Designing Savings Groups to Benefit Vulnerable Children

This brief addresses how donors and implementers can approach designing savings group (SG) programming to benefit vulnerable children, primarily by working with adults to indirectly benefit children, rather than by working with children directly. Savings groups are an attractive development intervention for many reasons. They can be established in remote or sparsely populated areas where more formal financial services are not cost-effective or available. Although there may be initial hesitation for people to join savings groups, once the first share-out occurs, the benefits become clear and demand is strong. This lowers the cost of expansion, and operating costs are low, certainly much lower than equivalent costs of microfinance institutions. There is no need for external capital – in fact, this is anathema to the good functioning of an SG. Impact is good, as shown in the primer on which this brief is based. Savings groups can reduce the cost of other interventions, such as the provision of agricultural or health extension services, by providing a delivery vehicle – the group – to which to provide the service efficiently. However, even with these advantages, savings groups have some risks and limitations, which donors and implementers should be aware of. Self-selection can be difficult, particularly for poorer, more vulnerable people who lack capacity to assume risks. Loans can create conflict among group members, and the amount of savings that a group can collect may be too small to meet the demand for loans. Limited market opportunities can reduce the impact of the intervention, and providing limited financial services with group support is not enough to raise people's economic status out of poverty. Donors and implementing agencies use targeting to achieve maximum impact on a desired population. However, targeting can create conflict with one of the basic premises of best practice savings group models: self-selection. The possibility of creating stigma against group members, such as might occur if all members are vulnerable or HIV-positive, is also a concern. In many programs, savings groups are heterogeneous in terms of economic status and vulnerability, and this seems to improve their functioning. To reach specific populations without jeopardizing SG success, donors and implementing agencies can adjust their targeting approach. This can be done through a geographical approach, a household approach, or an individual approach. Care must be taken not to stigmatize families or individuals, whatever the approach used. Donors should look for, and agencies should present proposals demonstrating, at a minimum, the following elements: knowledge of the target market and target group, using a demand-side market study as foundation; knowledge of suppliers of add-on services for possible partnership, using a supply-side market study as foundation; an approach to targeting that maximizes outreach to the population of interest while minimizing risks to members and to their ability to self-select into groups; experience in successful implementation of savings groups or savings groups plus; an understanding of and approach for avoiding harm to children; a monitoring and evaluation system that monitors child-level impact; an exit strategy; and a learning approach with a dissemination strategy. The STRIVE Savings Groups Brief Series includes five briefs: #1: Savings Groups- Core Principles, #2: Savings Groups for Child Wellbeing- the Risks, #3: Designing Savings Groups to Benefit Vulnerable Children, #4: Introduction to Savings Groups Plus, and #5: Savings Groups Plus for Child Wellbeing. This brief is produced by the Supporting Transformation by Reducing Insecurity and Vulnerability with Economic Strengthening (STRIVE) Program, managed by FHI 360, under the FIELD-Support LWA.