According to the World Bank, more than 2.5 billion adults worldwide lack access to formal accounts at financial institutions; three-quarters of the world's poor fall into this category. Those living in rural areas are particularly disadvantaged. Financial institutions often do not serve these communities because of high transaction costs and small loans lead to losses.
With few viable means to save, these individuals and their families are vulnerable to life-threatening hardships. Savings groups (SGs) respond to the unmet needs of the rural poor by providing a secure place to save; the opportunity to borrow in small amounts with flexible terms; and a network of support and solidarity.
For the 1.3 billion people living on less than a dollar a day, many of whom depend on agriculture for their livelihoods, vulnerability to climate-related shocks is a constant threat to their food security and well-being. As the effects of climate change lead to increased the frequency and intensity of natural disasters, farmers face a growing risk that these weather-related shocks will destroy their assets and livelihoods. Understanding how to help communities confront and manage risk, so that they can be resilient to climate-related shocks, is critical for addressing global poverty.
Activities
Saving for Change
Saving for Change (SfC) is an innovative savings groups program that builds resilience and increases women's empowerment. Working in rural villages, SfC trains groups of women to save regularly, borrow from their group's fund, and repay loans with interest. At the end of a saving cycle—generally a year—the fund is divided and each woman receives her savings plus a share of the profit. Groups schedule distribution for a critical time, such as the onset of the hungry season, when money is scarce.
R4 Rural Resilience Initiative
R4 Rural Resilience Initiative, known as R4, is an innovative approach to helping communities better manage risk, one that involves a set of integrated tools: insurance, credit, savings, and disaster risk reduction. R4 is a strategic partnership between Oxfam and the UN World Food Programme (WFP) designed to enable vulnerable rural households to strengthen their food and income security in the context of increasing climate risks.
R4 builds on the initial success of an integrated risk management framework developed in Ethiopia by Oxfam, the Relief Society of Tigray, Ethiopian farmers, and several other national and global partners. The framework was designed to enable poor farmers to strengthen their food and income security through a combination of improved resource management (risk reduction), insurance (risk transfer), microcredit (prudent risk taking), and savings (risk reserves).
Goals and priorities
Saving for Change
Today, there are over half a million Saving for Change members in Cambodia, El Salvador, Guatemala, Mali and Senegal; in Mali alone there is at least one SfC group per village in over 6,400 villages. As the program grows, so does women's confidence, allowing them to demand increased training and services as well as more products adapted to their needs. Hence, SfC's new direction to morph the groups into efficient delivery channels to further development.
To respond to this demand, Oxfam has created a suite of programs called “SfC +”. Modules such as SfC + Business focuses on members' ability to improve their skills managing income generating activities; SfC +Agriculture improves yields and increases food security; and SfC + Citizenship provides members with a better understanding of their role in society. As the program continues to build upon the SfC + model, women members receive training on basic advocacy skills through associations of SfC groups. Saving for Change is as much about strengthening women's voices as it is about increasing their financial inclusion.
R4 Rural Resilience Initiative
R4's goal is to achieve food security and build the resilience of the most vulnerable rural communities against climate and weather shocks, through a risk management-focused and market-based approach.
In addition to directly improving the lives and livelihoods of rural communities, R4 aims to catalyze long-term, structural changes extending well beyond the Initiative itself. R4 will contribute to the development of a comprehensive planning approach for food security, adaptation, and resilience by country governments and its partners. R4 links labor-based safety nets that provide cash or food in exchange for work on community projects with community risk reduction activities that protect assets against disasters and improve productivity. Farmers participating in R4 will have access to tools to build physical resilience to weather-related shocks, and they will exchange work for enrollment in the insurance program.
The Initiative will also help build a sustainable commercial market for risk management products in the countries where it is implemented ensuring the sustainability of the Initiative. The strategy underlying the insurance component is to gradually transition from premiums paid with labour to premiums paid in cash for those who are able to afford it.
Farmers, having reduced their risks through natural resource management activities and having transferred the residual risks to insurance companies, do not have to resort to negative coping strategies such as selling their productive assets, reducing food consumption or removing children from school during periods of stress. With insurance, farmers can protect the investment they make in their crops, and feel confident in taking out loans for productive inputs.
R4 will leverage Oxfam's Saving for Change (SfC) program to help households create stronger financial bases. Members of savings groups will have access to reliable savings mechanisms, which can be used as collateral for loans and insurance. Thus, if successful, the comprehensive approach employed by R4 will enable many participants to graduate from Safety Net Programs.
Accomplishments so far
Saving for Change
In 2013, Oxfam released the results of an innovative study combining the statistical rigor of a randomized controlled trial (RCT) with an in-depth anthropological study. The study found that SfC provides benefits not only to its members but to the whole village where groups may be found. Overall, it shows that SfC reaches the most vulnerable (82% of members live with less than $1.25/day), members tend to save and borrow more than non-members, they invest more in livestock and overall we see the food security gap closed in those villages. All these factors contribute to building resilience, especially when we add the social capital built among members. Although we have not seen significant impacts on income, health and education expenditures yet, we believe SfC to be one of the simplest, yet most impactful economic innovations introduced by Oxfam.
R4 Rural Resilience Initiative
Many past approaches to risk management have not been holistic in nature; instead they focused only on one or two areas of risk. The R4 program has broken new ground in the field of rural risk management by developing an integrated risk management framework to enable poor farmers to strengthen their food and income security.
R4 focuses on mechanisms that can be integrated into social protection systems, including productive safety nets, so the results can be applied at a much larger scale by governments and international organizations, if successful. WFP formally became involved in the joint planning of R4 in Ethiopia in 2013 for program implementation in 2014 and beyond. By combining the participatory design and capacity building model with WFP’s global capacity and Swiss Re’s innovative risk transfer solutions, R4 will help accelerate the scale-up and testing of this innovative approach, while expanding grassroots capacity to new communities across Ethiopia and other countries.
R4 also constitutes a first step toward developing a sustainable insurance market for poor people, an essential factor in ensuring farmers’ livelihoods and food security over the long term. This initiative will enable thousands more poor farmers and other food-insecure households to manage weather vulnerability through an affordable, comprehensive risk management program that builds long-term resilience.