Sanderson Abel
Saving money can be hard for anyone, but it’s especially difficult for the poorest and most vulnerable in the various communities. The majority of these are characterised by insufficient and irregular income, high vulnerability to shocks, chronic food insecurity, and poor health. These characteristics call forth for the development of coping mechanisms to cover for the hard times.

Group savings 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.

Savings groups 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 fulfill 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
Having access to a financial savings makes it possible to access a pool of capital in case of emergencies or when deciding to make a large purchase.
In case of unforeseen illness, members can rely on their group members and the resulting group fund to quickly take out a loan.

Ultimately, group members have to repay the loans or end up contributing the same amount over time as if they had saved the money themselves, but participating in a group creates additional flexibility and builds a social structure that creates discipline.

Such discipline also enables members to save up for large purchases, since the cash is safely put away for extended periods.
Informal savings groups provide fascinating insight on the importance of social capital to group members. These members choose to participate in an informal savings group because the social structure it provides creates benefit that cannot be realised by trying to save as an individual. There are benefits that the group’s social structure creates.

Disciplined saving: the involvement in a group forces members to set savings goals and meet them each month. The negative repercussions both economic and social associated with failing to meet these goals create significant incentive to meet the monthly commitment. Maintaining this level of discipline is much more difficult as an individual, making group membership more appealing.

Group savings increases the strength of social networks. Working together towards the same financial goal as a group help create strong bond among members.

It is common knowledge in the Western world that you are more likely to get a job if referenced to a potential employer by someone you both know.

This principle works the same way in the developing world. Individuals are able to leverage other members of the group to further create opportunities for themselves.

It is important not to forget that there is a human aspect in informal savings groups. Groups are formed with trusted friends or family and can often be a perfect excuse to get together once a month to socialise.

This is usually the case with the burial societies in some of the communities in Zimbabwe. The burial societies usually meet at the end of the month at predetermined venues to pay their monthly subscriptions and discuss various issues of common interest.

Beyond just the economic opportunities, savings groups also offer a more enjoyable way to save money.
Group savings especially for the disadvantages members of the society can have a positive change in their savings attitudes.

The group members are able to make plans for the future and express interest in experimenting with new kinds of income-generating activities, such as the processing of fruit and vegetables.

It has also been found that group savings have an impact of encouraging self-reliance and entrepreneurial spirit. This then has the potential to encourage people into entrepreneurship and self-employment.

Group savings can also be an important precursor to establishing formal financial services because they will ensure that people have useful understanding and experience of finance.

Once well established and amassed enough resources, groups can then start using formal banking services and enjoy various products offered by the banks.

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] or on num- bers 04-744686 and 0772463008

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