If you’ve been following our work, you know that we’ve got a favorite approach to poverty alleviation. At the same time that microfinance was making a big splash on the world stage, Self Help Groups began to turn heads in India and East Africa.
Microfinance interventions take a linear approach to financial inclusion that simply scales down the size of a loan until it fits the borrower’s level of poverty. The strong financial incentive to attract borrowers in huge numbers led to a number of unsavory actors selling extortionate loans to poor people who lacked financial literacy and frequently exacerbated poverty. By contrast, Self Help Groups build enduring, self-sufficient micro-economies.
Self Help Groups are formed amongst the poorest of the poor, usually women and often in rural areas or vulnerable neighborhoods. They come together once a week and begin saving tiny amounts of money into a collective fund. At these meetings, the group works its way through the pillars of financial and business literacy so that they understand the risks and rewards of loan taking, the various types of interest as well as the basics of business plans, marketing, and income-generating activities. There’s also a healthy emphasis on conflict resolution, women’s empowerment, and inclusive group process.
Once groups have enough money from their combined membership (groups are typically around 15 members strong), individual members can request small loans from the collective. The entire group takes an open book approach to evaluating the possibilities and decides where to risk their capital and on what terms, typically by consensus.
When problems arise or businesses fail, these groups are likely to take a softer, more forgiving approach to the unlucky member than a typical creditor—after all, they are going to stay in community with each other for many years. SHGs regularly build up a secondary fund to help buffer individual members against unforeseen expenses (health, funerary, disaster-related), so that members aren’t driven into deeper levels of poverty by misfortune.
We’re working with more than a dozen organizations that run these programs and our motivation is to help them scale this transformational approach to poverty alleviation as fast and as far as they can. While traditional approaches to program scaling involve opening new offices or transporting staff around a country with boxes full of notebooks or training materials, we’re exploring how digital technology can lighten the load on supporting organizations.
We believe that an optimized digital platform can enable the program coordinators who might oversee 15,000 groups to have greater and more timely insights into which groups need help and why. When organizations can target their support (instead of cast a broad and costly net on a quarterly basis), the same small team should be able to support a greater number of groups. When the people who facilitate Self Help Groups have a resource-rich mobile application in hand, they also have a means of standardizing and raising the quality of group facilitation.
And this year, we’re finally growing up: taking the leap from hosting a content application to supporting a full-fledged digital platform. For the first time, we’re giving facilitators an opportunity to submit some simple group-based financial metrics during meetings. These metrics (like total group savings, group attendance and the number of outstanding loans) are sent to our web-based dashboard where coordinators can sort them and look for areas of concern.
We’re also launching six new language versions in early 2018: Luganda, Chichewa, Kinyarwanda, Oriya, French and Spanish—added to Kiswahili, Amharic, and English. Our content library also keeps filling up with new field-tested group learning activities to help the groups to look after their interests more effectively.
This is the first of our projects to reach such an exciting level of scale and sophistication and we’re discussing with our technicians and partners what sort of innovations we can incorporate to look after data privacy and security and also how we can set a truly responsible precedent in the arena of Digital and Financial Inclusion.
Self Help Groups are remarkable because of how they de-risk lending for extremely vulnerable populations and we want to build on that success. Financial institutions, donors, governments and non-profits are scrambling to connect the poor (individually or together) to elements of our financial system (analog, mobile or digital). We are committed to building one of the safest possible on-ramps for people who have never before confronted this system or its incredibly diverse array of products and motivations.
Later this year, we’ll be seeking additional financial support to help keep our product free and open source and we welcome any introductions to donors, private or public.
We’re also happy to connect with organizations who support Self Help Groups, Savings Groups or Voluntary Savings and Loans Associations to explore whether or not our platform is a fit for their ecosystem. We’ve built a smooth pathway for incorporating new language translations, so there are no geographical limits.
Stay tuned for more exciting updates later in the year!