How the Poor are Saving for Change

Last month Oxfam America, Freedom from Hunger, and the Strømme Foundation released the results of a three year in-depth study evaluating their joint Savings for Change (SfC) program in Mali. The study, implemented by IPA and the Bureau of Applied Research in Anthropology at the University of Arizona, combined an RCT and ethnographic research techniques over a period of three years resulting in arguably the broadest and deepest rigorous evaluation of a savings program we have.

SfC currently operates in 13 countries in West Africa, Latin America, and Asia but the program in Mali is one of the largest. Since 2005, women in the program have formed small groups that meet regularly and require members to contribute to a joint savings fund. Members then take out loans from the pot at an agreed upon interest rate. At a predetermined annual date, the fund is divided among members and returns can be anywhere from 30-40% or higher. The timing of the payout usually coincides with planting season, festivals, or other periods when there is a greater need for increased cash flow. For this study, researchers randomly selected villages to receive the SfC program from a pool of 500. They also conducted ethnographic case studies and the quantitative data necessary for the impact evaluation.

The study found that women in the treatment program took out twice as many loans from savings groups and saved 31% more than those in control villages. Additionally, they were 10% less likely to be chronically food insecure and held $120 more in livestock, a difference of 13%. The ethnographic study highlights that in Malian culture, livestock is used as a risk mitigation strategy. Since animals are a productive asset and can be monetized quickly through the market, they are a useful tool for dealing with economic shocks.

In terms of nonfinancial impact, the villages where the program was implemented did not exhibit improvements in overall health, income, or education. When researchers introduced a malaria prevention campaign, women in the treatment villages did show an increased knowledge of how to prevent the disease but this did not translate into behavior changes. However, women in SfC reported a higher level of perceived solidarity in the community, increased female decision-making power, and increased commerce activity among women at the local level.

Savings groups (SGs), especially those with commitment mechanisms, are often promoted as a cheap, scalable, and flexible for extending services to the world’s unbanked. The SfC model offers evidence of how groups can provide a tool for dealing with economic shocks and food scarcity. However, it is unclear how large the  long-term benefits SGs may be for the rural poor. In this study, researchers did not find any increase in household income or assets other than livestock. Also, the ethnographic research did not answer many questions about intragroup dynamics or the effects of group liability.

While there are still remaining questions surrounding this research, the findings are generally positive. It is encouraging to that a low-cost model spread rapidly and allowed members to increase savings and assets. The presence of over seven million savings groups in the developing world not only shows the potential of the model but also indicates that participants perceive its value.