Case Study

Connecting the World's Poorest People to the Global Economy: New Models for Linking Informal Savings Groups to Formal Financial Services

Innovative models to link informal savings groups to formal financial services in Africa

This paper examines emerging lessons from eight pilot projects that CARE International conducted on innovative models that link informal savings groups with formal financial institutions. The pilots began in 2008 and were conducted over twelve months in the following five countries: Rwanda, Kenya, Tanzania, Uganda, and Malawi. They highlight the potential that savings groups have to act as a first rung on the financial ladder for those who are otherwise excluded.The pilots aimed to address the limitations of village savings and loan associations by offering complementary products and services that the group could not provide itself. They brought savings groups together with a variety of private sector service providers including banks, MFIs, mobile money transfer providers, and insurance companies. CARE's principles for linking savings groups to financial institutions include:

  • Link groups, not individuals;
  • Only link mature groups;
  • Focus on demand rather than supply;
  • Prepare groups before linking them;
  • Protect core savings group principles;
  • Start with savings;
  • Maintain a conservative savings to credit ratio;
  • Minimize the use of savings as collateral.

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