Amazing what can be accomplished when a group gather with like-minds to advance in their financial status. #000341 By Octavian Msongamwanja
Community Savings Group
By Octavian Msongamwanja
On behalf of Inspiring Better Business my name is Octavian and I thank you so much for joining us today. I would like to talk to you about savings group and I want to start with the story for many years. I was working implementing Village savings and lending Association or community banks whereby groups come together, members come together, and that they decide how much they will be saving every week or every month. Then what they do every time they meet and save money all that money needs to be loaned out from that day. And then they said their own agreed interest rate that needs to be paid, but also the time that someone can keep the money for, like the long period how long does it, you know will you stay with the money so they decide all that and also they set their own rules and regulations like. If someone comes late to the meeting what do, they do they pay fines but a fine is not part of their savings that fine is part of the loan fund. But you don’t get anything any interest on that you get as a group but not as it, doesn’t go as your savings and also they do all that but the importance of the savings group that different are benefits that, this savings group bring one is it provides an opportunity to the group members to save money. Which is very key because you find out most of these groups where they are sometimes, there are no bonds like its banks or banks are very far away.
It is not very expensive to travel to where the banks are, and then cause some of them they don’t have relatives in these big cities where the banks are. So, they must stay maybe in a lodge or something and then must pay for transportation, so it becomes expensive for them to be able to know put their money in the banks. And if they put money at home when there are uncles or the aunties or somebody comes, they have a problem they need help then, if you have your money under the pillow. It Is easier for you to go and pick it and give it to someone else so this community savings helps group members to have a place, safe place that they can save money. Because no one keeps the money as I said the money once it is saved it must be loaned out and then even when they paid back when those people who borrow money paid back. Then they will do the savings again and then add with the loan repayment, the money that was paid back as loans then all that money will be added together and say our loaned out again so that money keeps accumulating. And then another thing so that can help also, one benefit that these groups provides is an avenue to save money. Number two, it provides an access to capital this is a big thing because, we have been making a lot of calls and I have been involved with a lot of mentors, one of the major questions are people always ask is. How can we find funding and this could be for a member who is about to start a new business or to start a business they have never had a business before or a person who has been in business but they want to scale up their business to they want to grow their business to the next level?
So it’s like they feel like I need to get to this level, are you guys providing us with funding? well how can I find money to take my business to the next level, so these savings group provide the group members with an opportunity to access Capital. Another point is, it helps these group members to fund emergencies, because sometimes like most of this savings group what they do is they save what is called social fund. This social fund every meeting when they meet the same social bond but, if there is no emergency from there’s no member who was on emergency, so what happened that Social Fund is mixed with the shares that people have saved. Also, they’ll only payment money and all that money is loaned out but, if there’s someone who was a problem and they’ve reported and the group of approved this is a legitimate reason that we need to give this person this social fund. Then a social fund is a grant that person is not required to pay that money back. Day after they keep it is for good, if someone may be one of the group members he seeks and are meted they will use that money to help them maybe pay some of the medical bills and stuff like that or buy medication and things like that. Nobody these groups operate for 12 months so what happens is like once you in your committed yourself for months. I’m going on you cannot all 5 months you have to stay in until the 1 cycle is over which is 12 months, when that 12 months is over then that’s now the group will do the group what it does is they share out all the money that people have saved. Also, you get back the savings that you have shipped, you have saved for example every month for the last 12 months but also the interest of savings has on over that period that same period. So, you’ll be able to get that money back but then during that time the group will have an opportunity to say man we have had a good experience with this group. We don’t want to continue so that is one, the group completely all together but also they can decide okay, we really enjoyed this group except we had few members that have been you know like we do you know what we don’t want to continue with them. So those members that can be let go or some members I can say very good you know experience with this group but, I want to join another group or I’m done with group I want to go on my own.
Also, they can draw the group and you know continue their own so after every 12 months. It’s like you know train reaching our station people can get in and some people get off, so that is like that’s part of how the savings group operate and no more like. We told people about that the savings group have two concepts: 1) cold money 2) hot money. Cold money means, if someone goes to that group and inject money, for example my organization that they are asking me if we decided to give them money that is cold. Because what happens is the person who receives that money, when they fail in business, they might fail to pay back the money because they would say that money was not from us. That money came from the other organization so who are you to come to me and tell me, I need to pay this money, but on the other side there’s what we call hot money. That is the money that people have labored so hard to get this money to save the money, so that this person can borrow so when they fail to pay that money back the whole group will go there. You have to pay your money right now because this is the money that they sweated, they worked so hard if it is farming or whatever it is, they worked so hard to get their money. So it is their own money they are, they feel the pain, they feel you know whatever it took for them to get their money, they will make sure that person pays the money and that’s part of the success.
But I’m not saying that injecting money is always bad, but it depends for example there’s a group in Kenya we visited last year with Mr. Gary, and what happened was they started with a thousand dollars in 2009 and there were 11 people. Over time I think maybe about 10 years until last year and visited them there were nine years, they were able to generate over two million dollars, and right now this year they told us they are over three those of their own money. Now they are learning out they are learning the money are to other members to other people, but also, they into real estate and property management. So now they are about fifty-nine people and they are saying that is the fixed amount the fixed number of people they don’t need any more people to come and join them. So, if you want to go join them you go on investor and they’ll pay you back with a nice interest rate, so a group like that is well established and they don’t have problem. They know what they do and you can, they can adjust and come up with you know be flexible, how they want to run their business but when it’s the group is new and normally they work on cycles. Then they are very strict when it comes to their rules and regulation and things like that. Thank you very much for joining us joining us today and thank you for spending time with us and I hope that this will open your eyes to understanding more about community savings thank you so much.
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