Zimpapers Logo

Pooling resources can assist members to access safe saving facilities, such as banks

Sanderson Abel
The recently launched BAZ/ZEPARU study established that although the informal sector players could have few resources in isolation, they could become a formidable source of resources when combined.

Banks should thus engage the informal sector players and embrace the idea of fostering partnerships and clusters. Under this arrangement informal sector players, through the assistance of banks, pool their resources by bringing their capital and expertise together to make a meaningful investment. This also allows them to gain knowledge, further their skills through knowledge transfer from their partners than when operating as individuals. If the small traders come together to work as a group, they can register their associations to assist in easily identifying their location, assessing their challenges and also make banks aware of their existence.

What is group resource pooling?

Most of the informal sector players can save only small amounts individually, which are usually not enough to invest in productive resources. One way to circumvent this problem is through pooling resources together as a group. By saving as a group, there is potential to accumulate a larger amount of money more quickly by pooling their savings in a common fund which can then be used by the group or a member of the group for productive investment.

Pooling resources as a group is one of the methods that members can use to cushion themselves in hard times. In a depressed economy like the Zimbabwean one, an individual’s cash flows are highly uneven and cash on hand is subject to the pressures of family members and friends. Some family members might find that control over their money is limited due to the burden of caring for the extended families.

These circumstances make it nearly impossible to save a sum of money large enough to invest in a piece of equipment that would improve a business, purchase materials for home improvement, or make any other large purchase to increase quality of life.

Savings groups allow members to shed the pressure placed on their free cash by husbands, neighbours, and friends. Ultimately, this enables people to commit their surplus cash towards future purchases with the potential to improve their quality of life.

What are the advantages?

If members of a group are able to self-organise, it is possible for the members to build enough resource base. This can then allow the members to learn basic financial skills. As a group, they can more easily receive literacy and money management training from group promoters or trainers from NGOs, and also learn from other more literate members. Low level of literacy and numeracy skills make it difficult for the poor to keep track of their savings and to manage their money.

Pooled resources can be used to cushion members against vulnerability to risks like bad harvest, food shortage, sickness, flood, income shortage, etc.

By saving as a group, these risks can be shared between the members. Individual members can rely on other members for help in time of need. Group savings can be used like an insurance scheme to help members deal with these emergencies when they arise.

Pooling resources can assist members to access safe saving facilities, such as banks. By saving as a group, the informal sector players can create a safe place to put their money. Some group saving methods does not require storing at all, since the money is immediately redistributed after collection. The group can also buy or make a cash box that will be safeguarded by several members which will periodically be deposited at the bank.

By pooling resources as a group, the poor can protect themselves from accusations of being selfish, since the savings belong to many individuals, not just one. The threat against a single member of the group is a threat against all members.

Saving requires discipline since it means withholding something for future use instead of consuming it right away. All group members must have discipline and agree on a common set of rules to follow. If the rules are not enforced, then all members suffer. Groups solve this problem by using peer pressure or punishing those members who do not follow the agreed rules. This may include a fine for late payment or for missing a meeting, and even expulsion from the group.

Pooled savings provide important financial services, but also have a powerful social impact. Participants take great pleasure in being part of a group, and receive the social and financial support they need to move forward in their lives.

Seeing their own success and that of their peers, they are inspired to earn more, save more, and fulfil their dreams of providing food for their families, sending their children to school, repairing their homes, and taking control of their lives and their futures. It is a long-term, sustainable solution which plays a central role in the efforts of the very poor to improve and stabilise their livelihoods.

Where can you keep the money safe?

Opening an account with a bank has advantages to the group since the account allows individual small savers to pool their savings in a single larger account and leaves much of the account handling costs up to the group rather than the bank. Instead of individually incurring bank charges, these are borne by the larger group which makes it cheaper for everyone as these can be shared.

• Sanderson Abel is an economist. He writes in his capacity as Senior Economist for the Bankers’ Association of Zimbabwe. For your valuable feedback and comments related to this article, he can be contacted on [email protected] <mailto:[email protected]> or on numbers 04-744686 and 0772463008.