"One community dollar equals a thousand development dollars"

It has been said that a single community dollar is equal to a thousand development dollars, because that community dollar represents the commitment of thousands of poor people to their own development.

Without the direct commitment of a savings scheme, people can participate in any kind of development freebie that comes along. But when development comes from people's own savings, it's theirs, they own it.

Without this, development and improvements have no meaning.

Community Savings and Credit

 

Daily "Araw-Araw" Saving . . .

For most federation members, saving and lending on a daily basis ("Araw-Araw" in Tagalog) is a key element in their organizational strategy.

Daily saving aims way beyond financial benefits, and has several advantages over weekly or monthly saving systems :

DAILY SAVINGS

* Pulls communities together

The constant interaction and constant exercise of communal decision-making that is inherent in a daily saving system "work like glue" to knit communities together. Daily transactions provide daily opportunities for people to meet, compare notes, pass on news and identify common needs, and are a powerful community knitter-together. Weekly or monthly saving systems miss out on this dimension.

* Matches informal earning patterns

For most of the urban poor, whose livelihood comes from the informal sector (laborers, scavengers, vendors, hawkers, etc.) both earning and spending of their money are daily, not weekly or monthly. When a savings system accommodates those earning patterns and makes it easy to deposit those daily earnings when they're still in the pocket - no matter how small - then it makes it possible for everyone to save.

* Brings in the poorest

 Monthly savings systems tend to work best for those better-off community members with more regular jobs, while they often exclude the poorest. For those living day-by-day on the edge of subsistence, putting very small amounts of money into savings each day is much easier than trying to put in a large amount all at once. This makes daily saving a system that works for poorest.

 

The common denominator throughout the Philippines Homeless People's Federation is savings.

All groups that are part of the federation are actively involved in running community savings and credit programs in their communities. The money which they save together creates a revolving community fund, from which members can take loans for their small enterprises, for emergencies and day-to-day needs, and for improving their houses. Members also save for land and housing in special housing savings accounts, and many take part in community-based health-care insurance schemes which groups in several cities have initiated, open to the poorest and most vulnerable in poor communities - scavengers, disabled persons, HIV patients, drug addicts and the elderly.

All of these community savings schemes are made up of many, many small groups of neighbours, who collect daily savings deposits among themselves and issue loans from their collective savings, according to guidelines and systems which they set themselves. In most cities, groups use part of their savings for their own internal lending and turn in the rest once a week to their Area Resource Centers (ARC), through which loans between groups can be taken from the larger city-wide savings pool. Procedures for saving and taking loans are managed simply, flexibly and openly, without any rigid banking-style rules, but with a few clear accounting rituals which ensure that everyone can understand and everyone can take part in the process, so responsibilities and information are shared.

Loans are given without collateral, and require only that borrowers have a solid record of savings. Decisions about loan applications are made collectively, by peers within the same community, who know the situation personally and can evaluate the borrower's need realistically. Yearly interest rates of between 12% and 18% are charged on loans. A small percentage of this interest earned on loans goes into supporting the administrative costs of the local ARCs, and the rest gets plowed back into increasing the capital available in the loan fund. So while it's helping people, that money keeps growing!

As senior member of the national federation, the Lupang Pangako Urban Poor Association (LPUPA) in Payatas has played teacher and host to innumerable visitors from fledgling savings groups in other parts of the Philippines, who come to learn the nuts and bolts of managing a community savings and credit system. When visitors come to Payatas to learn, it's poor people teaching other poor people, walking each other through all the rituals of community savings scheme management :

Over the past five years, members of the Lupang Pangako Urban Poor Association (most of whom are scavengers who earn their living collecting recyclable materials on the garbage dump and are among the country's poorest) have transformed a small, church-managed micro-credit program into a thriving community-driven savings federation, with over 7,000 members in 680 savings groups.

Members take loans from their own savings for emergencies, for day-to-day needs, for setting up small businesses or expanding their recycling operations. These micro-enterprise activities have bolstered incomes, strengthened the community's financial and organizational capabilities and given the scavengers increasing clout in their negotiations for land and external credit for housing.

Savings in Payatas have crossed the 15 million Peso mark, over 10,000 families have taken loans, and a 100% pay-back rate has allowed their savings capital to turn over several times.

Savings schemes in other parts of Manila and in other cities around the Philippines are following in these footsteps.