Ms Kyria owns a tailor shop in town. She speaks fluent English and always has a friendly smile. On a sunny Monday afternoon, we sat in front of her shop and discussed about her experience as the chairperson of a woman’s development group. As we were talking about how her development group runs, her eyes lit up.
The group was founded in 2002 by 20 women who were concerned about saving enough money for family use and emergency. I thought the group was just a ROSCA in a different name, but I was proved wrong. This group is meant to teach women how to develop, rather than directly giving out money. Women, like everyone else, have self-control problems. If they have extra money at hand, they can spend it straightening their hair, buying clothes, betraying their initial purpose of investing in productive businesses. Such present-biased preferences are all too common in a culture where planning is an unfamiliar concept. At the end of the day, they fail to pay the loan and their securities are confiscated. Problems are aggravated if the husband refuses to shoulder his responsibility — he might not have enough money to pay the school fees and the responsibility will be the woman’s.
How does this group help to avert the problem? The group meets biweekly. At each meeting, every member is supposed to save a certain amount of money depending on the amount of the loan she needs to repay. The loans are taken out from FINCA individually. Members are also encouraged to save when they meet, and the savings will be kept in separate individual accounts at the SACCO. If a member has difficulty repaying her loan, other group members can give her a hand. But without any collateral or guarantors, default is a big threat.
“Did it ever happen when you lend a group member money and she failed to pay it back?”
“It only happened once. A member took 200,000 Uganda Shillings (80 USD) and fled to another district. It was too far so we couldn’t chase after her. But we were confused.”
It fascinates me the way people supervise each other and exert peer pressure in planning ahead. Individual liability and individual ownership of savings eliminates the risks of pooling money in one account. They combine the security of formal financial institutions and the use of maintaining discipline in informal groups to serve their needs.
Ms. Kyria says she is developing a project to help the orphans in town learn baking and hairdressing to raise incomes. She is actively searching grant opportunities within and outside Africa. If you know opportunities that can empower Ms Kirya and the other women, please let me know. Thank you.