When money is kept in a sugar bowl or in a gold chain, it just hangs around someone's neck, doing nothing. But when money goes into community savings, it gets busy. It helps build houses, helps start small businesses, helps people in a crisis, helps pay school fees and doctor bills, helps build stronger communities, helps generate more assets, more money and more options for people's futures. Over 22 million Pesos have been saved in the federation so far, but 81 million Pesos have been given in loans. That means that all that money has been loaned out and paid back four times in just a few years, creating assets and increased wealth worth well over 100 million pesos in 20,000 households. All this in a group of communities with an average household income of just 3,500 Pesos a month! 

Talking Savings in Payatas

Singing Savings in Cebu 

More than just access to credit . . .

Making   savings and credit   the building block of a people' driven community development movement in the Philippines

It's more than just a convenient source of low-interest credit to the poor. Community-managed savings and credit is a key ingredient in poor people's struggle towards better lives, better incomes, more secure housing and more healthy settlements. Community groups without savings can certainly link together and organize to a limited extent, but with savings and credit at the core of the process, communities have both money and power - those two most essential ingredients for improving people's lives. 

Why have federations of poor communities in the Philippines and throughout Asia and Africa embraced the simple rituals of savings and credit as the foundation of their development process  ?

 

The money lender trap

When you look at the alternatives, it's not surprising a friendly community credit system offering small loans at low-interest rates would take off in poor communities around the country.

Indebtedness to informal loan sharks is a huge problem in the Philippines. 

Many of the Philippines poorest, who live on the edge of subsistence without a single peso's margin, have no option but to go to the local money lender for loans to buy stock for their small businesses, or to tide them over when emergencies come up.

These guys charge anywhere from 5 to 20% interest per month ( that's 60 - 240% per year! ) and can use brutal tactics on anyone who doesn't pay. 

In the "one-day-loan" system they might charge 100% per day! 

At these kind of rates, debts quickly skyrocket, and many find themselves in a swift, downward spiral, with more and more of their money going just to pay the interest, losing all hope of getting out of debt. 

It seems crazy to pay this kind of interest, but to those with no other credit options, the money lender means survival, and so people keep going back. 

This is why the poor stay poor.

 

SAVINGS AND CREDIT RITUALS 

help people understand their own situations and needs  
Instead of waiting for the government to provide development, communities now study their own needs, study what the state policies provide, and formulate solutions that work for everybody. They begin by looking at their own resources, and negotiate outside for only what they don't have themselves. The savings group is a forum to discuss, to analyze problems and to explore solutions to problems which affect them. The stronger their savings groups, the greater their capacity will be to deal with those problems.

builds  A  large scale
When savings schemes collect money, they collect people. Without big numbers, people can't get this kind of momentum to articulate their needs. When many small savings groups link together into larger organizations, those larger numbers provide access to greater financial resources and enhanced clout when negotiating for basic needs. This process has political implications, since the stronger status of large federations enables the poor to deal with larger, structural issues related to their problems.

develops community strength
When communities save their money together and make decisions together about how to use their collective resources, they are developing the confidence, the managerial capacities and the collective skills they need to link with the formal system in negotiating for secure land and access to entitlements and to become central players in the larger urban development equations.

creates the bargaining chip of collective assets
Poor people's individual savings are peanuts, but when large numbers of poor people put their savings together, it's big money. This enormous, growing collective asset bucks the myth that the poor are helpless and have no resources. When they come into negotiations with resources in their hands, they're not beggars, they come with thousands of people and millions of pesos in savings. That collective asset makes a strong bargaining chip when negotiating with the state, with municipalities and with finance institutions for land, housing and access to external finance.

makes poor communities potential development partners
Savings and credit schemes create the self-management systems, collective assets and large-scale involvement in poor communities which show government, landowners and finance institutions that the urban poor need not be seen as obstacles to urban development, but can make viable partners in the struggle to make our cities better for everyone.