This week, hundreds of experts, academics and donors are gathering at a global conference in Lusaka, Zambia to discuss and promote the benefits of savings groups.
An estimated 10 million people, mostly women and young people, participate in some form of savings group worldwide.
As a child rights organisation, Plan International will also be present at 2015: The Power of Savings Groups conference*, placing particular emphasis on the benefits of youth savings groups, which aim to support young people to save money and gain financial knowledge.
Basic elements of finance
By the end of December 2015, Plan International will have worked with 250,000 young people through savings groups. This experience over a 7 year period has been both a revelation, and an opportunity to expose young people to the basic elements of finance. All this, while helping them gain knowledge and skills to enter the world of work.
The revelation is that 15 to 24 year-olds have the ability to mobilise small sums of money, save regularly in a disciplined way and manage their collective resources for the benefit of each other – in effect putting into practice the principles of community banking.
Savings groups are a perfect mechanism for this. They are small groups of 15 to 25 members, have well defined procedures, allow members to make the basic rules around savings and borrowing, and operate in transparent and democratic ways. All of this leads to a secure system that inspires confidence and encourages use of the savings, borrowing and social insurance services offered by the group.
Youth savings groups are a perfect ‘starter system’, allowing young people to learn about finance in a low risk fashion. Young people, are not content with just saving money and pose the question, “What’s next?” They are hungry for new knowledge and skills that give them livelihood options.
Savings groups are a perfect platforms for dispensing information, training and new opportunities. More formal financial education complements the practical management of group funds. Young people learn to set savings goals, distinguish between good and bad options for borrowing and discover how to link with banks and microfinance institutions.
Acquiring life skills to deal with enterprise creation and management is another key function that savings groups can serve. Discovering new opportunities by analysing local market dynamics, acting on these through planning, knowing how to choose among options, taking smart decisions that minimise risk, and distinguishing one’s business from others can be learned through interactive training exercises. These take young people through the process of building a small business.
Links between youth savings group members and promising agricultural value chains can also uncover profitable livelihood options. In Uganda, youth savings groups with over 2,000 members signed contracts to receive production training and provide high value hot peppers and green chilies to a fresh produce export company.
Business relations with private sector companies have put young savings group members in distribution channels for household goods and solar lighting products, helping those companies penetrate more deeply into rural markets. A study revealed that young people who became sales agents in these micro-distribution chains were able to increase their weekly savings by 5 times.
Banking on Change
Plan International’s Banking on Change programme, a partnership between Plan UK, CARE International and Barclays, has formed over 11,000 Youth Savings Groups since 2013, reaching over 120,000 young people under the age of 25. The partnership has also conducted research and sector-wide consultation to develop a Youth Savings Group Model, with the aim of producing a ‘how to’ guide to help other INGOs, NGOs, governments, funders, and policymakers integrate youth savings groups into their work. The scale of youth financial exclusion and unemployment means we need a global effort to tackle it, and we believe the Youth Savings Group Model can be part of the solution.
Our experience shows that youth savings groups can transform lives in vast rural landscapes across the world and invigorate local economies. The space is now open to build momentum for still more effective approaches to meet the financial and business needs of the developing world’s youth.
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