Written by Eryn Austin-Bergen
After six years of reading FH Canada partner community reports, I am crazy about Savings and Loans groups. Here’s why.
Have you ever felt like you don’t make enough money each month to put anything substantial into a savings account at your bank? Occasionally you try, but your budget is so tight that after shelling out for rent, utilities, food, insurance, and gas you hardly have a toonie leftover. On top of that, there’s always some unexpected expense to charge to the credit card, like unplanned car maintenance or replacing a lost or broken phone. My point is, at the end of the day, what’s the use of putting anything away for a rainy day when it feels like it’s pouring everyday?
Families struggling under the weight of material poverty feel this same pressure, but times a million. A mother who can’t feed her children three meals a day is going to look at you like you have two heads if you suggest she relinquish even a few precious coins to any kind of savings scheme. She needs that money today, not tomorrow!
And yet, time and again, families in FH partner communities demonstrate that developing a “savings culture” is critical to their success in breaking the cycle of poverty and establishing their economic resilience. Take Julienne, for example.
“Before FH started working in our community, I couldn’t do anything to make an income for myself,” she says. Julienne is a widow and a mother living in Burundi. Crippled by a high cost of living, she was forced to use all of her income to daily support her small family. There was no social assistance or free healthcare. If a crisis were to strike, she would have little margin to recover. Julienne knew she needed to save in order to create a future for herself and her son, but she didn’t know how to start. Fortunately, an FH Savings and Loans group opened up in her community and she joined. “I started saving and after some time I reached a point where I was able to request a cash loan. I took a loan amounting to 210,000 BIF ($150 CAD) from my savings group that I used to purchase a sewing machine.” While there’s still a lot of work to do every day, Julienne now has multiple sources of income to support herself and her son. “When I am not farming, I use the machine to sew clothes for my community. This allows me to earn money daily and earn a better life as well,” says Julienne.
I’ve come to believe this relational approach to wealth creation might be critical to my “earning life” as well. Here’s what I mean. We live in a “spending culture.” The message is strong and constant: “Buy now, not later! You want this, you need this, you deserve this! Don’t have the cash? No problem—finance it and worry about the payments later. Why? Because your happiness depends on it!” Day in and day out, the hounding never stops. But is this system really working for us or is it enslaving us to debt and anxiety?
To the contrary, a “savings culture” empowers individuals, groups, and communities to accumulate assets together. It empowers mothers like Julienne to feed her children three meals today and have cash on hand to pay for school fees, medicine, clothing, and those unanticipated rainy days that may come tomorrow.
FH promotes a savings culture primarily through organizing and training Savings and Loans groups. The concept is pretty simple—a group of people (often 10-12) from the same community meet regularly to pool their savings in order to create capital they take turns leveraging. While the weekly amount put in by individuals may be small, their combined savings quickly accumulates. FH staff train the group in financial literacy, savings practices, and small business management.
Thorough training at the beginning and ongoing coaching for the first few years are critical to laying a strong foundation that will help sustain the group long after FH exits its partnership with the community.
In addition to training, FH also provides each group with a "Piggy Bank" starter kit which includes a secure lockbox, ledger, and accounting books—but no cash inputs. (This is one way in which Savings and Loans groups radically differ from popular microloan schemes for the poor.)
The group (not FH) elects their leaders—members they choose to record savings, loans, and interest. Members borrow from the group to make onetime payments for items such as school uniforms or medicine, or to invest in long-term ventures like land, small businesses, or livestock. As a result of these initiatives, new wealth is brought into the group from outside the community through collaborative markets, roadside businesses, and livestock auctions, among others. Borrowers are faithful to regularly contribute their savings and pay back their loans to the group at low-interest rates. At the end of a "cycle"—often one year—each member is paid out their savings (with interest!) and can choose to keep or re-save the money in the new cycle.
Over time, the group becomes totally independent of FH trainers. In addition, groups often set up a “solidarity fund” to which they each freely contribute. When crisis strikes someone in the community—a child falls ill, a house burns down— the group gives a financial gift to the affected family. In this way, they selflessly contribute to the wellbeing of the whole community. By opening access to the practices foundational to creating wealth, this entire process gives agency to people who once felt powerless over their poverty.
The resilience of Savings and Loans lies in its interconnectivity. Decisions are made together, strengthening the group’s resolve to see each member thrive—when one member succeeds, everyone benefits! When one member struggles, everyone feels their pain. The group walks together through each other’s ups and downs, through risks and failures and wins. They cheer each other on and lend a helping hand when needed. The financial transparency of the group also helps hold borrowers accountable in a healthy way. If a member squanders their loan, doesn’t contribute savings, or fails to repay what they borrowed, they’re not holding out on some stranger thousands of miles away; they’re hurting their neighbour, their friend.
Being financially connected in this relationally intimate way is something quite foreign to me. I’ve never sat down with a group of friends or neighbours to discuss my money—my income, my expenses, my debt, my savings, my dreams for the future. In my social experience money is an off-limits topic.
But should it be? Isn’t it a little strange that we’re willing to entrust our finances to perfect strangers at the bank while resisting transparency with people who know and love us, whose own good should be wrapped up in ours? Wouldn’t we get further if we went together? Instead of pursuing financial independence, perhaps we should be after financial resilience by embedding ourselves in a relational, interconnected approach to wealth creation.
Imagine if a group of 11 friends encouraged you every week to put $10 in the pot instead of purchasing things (or experiences) you can’t afford. At the end of the month, you’d have $40 on your own, but access to $480. After one year of saving together, you would have accumulated $520 of your own money and have gained access to $6,240 low interest credit for dreams that matter. And what if, together, your group watched financial literacy videos or invited experts to teach you about starting a small business or cutting unnecessary expenses?
What a relief to know you’re not doing it alone! How empowering to say “no” to our spending culture and help your friends reach their dreams. I know Savings and Loans groups are not the silver bullet to ending poverty—not in overseas communities or in my own life. But I’m still captivated by the alternative, relationally oriented approach to financial resilience they offer. One that’s built on assets, transparency, trust, empowerment, and, ultimately, friendship. Whether we replicate such groups in our own Canadian communities or create a hybrid within our current financial system, I think it’s worth considering how far we could go if we went together.