Sometimes just having a safe place to save, or access to a small loan, can help a family work its way out of poverty. But many poor people can't go to banks and credit unions for that kind of help. Often, these services aren't available, especially in rural areas—and where they are available, poor people may not qualify. Oxfam America's innovative, fast-growing community finance program, Saving for Change, provides much-needed savings and lending services to those who have been left behind.
Community finance or "microfinance" institutions allow people who do not have access to credit the chance to borrow a small amount of money. Once the borrowers pay back the loan, they are able to increase the loan amount, giving them a chance to build small businesses or homes.
Oxfam takes a different approach to the traditional microfinance model, creating large numbers of savings and credit groups in the poorest regions of the world. Members of these groups can share their savings and make loans to each other with their own resources instead of taking out a loan from a bank, credit union, or microfinance institution.
In Oxfam's program, called Saving for Change, villagers come together to form groups of about 20 people that work like community banks; the members save money, make loans, and pay each other interest that grows the group fund.
Small loans from the groups can make a big difference in people's lives. Members use their loans to start or grow small businesses, purchase seeds, buy medical supplies for sick family members, or pay school fees for their children.
This savings-led approach to community finance has been proven to make a difference because:
- It keeps money within a community.
- It gives people a safe place to save instead of hiding their cash under a mattress or in a cupboard or suitcase.
- Groups are trained to save and lend their own money.
- No staff, buildings, or overhead are required, reducing overall costs.
- It's easy to replicate. Simple training by local agents and leaders creates new groups.
- Transactions are simple, and oral record keeping is used among largely illiterate populations.
- It reaches primarily women and rural people, who might not otherwise have the opportunity for financing new businesses.
- Savings groups bring community members together so they can work together on other development initiatives, like health or agriculture projects.