sophisticated about how I manage my own systems than Stuart’s friend in Bangladesh. So I will pose the question I asked to this small group to the blogging world as I sign off and start writing Part II of Day One: Is the ideal financial instrument (savings group, MF loan, BDS training program, etc.) one that serves all of a participant’s financial needs? What do you think? I’ll tell you the answer I got from the savings crowd in the next post!

For more liveblogging of the Arusha conference, check out Savings-Revolution.org

To be a part of the savings revolution stateside, join us at the SEEP Annual Conference  in Washington, D.C. for a track of workshops and plenary sessions devoted to helping you learn how to reach the poor with savings services. 

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