Finance Isn’t Just for Fat Cats

Nina Beina on the land she bought for her children, with the help of a loan from a microsavings group.Credit Tyler Pager
Nina Beina on the land she bought for her children, with the help of a loan from a microsavings group.Credit Tyler Pager

Nina Beina, a widowed mother of 11, couldn’t wait to give me a tour of the land she had just bought. She beamed as she showed me the site where her children will build their homes.

Ms. Beina isn’t a real estate mogul, and like most people here she has no access to banks or formal loans. But she was able to buy the property through a program arising from one of the hot ideas in the global fight against poverty — microsavings. With the help of Catholic Relief Services, an international humanitarian organization, Ms. Beina and her neighbors recently started their own savings group.

The idea is that villagers gather regularly and deposit tiny sums — often less than a dollar — into a pool, which is then lent to a member of the group. The loan is paid back over time, and it is often used to help people start small businesses. For Ms. Beina, the new land for her children will give her more space in her already overcrowded home.

For vulnerable populations, especially women, “it empowers them to save,” said Laura Dills, who oversees a range of Catholic Relief Services’ programming, including the organization’s microfinance efforts. “We’re actually building that capacity to go after loans in a very safe setting that’s not going to risk any of their assets.”

Some years ago there was a great deal of excitement among philanthropic groups about microlending, but that has worn off a bit. Meanwhile, it seems that microsavings may be the more important part of microfinance. Those savings are then used to make loans as well.

Research shows people living in poor households want to save money, and savings groups positively impact household business outcomes and women’s empowerment. Savings groups are also particularly efficient because they don’t involve outside capital and have lower barriers to entry for members.

Meeting women like Ms. Beina made it apparent that these savings groups can make a substantial difference for people, especially women, in incredibly difficult circumstances. They provide critical opportunities to some of the world’s poorest communities where access to formal financial institutions is nearly impossible.

This is particularly true in Boda, a town that was overtaken by fighting in 2012, where, for many, resources such as markets and schools are still difficult to access. Ms. Beina, for example, hasn’t left the small Muslim enclave where she lives for the past five years. A convert from Catholicism, she was caught in the middle of the conflict that broke out along religious lines. Though the fighting has subsided, Ms. Beina still worries about her safety.

But because Boda is no longer considered an emergency zone, the number of aid organizations here is dwindling. As aid groups move on from Boda, savings groups present a sustainable solution. Not only are the costs required for training the groups quite low, but also the members often continue the savings groups beyond the nine-month period during which aid workers provide support.

Besides the economic benefits they produce, savings groups also have benefits for social cohesion, particularly in post-conflict areas.

“It creates solidarity,” Ms. Dills said. “You’re not going to lend money to people you don’t know.”

In Boda, Catholic Relief Services has initiated the creation of 120 savings groups with roughly 1,660 members. The savings have resulted in a variety of investments. Some, like Ms. Beina, have used the available capital to buy land and build homes, while others have enhanced their agriculture businesses by investing in gardening tools or more profitable seeds. Funds have also been used as capital to launch new businesses selling oil, spices or cassava, or to pay for medical expenses.

Catholic Relief Services has replicated this success worldwide: The organization has helped start more than 130,000 groups with over 3 million members. These groups, it says, have accumulated more than $22 million in savings.

Ms. Beina is already looking forward to her next loan. Once she finishes paying this one back, she plans to use her next loan to expand her crop production. Her main source of revenue — selling cassava — isn’t enough to support her entire family, so she wants to start selling more profitable goods.

Tyler Pager graduated from Northwestern University and is studying at Oxford University.

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