Group Savings and Loans Associations: Gain Efficiency from New Approaches
In September 2008, CARE Kenya, with support from the Kenya Financial Sector Deepening Trust (FSD Kenya) launched a pilot project for the promotion of group savings and loan (GSL) associations designed to test whether an innovative management and incentive system could lead to large outreach at low cost per member. CARE’s Community Savings and Loans (COSALO) project began forming groups in Western Kenya in November 2008, and the first groups started saving a month later in December. COSALO is a two and a half year project, with a total budget of US$1.3m and a target of reaching between 42,000 and 96,250 group members.
The wide spread in the projected membership stems from the innovative nature of the project and the uncertainty about how well its innovations would work. COSALO is simultaneously testing two ideas. CARE hopes that both innovations will permit greater outreach at lower cost, while maintaining good group quality. The two innovations are:
Use of 1. independent contractors. Most of the fieldwork is being done by independent contractors rather than paid employees. These include franchisees (local entrepreneurs) and FBOs (faith based organisations), who manage and supervise Community Based Trainers (CBTs), the people who directly train and support the savings groups. The franchisees, FBOs and CBTs are all independent contractors rather than employees of CARE.
Use of 2. incentives. All contractors – franchisees, FBOs and CBTs – are paid exclusively on commission, based on the number of group members successfully organized and trained.
Franchisees and FBOs receive a bit less than two dollars for each group member in all the groups they form, with two-thirds of that stipend paid when the group starts saving, and one-third coming when the group distributes its assets at the end of the year. In addition, the CBTs receive the same amount, a bit less than two dollars, for each group member successfully organized and trained.
CARE has signed memoranda of understanding (MOUs) with five FBOs and four franchisees. The franchisees and FBOs each have four or five CBTs under their supervision. In order to test the relative effectiveness of different management models, CARE is also directly managing a group of five CBTs. The CBTs are paid on a commission basis, at the same rate as the other CBTs, but the CARE field officers who supervise them are salaried and do not receive any commission. CARE refers to the franchisees, the FBOs and the direct CBTs as three delivery channels. The franchisees and FBOs report to CARE’s three Field Officers, and are also frequently visited by CARE’s energetic management team, based in Kisumu. To cope with the huge workload resulting from the higher than anticipated rate of growth CARE has recently recruited an assistant field officer for each of the three regions covered by the project.
The groups use a largely standard GSL/VSLA methodology. Notably, CARE introduces groups to both ledger and passbook record keeping, and allows the groups to choose which system they prefer; the groups are often better educated relative to members in other countries, and many opt for keeping ledgers.