Why savings and loans?

There are a number of advantages to community based savings and loan activities. 

  First, community savings and loan activities draw people together on a regular and continuous basis.  They offer opportunities members of low-income communities to develop their strengths gradually through making collective decisions about concrete activities that affect the community.   

Second, the financial mechanisms are grounded in daily activities, saving and lending are quick, simple, and related to the real daily needs of the urban poor - as defined by the poor themselves.  

Third, savings and loan activities provide the urban poor with their own resource base to answer to their basic needs.  

Fourth, as importantly, the process create an on-going learning within the community about each other’s lives, how to manage together and how to relate to external systems with greater financial strength, to achieve more than day to day needs.  It is a process that every community member can relate to and which everyone can be involved in controlling.  It is a gradual process that provides the community with the capacity and confidence needed for a true and comprehensive self-development process.   Consequently, the poor can enjoy the pride that comes of being the owners of a process, not merely recipients waiting for benevolence from outside.

 Savings and loan activities are not simply an end in themselves, rather they are a means to strengthen community processes so that people can work together to achieve their multiple and diverse needs.  Once people have been brought together, there is an opportunity to link saving with related issues in need of being addressed.  For example, if achieving secure housing is beyond the immediate financial capacities of the community, the whole group needs to understand what is required to secure housing.  The group needs to simultaneously develop other processes, parallel to savings and loan, such as land searching, securing subsidies, price negotiations and infrastructure development.  In this way, all crucial elements in the struggle for secure housing have to be brought together and realised by the people themselves.

 Experiences in several Asian countries show that small scattered savings and loan groups that are supported to learn from each other with proper facilitation are likely to link to other groups and form networks as they become more mature.  These networks offer opportunities to bring together savings capital in a common capital fund.  Networks also provide groups with access to greater financial resources and enhanced legitimacy when negotiating for support from external agencies.  As they grow they may also lead to further collaboration between groups of the urban poor.

  This process has profound political implications as it addresses one of the major characteristics of the powerlessness of the urban poor – their isolation.  The stronger status of larger networks makes it possible for the poor to deal with the more substantive structural issues that relate to their problems - issues that were beyond their capacity before.  Networks increase the negotiating position of the poor, as they can demonstrate workable, self-managing community processes.  In the past two to three years, over 100 such networks have been organized in Thailand.  They have resulted in expanding activities and roles among urban poor communities and a much broader acceptance of their presence both in their immediate localities and beyond.  These networks have begun working with municipalities and other local organizations on issues vitally related to the lives of their members such as citizen rights, housing, welfare, community enterprises, community environment and health.

 If these stronger community processes can link up with good external sources of loan capital, then low-income communities are able to access and manage the financial resources they need to support the people’s own development process, as directed by the people.   Box One describes the Urban Community Development Office in Thailand that has sought to be such an external source.  Saving and loan groups or other grassroots organizations such as community co-operatives can help to bridge the formal and informal systems - the formal outside and the informal inside the community - so that financial resources can flow from one to the other with adjusted mechanism between the two different system.  This bridging function is critical if external capital is to be used by the poor in ways that do not increase their vulnerability.  For example, it is difficult for an individual working in the informal sector to make regular monthly repayments but a large group can help individual members to spread their repayment capacity.  Community savings can be used to bridge finance in particularly problematic months.   Together the two forces of community savings and lending activities combined with an external source of credit provide a powerful catalyst for development.

 

 

 

SAVINGS AND CREDIT
For Poor Communities

The Breath of Life

Our Family

The Pulse

The Glue that holds Us Together

The Life Line

What they're saying in 
Thailand, India, South Africa, Cambodia

  click

 

 

 

 

  

Overview of Savings and Credit  

Celine D’Cruz

A Reflection on Saving and Credit in Phnom Penh  March 1999 for ACHR TAP

  click

 

NETWORKS In THAILAND

by Somsook Boonyabancha

  click

Somsook Boonyabancha
UCDO / ACHR Thailand

" Savings activity is a tool, not an end in itself.  Savings and credit is a means of engendering a community's own holistic development. "

UCDO became CODI
in late 2000

CODI  is the

C ommunity
O rganisation
D evelopment
 I nstitute 

 

CODI Web Site 

www.ucdo.thai.com 

Box One 
above describes the history of the Urban Community Development Office. 
The table below shows its recent growth. 

What does not emerge from these figures is that the Office has targeted some of the poorest urban communities, seeking to work with local groups to continuously improve the support it is offering to those with the lowest incomes in the most vulnerable situations.

                                                           Sept 1996     Sept 1998     June 2000

No. of savings groups                          355                   484                   852

No. of individual members                47,959              65,940              99,015

Total UCDO member savings           317.27              444.28              515.74
                                                        

                                                                (million Baht     US$1 == 44 Baht)  
Housing development loans                343.33              424.01              470.32

Housing improvement loans                44.84                102.99              110.93

Income generation loans                      109.32              163.25              200.86

Revolving fund loans*                              45.49                73.80                79.95  

Total credit repaid                                    103.22              225.85              333.67

Total credit outstanding                         382.82              498.12              502.34

* small loans to communities for them to on-lend for a variety of collective activities

 In this way, savings and loan activities can go some way towards addressing the problems that the poor face in securing housing and their other development needs.  They can reduce the isolation and powerlessness faced by the poor.  They can create stronger larger groupings of the urban poor able to negotiation with state agencies and other external groups.  And they can provide a mechanism to enable the poor to benefit from formal processes whilst maintaining their own informal systems that are a consequence of their livelihood strategies.  In addition, they can reduce individual vulnerability through providing an immediate lending facility that is knowledgeable about each families’ needs and capacities. More specifically, savings and loan groups and networks provide an alternative system through which much-needed financial resources for development can directly flow to the target urban poor in the form of loan capital, and in ways that can be managed by the people themselves. 

 

APRIL   12    2000
Bangkok Thailand 
 
CODI Co-opted into Prime Minister’s Million Baht per Village Program

Thailand’s CODI  - Community Organisations Development Institute - will help the new Prime Minister fulfill an election promise of distributing 1 million bath to each of the poorest of rural Thai villages.  A larger meeting between Government and CODI and community networks is scheduled for around May 6.

 

 

 Next    3  Credit for Housing

     Introduction
     Why Savings and Loans    you are here
     Credit for Housing   
    The community process  tools and clues
     The Asian Crisis as an Opportunity  
    Conclusion