Community
Savings and Credit
Introduction
Community-managed
savings and loan programmes have emerged as one of the most powerful
tools to draw together the many people and disparate groups that exist
within poor communities. Because
they are controlled and operated by community people themselves, savings
and loan programmes build a community’s own resource base. People can develop themselves and provide for their own
needs, both individually and collectively, through the ongoing process
of regular, concrete decisions that are inherent in collective
management of a savings and loan programme.
Among
the problems faced by the urban poor is that of inadequate access to
housing and land with secure tenure.
In many cities (especially the larger conurbations), the poor
cannot afford to buy land through the formal market systems.
Their informal incomes fall well below what is needed for housing
to be affordable. There is
a clash of formal and informal systems, particularly but not
exclusively, in regard to housing.
For example, it is difficult for the poor to repay housing loans
on a regular basis. Even
when the formal system is prepared to lend to the poor, monthly
repayments are difficult for those on informal incomes.
At the same time, there is a lack of well-located and available
land. With secure land
close to their work, the poor can develop their own land gradually at a
pace they can afford. But
due to high levels of income inequality and speculative investment, the
price of well-located land is very high in many cities.
Speculation may mean that land is left vacant but lack of
security means that it is often difficult for squatters to invest on
such land. Alternatively
land may be available but it may be in unattractive locations that are
either dangerous or a long way from the city.
Hence there is no obvious point at which the formal and informal
housing systems can come together.
In this context, it is difficult for the poor to identify and
hold onto local improvements.
Government
programmes have sought to deliver subsidised welfare based housing to
the poor. However, the
systems of delivery that are commonly used face many problems.
These centralized systems create their own bureaucracies, have
too many steps, take too long, cost too much money and often lead to
corruption. Too often, due
to their lack of insight into the lives of the poor such systems end up
missing the target group and delivering housing to groups that are not
so poor. Even if they are targeted correctly, many of the poorest
cannot afford to stay in welfare-based housing projects where they are
isolated from the vital support systems of their original communities
that underpin their own survival. As
the numbers of the poor and the extent of the problem grow, there is a
corresponding increase in organizations, agencies and government
position to address the issue. However,
few of the growing number of international experts or organizations
learn about the solutions that the poor are using and they have little
impact on the scale of need.
In
this as in other areas, the poor are isolated, fragmented, unorganised
and powerless to negotiate with or participate in decisions about
their lives. As a result of
their absence from decision-making, the poor are not able to secure
resources or influence policies that affect their lives.
Even in cases where they can and do organize themselves, there
are limitations to their success. They
may extract concessions from government but they are rarely able to
maximise their advantage; improvements are promised but implementation
often does not take place. Until
people’s organizations develop their internal management and
experience in community development, it is likely that they will
continue to be ignored.
The
lack of financial development in many countries means that there are few
formal opportunities for savings and loan activities in low-income
settlements. Whilst finance
alone may not be an answer, the lack of investment capital compounds
many of the problems. In
addition to providing a route to strengthening community organizations
and addressing basic needs, savings and loan activities may be the
beginning of basic financial institutions among urban poor communities.
If savings groups are linked to institutions that provide
capital, then they can offer an even more powerful route to expanding
localised financial activities and provide low-income communities with
the financial liquidity that development requires.
This
paper describes how and why savings and loans can support such a
transformative process that works for the poorest members of low-income
communities. It draws
particularly although not exclusively on experiences of the Urban
Community Development Office in Thailand.
Section Two
discusses savings and loan related processes in
more detail and describes how such activities can channel external
resources to the poor and why they are proving to be such a powerful
form of development intervention.
Section
Three looks particularly at the use of lending for housing development
and how outside development agencies can affect the usefulness of the
finance they offer through the adoption of specific lending terms and
conditions.
Section Four
then explores the community processes that are stimulated through the
targeted use of savings and credit.
Section
Five uses the experience of the financial
crises in Thailand to further explore some of the more critical
management processes involved.
