I have had the opportunity to work in the rural areas; the forgotten half of Zimbabwe, where the main road is the wide gravel road that is some kilometres away one’s residence.
These would be the last areas that one would expect to find a vibrant financial system. The poor manage their finances on a minute by minute basis as and, when they receive the incomes. Their incomes are irregular and they cannot afford weekly, monthly or even annual budgets.
The interesting and encouraging thing is that the financial managers in these often outlying areas are women.
Contrary to popular belief, the rural poor are financially illiterate. I believe that what they lack are linkages to financial service providers (inclusion). It is rare to find rural folks who have accessed a bank or even a micro-finance institution, but they are surviving.
The poor save in many ways, but not a single financial institution in Zimbabwe is taking advantage of the Bottom of the Pyramid’s concept on saving patterns or even developing them into bankable solutions. What they get is credit, micro credit solutions. Are they sustainable?
Year in year out there has been an increase in the number of MFIs in Zimbabwe. One would hope that the increase in MFIs would lead to a decrease in interest rates, therefore, a reduction in the default rates. On the contrary the RBZ announced in 2016 that the default rates were actually threatening the MFI sector. MFI default rate in Zimbabwe is over two times the world average, at 11 percent against 5 percent.
Women have been saving for a very long time in Zimbabwe. Even in the remotest of areas were women are oppressed and treated as second class citizens with little education, there is evidence that women are superintendents of family savings. They have always been. It’s a sustainable model.
There are women who are in savings groups because their grandmothers advised them to do so. Older women in my rural area are members of several savings groups and burial societies; they teach the young ones how their husbands may be angry now, but at a certain time in future they would be praised by the whole family. As a result, every woman in the village has a savings plan.
Women run savings clubs, have minimal if not zero default rates. How do they manage such minimal default rates when our learned friends from the financial services sector actually create an account called provision for bad debts? It is unheard of within the savings groups. Cannot we learn from these groups and go national with such a model.
In these traditional models the starting point is savings. On the other hand, credit is the starting point for the MFI.
The history of savings groups has evidence of graduation. It teaches women to save first before considering borrowing and in terms of these models you can only borrow when you have built a reputation in the group, or rather one has to fully subscribe to the group ethos. Groups have often graduated from savings for groceries to savings for projects.
Women Micro-finance bank as a solution
The advantages of micro-credit are often praised enthusiastically, but money owing remains debt; it always escalates the risk and poor women are almost always overstrained. There is need for a different way of looking at women empowerment.
This should not be another micro-finance bank that only offers loans and nothing to empower women. Women have the solutions already from their savings groups’ experience. It is this experience that needs formalisation and link the savings groups to a formal financial institution, thus promote sustainable credit policies for women.
What women really need to be empowered with is beyond the scope of this article, however, women empowerment starts with formal financial inclusion and financial literacy training.
Savings linkages critical for formal financial inclusion for women
The savings group model has stood the test of time and has seen women graduating from small savings objectives to larger targets.
In Chimanimani there is a women-led group that was saving for boreholes. They started small, saving to improve their community gardens, now they are drilling boreholes at their homesteads. That is sustainable, reduces poverty, leads to family and community development through to economic development.
Women need access to the right financial tools, they need the right financial education and investment ideas. This can determine whether women will be able to utilise an opportunity to move out of poverty or absorb a shock without being pushed deeper into debt.
Traditional banking and MFI models seem to have failed the women. It ought to be the duty of the new Women’s Bank to come up with solutions for women, by women. Women require solutions that can assist them to steer their multifaceted financial conditions, as evidenced by their needs, and more often than not unpredictable income.
Women as financial managers of the families are vulnerable to obligations from disease or funerals in the family. In farming, weather can lead to catastrophes that can drain the families.
The good thing that come out of savings clubs is that, in as much as they may not be able to cover all damages caused by unfortunate events, they always have their savings to lessen the burden. This can be savings in kind or in cash.
A good linkage programme for savings groups, taking advantage and formalising what they are already doing, will lead to sustainable credit and reduce default rates.
The Group Model
Savings groups have the potential to invest in much larger projects if they get the necessary support through the appropriate linkages to financial services providers. One can only imagine how much money savings clubs are keeping under mattresses. What would be the impact of such savings if they were formalised.
Savings clubs could actually start buying shares in companies they want if they got the necessary advice and if members commit to paying the monthly commitments and extend the sharing period from annual to longer periods.
There is no doubt that some projects may be too large to be financed from the savings; an opportunity for credit. The women would now borrow from the financial institution and in groups. There is safety in numbers. Group lending gave birth to the current micro-finance revolution.
It’s unfortunate that most MFIs now prefer lending to individuals, but group lending has proved to be less risky and has lower default rates.
Bankers will not like this but, group lending has been the backbone of micro-finance.
Joint liability has always allowed the poor to access loans even when they individually do not have collateral and do not have the history to support them as deserving borrowers. When a group borrows, each individuals is liable to every member of the group and they will support each other to ensure that they can be able to repay and have access to higher value loans in future.
Food for thought for the women’s micro-finance bank; doing things the same way they have been done will not bring different results. Solutions for women should not be generic.
Financially include a woman, financially include a nation.
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