Background
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 has pioneered an alternative microfinance model called Saving for Change, which self-replicates on a large scale and at a low cost, serving those who have been left behind.
Microfinance institutions allow people who do not have access to credit the chance to borrow a small amount of money. Once the borrower pays back the loan, they are able to increase the loan amount, giving them a chance to build small businesses or homes.
The Future of Community Finance
Oxfam is moving away from the traditional microfinance model by creating large numbers of savings and credit groups in the poorest regions of the world who 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.
The savings-led approach to community finance has great potential to reach the poorest people because:
- It keeps money within a community.
- It gives people a save 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.
- Groups average about 20 people.
- 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 primarily reaches women and the poor who would not otherwise have the opportunity for financing new businesses.
- Savings groups bring community members together so they can work together on other development initiatives.