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Live Chat: Savings as a Path Out of Poverty, Tuesday at Noon ET
Microcredit may have won a Nobel Prize, but evidence is mounting that savings-based programs are more effective tools for providing a pathway out of poverty.
In this week's New America/Politico Live Chat, Jamie M. Zimmerman, New America's deputy director of the Global Assets Project, will be taking questions at Noon ET Tuesday on the role of savings in international development, from the United States to Mexico to Uganda. For background on this issue and some promising pilot programs, please see the video from last week's event, "Savings as a Tool for International Development."
UPDATE: This online discussion has concluded. A complete transcript is available below..
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Past Chats
Previous New America/Politico chats have their full transcripts archived:
- Schwartz Fellow Dayo Olopade on the Obama Administration's faith-based initiatives
- Education Policy Program staffers Lisa Guernsey and Christina Satkowski on the future of Head Start
- Health Policy Program Director Len Nichols on the current state of health reform
- Energy Policy Initiative Director Lisa Margonelli on the prospects for real progress with climate policy legislation.
- Schwartz Fellow Nicholas Thompson on Cold War lessons for Afghanistan
Who should offer savings services to the very poor
There is very little debate remaining about the importance of savings (especially for the poorest), but hardly any debate about how this should be done. The presumption seems to be that 'institutions' will somehow figure out how to do it, hand-in-hand with smart technology. But no-one seems to question whether or not the established players are properly configured to reach the bottom of the pyramid and, even if they do, to offer attractive returns.
In the light of the SHG revolution (and the emerging work of CARE, Oxfam, CRS, Plan and a myriad of local agencies in Africa, promoting community-managed approaches), is it not time to agree that this is something that the very poor might be able to do better and more profitably for themselves? Or are we going to be stuck with a self-serving industry perspective that somehow this is too risky, illegitimate, simple and irrelevant (or at least in need of regulation)?
savigns for the poor
In fact there are concrete forms in which self help groups have been channelising their savings in India. I can give you an example of an organisational form called Mutually Aided Cooperative Societies. Here the Self Help groups form federations of Self Help Groups, which in turn float a cooperative bank. The share capital of the cooperative comes from savings from individual self help group members. The corpus is used to lend to self help groups and the profits also go back to the group members in the form of dividends. There is very little interference from the Govt in the form of regulations, which was so much a bane responsible for cooperative movements; failure in India. This model has been working remarkably well.
P B Ramesh
sherma100@yahoo.in
There are some inherent
There are some inherent disadvantages to the ROSCA mechanism
- You may get the money when you don't need it (timing)
- The amount of money that you receive might be disproportionate to your requirements (high or low)
The savings groups promoted by a variety of organizations overcome these restrictions by letting the gruop members decide how much to save and at what frequency, who to lend the money to and for what period and purpose. It also enables them to share the interest earnings and thus creates apositive economic asset building spiral.
response to JP's question
JP, at Oxfam America, we are currently in the process of conducting a randomized control trial impact study (funded by the Bill & Melinda Gates Foundation) that will enable us to find answers to the actual impact of the provision of such savings services on the livelihoods of the people who participate in these programs.
We will not be able to comment about the relatve effectiveness of these interventions vis a vis microcredit programs but we will defiitely be able to talk with certainty about the economic and social impacts of savings mobilization through formation of savings groups.
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