This blog post originally appeared on the FSD Zambia Blog and shares thoughts from the Fail Fest session, "Savings Groups Warning! How to Avoid Failure!" at the 2016 SEEP Annual Conference
We are pleased to share it here with the SEEP Community.
Learning from failure.
In recent years community savings and lending groups, in Zambia called Savings Groups, have been lauded as the emerging opportunity to make financial services available in rural communities. These groups improve members’ ability to manage money and respond to unexpected expenses, enhancing their lives. Many donors and organisations, including Financial Sector Deepening Zambia (FSDZ), fund projects to expand the reach of Savings Groups around the world. I have spent twelve years of my career championing and improving this model, and I have seen great successes and frustrating failures.
This is one of the failures.
In 2014, I faced one of the greatest challenges as a Savings Groups advocate. I developed a proposal to deliver an impressive number of Savings Groups within three months of project start-up. The proposal theorised continuous growth from inception of the project to respond to donor pressure for early results. However, the proposal methodology failed to take into account the following factors: time needed for the project start up, monitoring and reporting setup, and the likely growth and acceptance pattern for Zambians unfamiliar with the Savings Group model.
With my ambitious proposal I obtained the funding from the donor agency. However, the programme was never able to reach the lofty projections, and underperformed on almost all quarterly targets! To make matters worse, I joined FSDZ, the organization that had donated the funds, and became responsible for supervising the project results. The project performance was under par for most of the period. Ultimately, this led to missing the quarterly FSDZ and donor targets.
The lesson learned is that donors and implementers alike need to understand the following two potential pitfalls for new projects:
- Do not compress the start-up period. Allow, minimum, 4 months preparation time for direct implementation, and, minimum, 6 months for implementation through a local partner;
- Savings Groups outreach does not follow a straight growth curve. Due to the demonstration effect, where people wait to see how the initial groups fare before forming new groups (which can take up to a year), Savings Group outreach follows a distinct overall pattern of slow initial uptake and accelerated growth once the demonstration effect comes into effect (J-curve). In addition, donors and implementers must take seasonality into account.
Respect start-up time and plan for the J-curve!
The animation shows the straight line ‘theoretical’ growth curve versus the J-curve that occurred in reality.
Guy joined FSD Zambia in February 2015 as Head of Rural and Household Finance, whose work is centred on savings groups, and also coordinates work with Mobile Money for the Poor (MM4P) on Digital Financial Services (DFS).
His career in development began at the United Nations Industrial Development Organization in Morocco, where he helped the government support private sector development through policy and by promoting small enterprise development and solar technology. He joined Catholic Relief Services (CRS) in 1996, first as Microfinance Program Manager in Lebanon, and then remained with CRS to take up various senior roles related to best practice in rural finance in technical, product development, advisory and training-based positions.
Fluent in Dutch, French and English, Guy grew up in Keerbergen in Northeast Belgium. He holds a Master’s of Science in Applied Economy from Belgium’s Katholieke Universiteit Leuven.