How Saving Groups Work
Mobilising and empowering slum dwellers is one of the core objectives of the Cities Alliance Country Programmes, and one of the most effective ways to do so is through community saving groups.
Below is an overview of community saving groups and a snapshot of how they are working in Uganda, one of our Country Programme partners. The information was provided by Skye Dobson, a programme officer for Shack/Slum Dwellers International (SDI) based in Uganda.
About Saving Groups
How Saving Groups Work
Connecting Communities and Building a Federation
Positioning Slum Dwellers to Negotiate with the City
Leveraging Financing Through Urban Poor Funds/Community Funds
Saving groups form the basis of collective action in urban poor communities. Each saving or credit group consists of slum dwellers living on the same street. Leaders walk door to door gathering small change from neighbours and conducting daily community needs assessments. This process is designed to maximise the contact that people have with each other, enabling strong bonds to form within a community and increase its organisational capacity.
These saving groups also play an important role by providing the urban poor with affordable loans in times of crisis or to start a business. Slum dwellers are generally excluded from formal financial markets and are often forced to borrow money from moneylenders who charge extremely high interest rates—creating a vicious cycle of debt and ever-deepening poverty.
In addition to community saving, members of the group also save daily to a national fund. It is this fund which is used to leverage the savings of the urban poor to support larger investments in slum upgrading. As savings groups come together, or “federate”, they begin to look beyond simply the needs of their savings group to the needs of the federation and the urban poor at large.
Committees found in the saving group are replicated at network, regional, and national levels. This enables the generation of a self-governing national movement that is rooted in the hopes, aspirations, and challenges of its members.
Both functions reinforce each other. The savings and loans systems at the group level prepare communities for much bigger loans and project management demands when upgrading is undertaken.
In Uganda, the saving groups are self managed and self capitalised. Groups have their own constitution and governing systems based on the fundamental concept of ritual daily savings as a tool for uniting communities and building organisational capacity and trust.
Members save at least 100 shillings per day to this group and they loan to members, generally with interest but no collateral. These loans are usually for household and livelihood needs such as school fees, health care, and small business support.
In each savings group in Uganda there is a collector and a treasurer. The collector is responsible for the door-to-door collection of the daily savings of members. There is no minimum or maximum amount to be saved daily. The monies collected are recorded both in the collector’s book and in the individual’s savings book. The collector is then responsible for giving these funds to the treasurer.
The treasurer records all transactions in the treasurer’s book. The treasurer is also responsible for banking the savings, which is typically also done on a daily basis. The treasurer must keep all bank receipts and present these to the group at weekly meetings. Women constitute the majority of collectors and treasurers; while men are not excluded from these roles, women have proven to be well-suited because of their intimate knowledge of the community.
Federation savings groups see savings as uniting the community and building collective capacity to address larger issues with a wider impact beyond a particular group. Traditional savings associations work to the benefit of the members of the group. Within the federations, however, savings groups serve as building blocks for community institutions that in turn enable them to address and invest resources in issues that affect the entire community or city, stretching beyond those of livelihoods alone.
In each savings group there is also an auditing committee that is responsible for auditing on a weekly basis to reconcile the collection and withdrawal records of the collector and treasurer. All financial transactions and loan approvals are recorded by the group secretary in the meeting minutes.
When it comes to the loaning of savings, there is also a loans committee. This committee is responsible for evaluating the loan approvals made by the savings group and monitoring loan repayments. It is the members of the group that determine the interest rate and repayment period. Members record any loans taken and repayments made in their savings book. Members are free to withdraw their savings as needed by presenting their book to the treasurer or collector. Each savings group account has three signatories to ensure oversight of any withdrawals.
The development of the city-level federation is inextricably linked to the federating of the savings groups. The city-level federation grows out of the networking and institutional structures that arise from the coming together of savings groups in the same settlement or network (approximately a parish), regional (usually city-level), and national level. In Uganda this process started in Kampala and Jinja regions, then spread to other areas through community learning exchanges.
Issue-based committees are established (such as health and hygiene, loaning, auditing, and eviction) that form the structure of the savings group and are replicated at the network, regional, and national level of federation governance. Leaders groomed at the saving group level that demonstrate their capacity and dedication have the opportunity to rise to positions of leadership at higher levels, where they can provide mentoring to the citywide agenda that is firmly rooted in the ideals of the savings groups.
The voices of the poor are taken from savings group level meetings to network-level meetings, and from there inform the city agenda as these voices are brought to the regional meetings. Thus, the city federation is driven from the bottom, not the top. Network, regional and national level meetings are critical to maintaining this bottom-driven process. These, rather than projects, are what make the savings groups feel part of a larger process, a larger agenda; a movement.
In Jinja, for example, there are 42 savings groups which come together as six networks. Each network has eight programme facilitators – 60% of whom are women. These programme facilitators (for the issue-based committees listed above) come together to form the regional council. The regional council should be considered a planning forum as it is a space where the representatives of the savings groups come together to plan and strategise. Facilitators are chosen for the capacity and accountability they have demonstrated in their savings groups. Five representatives – three of whom are women – from the Regional Council sit on the National Executive Council. This is the space for national planning.
At the city level, representatives of the savings groups are able to negotiate on their behalf with city authorities. The savings are the tool for mobilising people into organisations that can collectively determine slum upgrading priorities and implement solutions.
In Uganda, settlement forums initiated by the federation have proven to be an effective way for the communities to mobilise, organise and later send their issues to city authorities for consideration. These forums bring together all stakeholders – such as opinion leaders, savers, women’s groups, the disabled, religious leaders and local politicians – within a particular locality to discuss and agree on the pressing issues that should be pushed to the authorities, the community’s strategies for addressing them, and the partnerships they seek.
For example, in Mbale a forum was convened in Mission Settlement. At the forum the participants identified the issue of malaria as a crucial one, since the drainage in the area was poor and stagnant water the perfect breeding ground for mosquitoes. The forum committee took this issue to the municipal council for consideration and successfully negotiated for the issue of malaria channels to be incorporated into the municipal budget. The municipal forum that was institutionalised by the municipalities in 2011 has led to more community and city engagement around the most pressing issues identified by the community.
The financial value of savings is used to contribute 20% of slum upgrading project costs, and sometimes to repay loans secured for these projects. The value 20% is suggested as a means of demonstrating settlement-level community commitment to a project and leveraging support from other actors.
The whole process of project determination, negotiation, and implementation is rooted in the skills developed as part of the savings groups. Money management, collective capacity, organisational capacity, accountability, and problem solving are skills honed in the savings groups.
Representatives of the communities who engage directly with the city have the support of a broad base of residents, giving the federation the legitimacy to engage meaningfully with authorities. As such, the federation representatives speak on behalf of a major constituency for city authorities. The federation’s organisational capacity allows it to apply pressure on officials and strategise so that this base cannot be ignored.
The case of the Kawama Housing Project in Jinja is a good example. The federation leadership has managed to negotiate for 7.6 acres of land from the municipal council for housing for the very poor. Other successful negotiations with local authorities have enabled the federation to secure land for sanitation units in Kisenyi III, Mbarara, Mbale and Jinja.
Highly productive negotiations with city officials and other actors on the issue of slum upgrading include:
- Citywide enumerations in five cities – Community-conducted household surveys (enumerations) were undertaken in all the slum settlements of Jinja, Mbale, Mbarara, Arua, and Kabale.
- City-wide slum profiling in Kampala – The federation conducted profiles (really more of a qualitative survey in each and every slum settlement in Kampala.
- Urban forums – Urban forums have been convened at the national, municipal, and settlement level and have largely been driven by the federation.
- Transforming Settlements of the Urban Poor in Uganda (TSUPU) – This national government programme is being funded by Cities Alliance, and the federation is the key community mobiliser.
- Social Tenure Domain Modeling (STDM) – Global Land Tools Network/UN-Habitat have worked closely with the Government of Uganda and the federation to pilot an innovative new land administration tool.
- City-cleaning programmes – The federation is supported to clear drains, sweep streets, and generally tidy their cities.
- Community Upgrading Funds (CUF) – Established at the municipal level as part of the TSUPU programme.
- Kampala Community Development Fund (KCDF) – Established in 2011, it aims to bring together the national government, the Kampala council and the federation to manage a fund for community-driven slum upgrading.
- Municipal budgeting – The federation has negotiated a seat on a number of budget councils at the municipal council level, which enables them to ensure the priorities of slum dwellers are incorporated into municipal planning
In many countries, savings groups also save towards their community funds at the city and sometimes national level – called Urban Poor Funds or “community upgrading funds”. These funds are put in a separate pot and used to leverage external funds for collective projects. They are mostly designed to be revolving funds that allow communities to obtain collective loans for slum upgrading and housing.
These funds are a powerful development mechanism. They enable urban poor communities to organise themselves into saving groups and improve their financial and managerial capacity to manage the loans for community development activities, either on behalf of members or the community as a whole, from the fund directly.
They are also an alternative way of avoiding traditional bureaucratic mechanisms that decide development activities on behalf of communities. With urban poor funds, communities decide and design various development activities by themselves, on a large scale, and later link together into networks of learning and sharing of knowledge.
Examples of such funds in Uganda include:
The Suubi Development Initiative: A national urban poor fund established by the National Slum Dwellers Federation of Uganda, with support from ACTogether, Slum Dwellers International (SDI), and the Urban Poor Fund International (UPFI). In Uganda, over 60% of the population cannot access credit formally or informally. In Uganda’s local language, Suubi means hope and, indeed, this fund represents a tremendous opportunity for communities to access and manage the resources they need to combat urban poverty. At present there is over USD$22,000 in this fund.
Kampala Community Development Fund (KCDF): The KCDF was established in 2011 to support the transformation of lives and living conditions of the urban poor. It is a city fund committed to nurturing, sustaining, and developing the growth of proper dwelling and housing facilities in Uganda, in partnership with stakeholders in the community development fraternity and other development partners. Since the fund was operationalised in June 2012, five loans worth 29.6 million Ugandan shillings (UDS12,300) have been issued to groups in Kampala’s five divisions. Its board comprises 60% community members, 20% government, and 20% support NGOs.
Community Upgrading Funds (CUF): City funds were established by the Government of Uganda with support from Cities Alliance as part of the Transforming Settlements of the Urban Poor in Uganda (TSUPU) programme. The funds are located within the municipalities of Jinja, Arua, Mbale, Mbarara, and Kabale. Once they are operationalised, the funds will target improved community infrastructure, and the federation will monitor their use in order to increase efficiency. The federation has been pushing the municipalities to appreciate the enhanced cost effectiveness of upgrading projects that use community contractors rather than those required by municipal procurement policy.