What Are Savings Groups?

A ”savings group” is a community-based financial initiative where a small group of individuals come together to save, borrow, and manage their finances collectively. With a simple, transparent, and democratic setup, savings groups enable communities to pool their resources together to create a shared fund, building their confidence in managing money, and supporting one another along the way. They provide small loans, saving facilities and sometimes social insurance. Operating as more than a financial collective, they promote communities of learning and trust.  

Savings groups tend to be small, typically bringing together just 15 to 25 members. Despite their size, their impact can be anything but small. Promoting financial inclusion, the groups support people who have traditionally been excluded from formal financial systems — and they do it through community, trust, and shared purpose.

By creating opportunities for financial inclusion, their popularity has grown rapidly over the years particularly in Low-Middle Income Countries (LMICs). According to SAVIX (the only reporting system on savings groups programmes worldwide), there are now more than 630,000 savings groups across Africa, Asia-Pacific, and Latin America serving over 13 million members.

Insights from Sierra Leone

Africa is home to more savings groups than any other region in the world. Sierra Leone stands out as a country where these groups have become an important part of local community life. It is also where Social Income began its journey.

Several studies over the years shed light on how these groups shape livelihoods. Their findings show both inspiring progress, meaningful challenges, and perspective on how groups can operate differently depending on context, purpose, and setup

What Studies Tell Us: Savings Groups Can:

1. Provide growth for farms and futures (2023):In Moyamba District, a study of smallholder farmers found that participation in savings groups supported agricultural activities and helped families fund school fees through loans or shared profits.

2. Act as a support mechanism during crisis (2017):A USAID cash-transfer project for Ebola-affected households, identified that participants valued the groups’ lower borrowing rates compared to local moneylenders, as the groups provided a vital cushion during difficult times

3. Generate different outcomes for savers and borrowers (2021):In the Bombali District, women who saved regularly reported improved overall wellbeing. But loans didn’t always bring the same benefits, especially when used to cover urgent expenses rather than long-term opportunities.

Common Risks Associated with Savings Groups

While acknowledging the huge potential of savings groups, it is important to have a holistic point of view. Saving groups don't come without risks.

Fund limitations, operational challenges, and potential for loss of funds are among some of the most commonly associated risks. High demand for loans during community-wide shocks can lead to pots being drained quickly. People managing the funds can also mishandle the funds or they can be stolen, without any insurance to get them back. 

Being a member can also open up pressure to keep contributing, which can recreate the downsides of microcredit on a smaller scale. 

Despite acting as a vital support mechanism during times of crisis, when a crisis deepens, groups can run out of funds just as needs rise — a challenge researchers call the “resilience paradox.”

These insights reveal a nuanced reality: savings groups have a proven track record as a means to strengthen inclusion and build community resilience, but they also need tailored support, training, and a buffer for emergencies to remain reliable during turbulent times.

While savings groups might not be a silver bullet for solving financial exclusion, they frequently help communities take meaningful first steps towards financial inclusion.

Is Social Income Engaging with Savings Groups?

SI focus is firmly on cash transfers.  Some of our recipients do choose to join or create their own savings groups.  Some recipients reached through the Jamil Foundation chose to join and participate in women only saving groups. 

In our annual partner meetings, we sometimes hear the suggestion that Social Income should also manage savings groups. We have intentionally not taken this on, for multiple reasons:

1. It would dilute our core mission: direct cash transfers

2. Savings groups already function well when organized locally: For this reason there is little value in replacing something that works

3. Managing people’s pooled savings introduces legal and regulatory responsibilities: An organization running savings groups can be classified as a financial intermediary, meaning that there are a lot of additional compliance obligations that come with additional overhead costs

Our approach is that no one should feel forced or obliged to join a savings group, it is each individual's choice on how they manage their money.