Financial Services and Sustainable Livelihoods for the Poor

Financial Services and Sustainable Livelihoods for the Poor

Multiple rural areas, South AfricaPietermaritzburg, South Africa
Organization type: 
nonprofit/ngo/citizen sector
Project Stage:
Scaling
Budget: 
$500,000 - $1 million
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

SaveAct promotes safe and reliable savings and financial services complemented by financial education and enterprise training for South Africa's rural poor.

About Project

Problem: What problem is this project trying to address?

SaveAct was established to respond to social and economic exclusion, particularly of women and other vulnerable groups living in poverty. The challenge that most poor people face is a lack of safe, reliable and convenient financial services to manage their irregular incomes. There is also a lack of technical skills in enterprise development and agricultural activities. Although the South African financial landscape shows a multitude of formal, semi-formal and informal financial services, 27% of the population is still not able to access any type of financial service. In rural areas, this figure rises to about 38%. It is estimated that 4.5 million South African poor people constitute a potential market for SaveAct's model. This would benefit their households (about 20 million people).

Solution: What is the proposed solution? Please be specific!

SaveAct model consists of three phases: 1. Community-based promoters train and mentor self-selected groups in how to save and lend money to each other according to a rigorous system. This provides members with a safe and convenient place to save money and take loans at a low interest rate. 2. Groups are trained in financial education. This equips them with the knowledge and skills to better manage their finances, budget for expenses and improve their coping mechanisms. . 3. Mature members are trained in enterprise development. This helps them to select, plan and manage an enterprise. The model aims at empowering beneficiaries to develop their own pathway out of poverty and exclusion through escaping a spiral of debt, building assets and stabilising their household economy.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

Members of savings groups are trained in the savings methodology. Groups are self-selected and self-governing. Members meet monthly to save and lend to each other. Loans are repaid with interest. The interest is decided by the group and is usually 10% pm. At the end of a saving cycle (usually 12 months), the capital is shared out among members according to the amount of money they have saved during the cycle, with higher savings levels being rewarded. Members earn an annual return on their savings of around 30-40%. At savings meetings members receive financial education to enable them to manage their money better. Later, mature members interested in enterprise, receive training in enterprise. They are then channelled into commodity interest groups. These groups act as centres of learning and platforms for collective activity to support enterprise. For instance, members pool funds to buy inputs for farming. This allows access to better quality inputs, while saving on the costs of goods and transport. Members use their loans and share out for consumption and investment purposes. Funds are often used to start new enterprise activities or improve existing productive activities. Thus, financial services and livelihoods are possible where there were no services.
Sustainability

Marketplace: Who else is addressing the problem outlined here? How does the proposed project differ from these approaches?

There are few competitors in South Africa. SaveAct is regarded as the pioneer of a new and sustainable alternative able to reach the very poor even in the most remote rural areas. Some agencies use a similar methodology but have not been able to reach a high number of members; whereas SaveAct’s work is embedded in communities through community-based promoters that derive service fees from groups. Providers of mainstream microfinance have not succeeded in South Africa. Other providers have not integrated financial education and enterprise development into their model. SaveAct’s unique stepwise model (see poster) sets it apart from others.
Team

Founding Story

SaveAct, with Ford Foundation support, had been experimenting in savings methodology for a few years. The founder attended a course in savings methodology in Zanzibar for 1 week. After this he began introducing adjustments to the model, with stricter attention to detail that instilled greater confidence amongst savings group members. Concurrently, older groups were doing their annual share-outs. These factors combined to create a tipping point, after which the programme began to grow. Demand has continually escalated from that point on. Despite being a small NGO, SaveAct has been able to change its way of implementing to allow for accelerated implementation at lower cost through the partnership with community-based promoters. That is when we knew we could scale up this model in South Africa.
About You
Organization:
SaveAct Trust
About You
First Name

Anton

Last Name

Krone

About Your Organization
Organization Name

SaveAct Trust

Organization Country

, KN, Pietermaritzburg

Country where this project is creating social impact

, KN, Multiple rural areas

How long has your organization been operating?

More than 5 years

Has the organization received awards or honors? Please tell us about them

We have recently been selected as finalist for the Productivity SA Awards.

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Innovation
How long have you been in operation?

Operating for more than 5 years

Which of the following best describes the barrier(s) your innovation addresses? Choose up to two

Access, Quality.

Social Impact
Please describe the goal of your initiative; outline what you are trying to achieve

The goal is to develop effective and relevant strategies to address poverty and exclusion at scale in South Africa and beyond. South Africa has a peculiar form of rural poverty, distinct from the rest of Africa. Its dominant formal economy and migrant labour system undermined the rural economy, whilst HIV/AIDS wreaked a devastating toll on human life. The government and other actors have lacked effective strategies and at times ignored the situation. This compelled the founder to establish SaveAct, with the express purpose of empowering the rural poor, especially women, to assume agency and establish a pathway out of poverty. Safe and reliable savings-led financial services seemed to be the most powerful way to achieve that goal.

Which barrier(s) to financial inclusion does your solution seek to address? (select all applicable)

Physical and other accessibility obstacles that prevent communities from reaching financial services, The lack of affordable financial products tailored to the needs of underserved and excluded communities,, Other (Please describe below).

If you selected 'other' above, please specify which other barriers to financial inclusion you solution seeks to address:

Financial literacy: Financial education is provided to enable savings group members to navigate the complex financial world.

For which underserved or excluded communities will your solution create access to valuable, affordable, secure and comprehensive financial services?

Savings group members are living in rural and peri-urban areas where access to financial services and infrastructures are scarce. Economic opportunities in these areas are low and the majority of people live with less than $2 per day. A high number of people are affected by HIV/AIDS and other chronic diseases. Members have low levels of education and are mainly unemployed. The majority of them are women and youth. This reflects a South African pattern where men migrate to bigger cities to find employment, leaving women and children behind. These communities try to make a living on agriculture for subsistence, piece jobs and government social grants. These communities are from the former ‘homeland areas’ where people were most severely affected by apartheid policies.

Could your solution work in other geographies or regions? If so, where?

SaveAct methodology has proven to be highly scalable. It has worked so far in several areas of two of South Africa’s largest provinces (KwaZulu-Natal and Eastern Cape) and it can be scaled up to reach other provinces and regions of Southern Africa. In the next 12 months, SaveAct will expand in two more provinces of South Africa: the Free State and Limpopo. The methodology is flexible and can easily be adapted to local circumstances. This will allow SaveAct to expand or replicate its model in other neighbouring countries, such as Zambia and Mozambique. Africa has a tradition of indigenous saving that is conducive to scaling up the model.

If your solution is dramatically successful, how will things be different in 10 years?

In ten years time members of savings groups who have been in a group for several years will have developed their path out of poverty. They will have built assets, developed new sources of income and acquired new knowledge, skills and extensive experience in managing their finance. Thus they will be less vulnerable to emergencies and shocks. Women in particular will be more economically independent. In the broader community there will be a new sense of working together and people will be better equipped to organise collective activities. Members will have acquired self-esteem and a feeling of being respected. They will be able to be the drivers of change for their own communities. They will expand their portfolio of financial services, embracing complementary formal services.

What will have had to have changed to make this happen?

Savings groups must continue to operate in a sustainable manner, according to their rules and procedures. This trend is in evidence amongst groups as old as seven years.

Members will continue to invest in enterprise and collective steps to secure inputs that can enable expanded economic activity. These changes will have a ripple effect in their communities. Agency will have replaced a pervasive culture of dependency.

Gender and power relations will have to change in order to allow women to be in charge of their own finances. This will happen at different levels, such as household and community level. Research indicates that these changes are underway.

There will be effective links to selective formal financial services and improved access to markets.

What has been the impact of your solution to date?

SaveAct has so far reached 20 000 members in about 900 groups in several areas of two South African provinces. Performance has been outstanding with a 99% repayment rate on loans, and very few groups which have disbanded. Recent research into savings groups found that members are able to smooth their household consumption, reduce dependency on local informal micro-lenders, build assets, support their income generating activities and engage in new enterprise activities. Research has further shown that members’ income from enterprise activities are channeled again into savings, thus creating a sustainable virtuous circle (Delany and Storchi, 2012; http://www.saveact.org.za/). Research with members affected by HIV/AIDS has also shown that members become much more resilient and develop a sense of empowerment and self-esteem that help them cope with the disease (Barber, 2012; http://www.universitasforum.org/index.php/ojs/article/view/83/340)

What is your projected impact over the next five years?

The project will reach 100 000 poor people. This will impact on the lives of their households and extended communities. They will be able to access safe and convenient financial services, develop skills and acquire knowledge to better manage their finances. Households will be able to stabilise their consumption, build assets and develop better strategies to cope with emergencies. Members will be able to develop more sustainable livelihoods, take advantage of local economic opportunities and diversify their income sources. This will be recognised as a national strategy under the National Development Plan to overcome poverty.

What barriers might hinder the success of your project? How do you plan to overcome them?

A high quality and effective implementation of the programme will be critical as scaling up develops. This is being addressed through strong monitoring and evaluation. A steady, predictable flow of income to fund the expansion is also essential. This is being dealt with through the development of partnerships towards a social enterprise, where shared channels bring improved access to essential products and services at low cost with a shared margin being used to fund the programme. Retention of experienced staff and community-based promoters is important too. They will be incentivised through training, career-pathing and rewards in meeting goals.

Winning entries present a strong plan for how they will achieve and track growth. Identify your six-month milestone for growing your impact

Bring the methodology to a new province. Train 6000 people in savings, 3000 in financial education, 300 in enterprise skills.

Identify three major tasks you will have to complete to reach your six-month milestone
Task 1

Pilot and bring the methodology in a new province, through partnership with local organisations.

Task 2

Identify, recruit and train new field officers and community-based promoters in the communities where the programme will expand.

Task 3

Train 6000 people in the savings model, 3000 members in financial education and 300 mature members in enterprise development.

Now think bigger! Identify your 12-month impact milestone

Bring the methodology to a new province. Train 14000 people in savings, 7000 in financial education, 800 in enterprise skills.

Identify three major tasks you will have to complete to reach your 12-month milestone
Task 1

Pilot and bring the methodology in a new province, through partnership with local organisations.

Task 2

Identify, recruit and train field officers and new community-based promoters in the communities where the programme will expand.

Task 3

Train 14000 people in the savings model, 7000 members in financial education and 800 mature members in enterprise development.

Sustainability
Tell us about your partnerships

SaveAct has worked with partnerships in two ways. It seeks complementary inputs that leverage the value of its work. Secondly, it seeks partners with an established local presence to implement the savings model. Similar strategies will be used for scaling up. Strategic partnerships are in place for research and policy impact. SaveAct is developing a partnership with a bank and a big South African retailer to introduce revenue streams to sustain its work.

Are you currently targeting other specific populations, locations, or markets for your innovation? If so, where and why?

SaveAct is targeting communities highly affected by HIV/AIDS through specific partnership. Promising partnerships with organisations working with small-scale farmers are also under development. This is happening in both South African provinces where SaveAct is currently operating.
The savings methodology is flexible enough to adapt to different environments and meet various needs. In particular, the methodology can be effectively integrated with other development programmes which are targeting specific vulnerable groups.

What type of operating environment and internal organizational factors make your innovation successful?

SaveAct is located in a city with a citizenry active in fighting apartheid. The city is surrounded by a large rural population. These factors formed bonds and sense of urgency in developing ways of dealing with poverty. This culture enabled the founder to become involved in supporting communities working to overcome apartheid and deal with poor living conditions. He was a drawn into one of the first NGOs to play an important support role to people’s campaigns. He gained years of experience in designing and developing anti-poverty programmes. Being close to communities and building a solid, focused staff complement was key in translating the ideas into a successful programme. Similarly, the introduction of community-based promoters from local communities has been key in the innovation.

Please elaborate on any needs or offers you have mentioned above and/or suggest categories of support that aren't specified within the list

We will benefit from mentorship around scaling up challenges, especially human resource management. SaveAct is keen to support NGOs in neighbouring countries possibly through a social franchise. South Africa remains isolated from Africa and this programme can build bridges. SaveAct has strong training, research, monitoring and evaluation capacity to share.

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