Katy Love

ANNEX 1: “The promising practices” case studies series Savings-led approaches Pact’s WORTH, CARE, CRS, OXFAM
I. Context:

a. Socioeconomic overview Pact’s WORTH program addresses the issue of HIV/AIDS and its effects on orphans and vulnerable children (OVC). Pact works mostly in rural Sub-Saharan Africa, as this is where AIDS has hit hardest, but also has programs in Nepal. CARE’s work with Ophavela in Mozambique operates in an agricultural region where illiteracy is high, AIDS is increasingly becoming a problem, and few women are involved in microenterprise. CARE’s MMD program works with rural women in the poorest countries in Africa, particularly in Niger, and has replicated it in Mozambique, Zimbabwe, Malawi, Zanzibar, Mali, Eritrea, Rwanda and Uganda. CRS works in India. Oxfam’s Banking on the Poor Program (BOP) is in poor, rural areas where malaria kills more than AIDS. b. Purpose of intervention The WORTH program operates on the principle that by empowering women to become economically self-sufficient, they will be better able to care for the OVC, raising awareness on HIV/AIDS, and creating community responses to the disease. CARE’s Ophavela program creates “Accumulating Savings and Credit Associations” (ASCAs) in rural areas to help families gain access to credit and mobilize their savings. It responds to a demand for a bottom-up styled, member-owned organization that creates independent, trained, and sustainable savings and credit groups. It seeks to reduce vulnerability, increase the levels of assets and create or expand on existing incomegenerating activities. CARE’s MMD program is based on own savings and self-management. Although each MMD group determines its own bylaws and interest rates, MMD groups tend to operate in a similar manner. Unlike an MFI that drains money from the community through high interest rates, the interest is retained at the community level. CRS links self-help groups (SHGs) to banks by encouraging NGOs to create groups that give small grants and trainings as incentives. CRS has 2,500 development partnerships with grassroots organizations in India.

Oxfam’s BOP reaches the poorest of the poor, and is based on the principles of: best experience, demonstratable impact, large scale, low cost, efficient training and quick graduation, replication by local institutions, self-propelled group formation, and a commitment to sharing knowledge. c. Description of target group/clients/members The WORTH program targets women in high areas of HIV/AIDS in order to help them provide for OVC. CARE’s work in Mozambique (Ophavela) and Niger (MMD) target rural areas, and MMD targets women exclusively. Ophavela serves the poor living in urban and rural areas and are mostly engaged in microenterprise. Description of methodology: a. Summary of design concepts: Pact’s WORTH’s innovative, replicable, and low-cost initiative fosters economic security by encouraging women to help themselves and each other through community-controlled village banks. The model invests in training women in literacy and savings in order to manage economic security and enhance the abilities of communities to respond to HIV/AIDS. WORTH is not solely a financial program; it educates women about HIV/AIDS and builds their confidence through literacy and financial trainings. Furthermore, WORTH has created an empowerment cycle that builds on women’s individual skills, creates small groups, and encourages the groups to become involved in their communities. CARE sees itself not as a service provider, but as a catalyst. Through Ophavela in Mozambique and MMD in Niger, CARE established self-sustaining and self-replicating savings and credit groups in order to reduce the economic vulnerability of its members. Ophavela creates a group in which all members regularly contribute and one member each rotation receives the whole pot of funding. The methodology is flexible and is client driven. By empowering people economically, Ophavela addresses issues like isolation, inferiority, and powerlessness. Both projects build on traditional credit and savings practices, and the members own the groups. MMD operates on the principle that clients need sustainable financial services, which necessitates the creation of an organization that meets client needs and generates enough income to cover costs. MMD trains women in income generating activities, and in turn, the women contribute to savings and a credit fund to make loans to members. Groups of 30 women meet weekly and save in fixed contributions. CRS promotes the concept that SHG members are good customers to banks; they generate low rates of non-performing assets, borrow steadily, and have high repayment rates. Groups deposit surplus savings, which improves bank liquidity. Strong linkages are formed between SHGs and banks. CRS believes that helping an SHG to financially II.

develop will allow its members to enjoy social benefits, like community development and peace building, and helps to prevent emergencies by creating insurance. Oxfam’s BOP savings-led model trains groups to manage their accounts. It adds pooled savings, lending at interest and simple record teaching. Local NGOs train groups in a number of projects. Groups approve loans and there are no restrictions on what loans can be used for. As women save and borrow, they form solidarity, learn about malaria and treatment, become involved in communities, liberate themselves from moneylenders (and therefore empower themselves), and improve their status within their household as income-generators. b. Process/steps in implementations: Pact’s WORTH program is implemented in six steps. Partnerships are established with local NGOs (which allows WORTH to replicate quickly and remain affordable), which mobilize communities. Small groups of 15-25 women are created. Participants are selftrained through books and with the help of literacy volunteers. Groups then create savings-led banks. WORTH works to build linkages between the different groups by organizing Empowerment Clusters, led by Empowerment Workers (who mentor and troubleshoot). Finally, the group graduates and Pact exits to launch new programs. CARE’s Ophavela program starts with savings and credit agents training the groups. Then, community trainers are selected and once enough have been trained, Ophavela withdraws and leaves with the community trainers in charge. CARE’s MMD program begins with an intensive phase in which the animator trains the members in basic procedures of savings, credit, interest and fines. The development phase allows the group to become more self-reliant, and agents visit less frequently. In the final and maturation phase, groups are independent, and agent conducts a final evaluation. CRS first selects “promoters,” who encourage women to save. Promoters find the poorest people, and organize and motivate them by organizing groups. The groups have four development stages: savings, interlending, linkages, and sustainability. They train groups in lending methodology and instruct them in savings and record keeping. Once the groups are stable, promoters link them to a local bank with the capacity to provide credit and savings services. BOP, with the help of local NGOs, first identifies partners and NGOs hire a manager and several animators. Partners, animators, and managers area trained from 1-3 weeks. Animators will then work with fifteen groups with fifteen members in the first year. Within the second year, four to six group leaders are trained as “village agents.” These agents will replace the animators, but animators will continue to monitor performance and conduct evaluation. Oxfam staff visits partners quarterly. Finally, Oxfam typically exits within three years, once groups can operate independently. Oxfam’s other goals include attempting to develop the Oxfam CF team, to mobilize funding, and launch BOPs in pilot phase countries.

c. Methods of measuring results: CARE has not begun to properly evaluate MMD. Evaluation is key to Oxfam and BOP. BOP will monitor and collect data when it designs and implements an evaluation system. Group animators will collect data monthly on indicators, and after three months, animators will track the progress of groups through their training, monitoring, and graduation phases. The BOP manager will also track measures of efficiency every three months. Oxfam will collect data from a random sampling of groups on their baseline and follow-up data on financial indicators. III. Results The WORTH model has successfully increased literacy and savings rates, as well as the number of women in business, the ability for rural women to acquire capital, and has empowered women in the decision-making process. In Kenya, 5,000 women have been involved with WORTH. Ophavela was only recently begun in 2001, but thus far, it appears to have a positive impact, as 69 groups have been formed. Because the methodology is so flexible, it is highly replicable and is done by village trainers. Both Ophavela and MMD have been successful in rural areas. CARE’s MMD program graduates groups quickly, increases literacy, and provides training at low costs through community agents. CARE’s model is easily replicable because of its decentralized system, and has helped to create 5,000 women’s groups with 162,000 members. Savings has tended to increase, on average, up to 250% annually. The majority of groups (over 95%) continue after graduation from CARE’s program. CARE believes it owes its success to the fact that MMD provides a high return on savings that simultaneously allows use of funds. This method increases morale because members borrow their own money. For CRS, sustainability is a key component. When members receive benefits, groups will sustain themselves. The simplicity of the model adds to its ability to sustain itself. SHGs have proven to increase self-confidence, increase assets, and decrease moneylender rates. Groups help each other save, too. Oxfam’s BOP will have tested the pilot project by October 2007, and intends to expand in order to reach 1,000,000 poor. It is highly replicable by NGOs that lack financial sophistication to become MFIs. Most groups operate autonomously within two years of group formation. IV. Resources required/cost to institution Because of its success and extremely low-cost, Pact’s WORTH is expanding rapidly, and is on target to deliver the program to 195,000 households in nine nations in Africa and

Asia. In Nepal, for instance, programs (including overhead, curriculum, technical support, etc) cost $1 per head per month. Ophavela required funding for the creation of a local NGO to implement projects. MMD’s costs arise from several issues, including: isolation of areas, low productive capacity, small loan sizes with high fixed costs, seasonality of cash, and the risk of natural disaster. Costs in the early stages of the program were over $1,000 per group (and $33 per member), but now programs cost between $18 and $25 per member. All groups are immediately self-funded, so subsidies are not needed and there are no operating costs. CRS’s cost per group ranges from $0 when volunteers and group members form new groups to $100-200 when an NGO’s assistance is needed. The cost per member is approximately $6-12. Oxfam’s model with simple methodology is low cost because it gradates trained groups quickly, trains new groups with staff resources, and empowers successful leaders to take on more responsibility. Approximately $10-40 is spent per member as compared to the start up costs for an MFI, which range from $200-400 per borrower. Because the program relies on local animators and village agents, the costs are low. V. Challenges/pitfalls/lessons learned Ophavela’s largest challenges in project implementation are the dispersed nature of the population, low level of cash incomes, and the seasonality of activities. With MMD, groups were often not able to accumulate enough savings for their credit needs. One of the challenges for CARE’s MMD program is that CARE staff implements the programs directly and there are no partners. Moreover, the funds grow slowly (but steadily), large loans cannot be made, expanding services to non-members can be difficult, and dealing with cash surpluses and shortages can be difficult for the groups. Finally, since MMD operates outside the regulated sector, linkages to banks are difficult to form, but CARE is working to create networks tot overcome this. The MMD program seems to work well in rural, landlocked environments. CRS is concerned that with their model, NGOs may become a bottleneck to information, members will be unable to exit the groups, and that the poorest continue to be overlooked in the self-help groups (as mostly middle poor join). They also are faced with inconsistent quality, training and monitoring, and the fact that groups can be dependent on staff for longer time periods. BOP’s major flaw is that as the group size is relatively small, loans could fail with a natural disaster (while larger financial institutions easily absorb losses). As the risk of natural disasters do indeed create a large risk, locals cope with these realities by saving in animals that can be sold, or buying expensive items like jewelry.

VI. Contact information/sources of information Jeffrey Ashe, Oxfam America William J. Grant & Hugh C. Allen, CARE’s MMD Kim Wilson, CRS Gabrielle Athmer, g.athmer@chello.nl, CARE Marcia Odell, model@pacthq.org, Pact WORTH Mark Pickens (mwp2102@columbia.edu), Pact WORTH Erica Tubbs (etubbs@pacthq.org), Pact WORTH

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