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Day One in Arusha: Savings groups and poverty downreach

by on Oct 5, 2011  |  posted in Savings  |  0 Comments
[caption id="attachment_350" align="alignleft" width="300" caption="The road to Arusha, Tanzania. | Image by Kat Stan"][/caption] In the afternoon of the first day of the Arusha Savings Groups Summit, I participated in a small group discussion about the poverty levels that savings groups are best suited to, and the levels that savings groups reach among their members.  As facilitator of SEEP’s Poverty Outreach Working Group, this was one of the sessions I was most excited for out of the whole conference.  The discussion was divided into two segments, outreach and impact.  Essentially it boiled down to there being two approaches to reaching the ultra-poor with savings group: targeting and trickle-down. In the first approach, the ultra-poor are targeted specifically for the formation of savings groups. The targeting is often geographic—practitioners choose communities on which to focus based on government-established, national-level poverty rankings. The second approach assumes that if savings groups are introduced to a community, there will be early adopters who are more willing to accept risks and have greater capacity (i.e. more capital) to save.  Once these groups have taken hold and are proven to be successful, others in the community will join in, in order of increasing vulnerability, until eventually, the poorest—with less to save and more risk to take—will join in. One excellent example was given of a program in Tanzania (I missed the name) that followed the second model with a twist: their savings group model included educational opportunities around financial literacy and health topics. The groups were open to everyone in the village. At first, those who were least risk-averse and had more to save joined in. Gradually, more people learned about the education programs and started showing up. They were let into the group even if they were not saving any money.  Eventually, the poorer group members, through association with and support of other members, found ways to start saving small amounts and became full members.  These themes of the importance of solidarity, support, and community building, have come up over and over in this conference. While I did hear several examples of programs directly targeting the very poor (mostly through geographic targeting), most people I heard from and spoke to used the market saturation approach to reach the ultra-poor.  Furthermore, many people who did use this approach admitted it was likely that the poorest of the poor were still excluded.  I will give some of the reasons for this in a moment. I later posed a question during a large group plenary about whether or not there is an inherent conflict between downreach to the ultra-vulnerable (including the ultra-poor, handicapped, geographically isolated, etc.) and scalability. Each of four panelists addressed the question. There was a general consensus that market saturation was the predominant approach used to reach the ultra-vulnerable. Again, the theory behind this is that building a high number of savings groups in a village or region will inevitably include nearly everyone, including the poorest. However, panelists agreed with participants in my small group discussion that this model for reaching the ultra-poor might not be highly successful; it’s just not known yet. One of the primary reasons is that the poorest simply do not have capital to save.  A solution to this is using the subsidy model to provide cash or in-kind transfers to “jump-start” savings for the poorest. These subsidies would be funded by fees paid by members of other savings groups. This is a controversial topic, but not an uncommon model.  Private school and higher education in the U.S. works this way; tuition rates are inflated so that that those who can afford the full tuition can subsidize scholarships for those who cannot afford it.  Taxes often work this way as well. To me there are two questions to ask: 1) Is this fair? 2) Will it work or will those providing the subsidy be driven away by fees? What do YOU think?  ___
For more liveblogging of the Arusha conference, check out Savings-Revolution.orgTo 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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