The power of savings clubs
Iam not sure if I miss the strict parental discipline of yesteryear or the current negotiation style, methodologies that today’s parents use to raise their children. In my days, parents did not “spare the rod” In addition, the “tricky” thing about growing up during our days was that, all parents in the neighbourhood tended to have parental privileges over you. I recall a time when Kenneth, the boy I competed with in our Grade Seven class decided that he really “loved” me.
That fateful day, he decided to accompany me home. This exciting episode was recorded with “glee” by all the neighbours. Up to now I still don’t know the “culprit” who reported this incident to my parents. By not sparing their “rod” my parents were simply preserving their legacy as good parents.
Other than helping each other in raising children, the neighbours came together for celebrations, funerals and other noteworthy events such as graduations and Christmas celebrations. Furthermore, the women in our neighbourhood had a funeral purse that was used during times of funerals. In addition, they had their own utensils that could be lent to the bereaved family for use. These cooperative efforts still permeate our society to this day, with many sections of society finding ways to pool their resources through different types of “Savings Clubs”.
What is a savings club?
A savings club, is a type of bank account, in which the account holder makes regular contributions toward a predetermined goal. Savings clubs often involve various incentives designed to encourage the customer to follow through with their intended contributions. A publication entitled, “The Group Savings Resource Book” which was published by the Food and Agricultural Organisation (FAO) notes that, “Typically members share a common goal and a savings horizon”.
In Zimbabwe, members make contributions towards different items such as groceries, farm equipment or kitchen appliances. In Mrehwa, Kubatana Mkando cooperative members contribute US$10 every month towards the purchase of fertilisers and seeds. According to Mrs Muzota, one of the founding members: “This club has really helped them immensely” as they also use some of the funds to pay school fees. Rose Buwerimwe, one of the leading female entrepreneurs in Mutare and owner at Distinct Fashions purchased some of her sewing machines using money that was sourced from a savings club.
What are the origins of savings clubs in Zimbabwe?
Savings clubs date back to the 1890s with the emergence of burial societies. These burial societies were started by migrant workers from the then Nyasaland and Portuguese East Africa to assist with burial of members and help new members to settle in. However, the savings club movement was accelerated in 1963 by Brother F. Waddelove, a Catholic Missionary, who started the Self-Help Development Foundation (SHDF) with an average member size of 10 to 100 members for each group. By 1984, there were 5 700 clubs nationwide.
Mutual aid groups
Mutual aid groups (“burial and friendly societies”) are aimed at raising specific funds to cover particular expenses such as funeral incidentals.
These schemes evolved from the first half of the 19th century who wanted to give decent burials to their colleagues. These schemes are a fusion of savings and insurance. Group members meet regularly and make contributions to cover funeral expenses and support a family in the case of the death of a member (burial societies).
In Zimbabwe, Townships such as Mbare and Chitungwiza are home to a myriad of burial societies. In Chitungwiza, the Gule Burial Society was started by a group of Malawian men with the aim of preserving Malawian burial culture. However, burial societies are morphing into economic groups as well.
Rotating savings and credit associations
Popularly known among women as “MaRound” this savings method, is a flexible way of quickly having access to your money without abiding to the rigid terms that are associated with savings club. This scheme allows members to access the funds accumulated on a rotating basis. In cases where there are emergencies, group members can swop places.
In addition, members can decide to use their group savings for their own purposes. This type of savings is also not dependent on rigid timeframes.
Cumulative savings and credit associations
Cumulative savings and credit associations differ from the above two methods in terms of flexible withdrawal modalities. The system binds an entire group to save the same amount of money and withdraw it on agreed dates.
Administratively, these systems require robust administrative arrangements, that require accountability and proper tracking of funds utilised.
For example, depending on the accumulated savings of the group, members can apply for credit usually with an agreed interest rate. It should be noted that groups in which savings are distributed by turns are easier to manage.
Success lessons from across the globe
Stokvels in South Africa
The stokvel story in South Africa is an encouraging example of how savings clubs can improve livelihoods among poorer members of society and even contribute to Gross Domestic Product(GDP).
Research into the stokvel phenomena reveals four different methods of savings culture.
Savings club members contribute to a fixed amount of money into a common pool and they agree upon the order of the rotation in which one receives the pooled funds. ◆ Burial stokvels provide material and non-material support to members and their families in the event of death. ◆ Investment Stokvels are meant to accumulate capital by investing in business ventures. Members contribute fixed amounts which are allowed to accumulate until such a time they can withdraw.
◆ High budget stokvels operate as financial banks, and are established for the purpose of promoting savings. It should be noted that these Stokvels are not for the poor and members pay substantial amounts. ◆ The South African Stokvel Market is also massive. According to Andrew Hutchinson from the University of Cape Town, “The South African stokvel sector massive and controls vast financial resources.” He estimates that the sector holds a massive member savings of R49,5 billion and has some 11,6 million members.
Murang’a County Women SACCO from Kenya
The Murang’a County women, in Kenya decided to take the opportunities that were being presented by accelerated investment in the national education sector by the Kenyan government.
To this end 25 000 women, contributed 1 million shillings to build a 5 Storied, apartment block that will house university students.
Cereal Banks in Zambia and Miembeni Groups in inputs in Tanzania
According to the “Group Savings Resource Book” Cereals Banks have been very successful in Zambia. A Cereal Bank is a group of people who sell grain or food crops to make a profit.
Group members contribute some of their harvest or collectively purchase the grain, store it and sell it later when the price is good.
For example, prices are very low after harvest and are very high towards the end of the year. In Tanzania, members of the farmers group cultivate their plot but collectively buy their inputs.
Housing cooperatives in Zimbabwe
The “State of Cooperatives in Zimbabwe Report” by the Ministry of Small and Medium Enterprises and Cooperative Development noted that, Zimbabwe is being ranked first position in housing cooperatives development in the whole of Africa.
The housing cooperatives are the largest sector, contributing 83 percent of registered cooperatives.
According to the report, between 2010 to 2015 the housing cooperatives built 99 840 houses for themselves.
What are the success factors for savings clubs?
Various researches show that trust and honesty are crucial success factors for a successful savings club set up. In addition, the savings club should have very clear objectives and goals that allow for buy in from the stakeholders involved. Though large savings clubs have been successful, generally, smaller are thought to function better.
In conclusion, savings clubs have been seen to improve the livelihoods of ordinary people who aspire in the betterment of their health. We need to do the art of saving. Warren Buffet says “Do not save what is left after spending instead spend what is left after saving.”