Humanosphere is on hiatus. Many thanks to our web design, development and hosting partner Culture Foundry for keeping the site active while we plan our next move. Culture Foundry builds, evolves and supports next-level websites and applications for clients you know, and you couldn’t ask for a better partner to help you thrive in digital. If you’re considering an ambitious website design or development project, we encourage you to make them your very first call.

Surprising growth of savings and loans groups in Uganda

Map of CRS and CARE programs.

A savings-and-loan initiative in Uganda sought to create groups where people could increase their personal finances. The hope was that agents would then help form new groups to reach more people. It succeeded, but not in a way that was expected.

A survey of savings-and-loan groups across Uganda in 2013 found that many of the new groups were self-formed.

A group of researchers went back to the villages that once participated in savings-and-loan programs. The Datu Research team found that villagers learned from the other groups and went on to start their own. The new groups are performing just as well as the ones assisted by CARE and Catholic Relief Services (CRS).

“At first people were overlooking our group. They would keep on moving. But at the time of sharing out, these people would see members of our group improving their standard of living. Many people were encouraged by our growth and wanted to join,” explained a group member from Bundibugyo, to the researchers.

The findings, published in the report Post-Project Replication of Savings Groups in Uganda, give evidence to the argument that programs can succeed when control is in the hands of the people, rather than the aid organization. The majority of members of the self-created groups say they were motivated to pay off recurring costs, mainly their children’s education. Fewer cited the desire to meet future financial needs and gain access to savings and loans.

Savings-and-loan groups differ from other group-based microfinance models. In the case of the groups in Uganda, money from members is placed into a fund managed by members. Loans are then disbursed from the fund with interest rates and terms determined by the group. The interest earned on the loans go back into the fund to remain until the end of a pre-determined cycle.

At the end of each cycle, the money is distributed back to the members who can then contribute a portion of that money back to the new fund cycle. Additional contributions go to emergency funds that members can access in times of need, thus preventing members from having to draw from their savings. CARE and CRS planned that trained agents would help form new groups under this model.

That happened, but people also went on to form their own. By observing how the groups functioned and talking to members, community members replicated the model nearly perfectly.

“Replication of the model was their intent all along, and it succeeded,” said study lead author Sarah Mine. “What surprised us was that, by far, most of the new groups sprang up on their own, even without agent help.”


The replication groups outperformed their project counterparts. The researchers determined that replication groups earned an average of 35% returns on savings as compared to 30% by project groups. Although they did experience higher default rates; two/thirds of all replication groups reported that there were no loan defaults.

The desire by the self-created groups to learn was so strong that nearly 70% of the groups paid for the agents to provide further training, more than twice the rate of the program-created groups.

“This strikes me as how development should work. People are given knowledge rather than funding and, as they become successful, they seek out and pay for further knowledge,” said Marcy Lowe, president of Datu Research.

Money earned through the share-outs at the end of each cycle was spent predominantly on investments and school fees. Some 60% of the people surveyed said that the savings-and-loan groups met their expectations. The report attributes some of the unmet expectations to the groups that are relatively young and the financial returns have yet to reach their potential.

Savings may be the greatest impact of the model on individuals and families. The report concludes that there was broad agreement on the positive way that people viewed savings.

In nearly all focus group discussions the enthusiasm was clear: not only does money “grow” through interest accrued, but also through the mere fact of being stored in one place where it can accumulate. This appears to be a game-changing dynamic clearly attributable to the VSLA/SILC model.

What remains unanswered is the actual impact of the agents. Self-created groups did use the agents, but they were not a part of the formation. The report raises questions as to what ways the agents could be used to improve financial literacy and the performance of all groups.


About Author

Tom Murphy

Tom Murphy is a New Hampshire-based reporter for Humanosphere. Before joining Humanosphere, Tom founded and edited the aid blog A View From the Cave. His work has appeared in Foreign Policy, the Huffington Post, the Guardian, GlobalPost and Christian Science Monitor. He tweets at @viewfromthecave. Contact him at tmurphy[at]