"Over the last twenty years, many people have become interested in helping poor people around the world get good financial services. Mohammed Yunus and the institution he founded, the Grameen Bank in Bangladesh, won a Noble Prize in 2006 for helping start a movement that has brought financial services to millions around the world.

Banks and microfinance institutions are one way to bring financial series to the poor. Savings Groups, managed by the members and based on savings rather than debt, are another solution.

Savings Groups are self-selected groups of 15 to 30 women and men who get together to save and borrow. Rather than go into debt to an external institution, they manage their own savings through transparent procedures and all the money they earn through interest on loans stays in their village, and in their group".**

I became involved in microfinance in 1981, as a Peace Corps Volunteer in Burkina Faso (then Upper Volta). We were called 'credit advisors' and were among the first of our kind in the Peace Corps world. The '80s were very early days for microfinance and we mostly learned how NOT to do it during that time! I re-joined Peace Corps in 1986 and, after reading ACCION International's revolutionary (at the time) "An Operational Guide to Microfinance", I described the approach to a farmer's group in Sierra Leone. We launched the Yonibana's Farmer's Groups Association whereby in-kind loans of grain (rice and peanuts) were lent to individual farmers via their groups. The loans were paid back at the end of the farming cycle with interest. I left in 1988 and the scheme was functioning very nicely; however it wasn't long before Sierra Leone's civil war wiped out the program. 

I continued on to work for various non-government and government organizations as a consultant for microfinance. I was a big fan of the approach. However, in 1996, I was asked to accompany a social welfare expert to evaluate a multi-sector project that aimed to reduce the impact of HIV/AIDS on communities in general and on children in particular. Part of the project focused on strengthening the economic resilience of families so that they could better support the children in their care. Naturally I advised that they consider using microfinance. 

Theoretically, everyone agreed that it made a lot of sense. But, to cut a long story short, most of the MFIs were not interested mainly because the project's target group was too poor and the rhythm of loan disbursement and repayment was not suited to clients who would—from time to time— need to 'rest' from taking loans and perhaps miss a loan cycle. These clients would have to drop out in order to do this. 

So, I started to question whether I was promoting the right approach. In 2000, I decided to lobby MicroSave to help me finance a study amongst microfinance clients in Kenya and Uganda. While doing the study, we discovered from microfinance clients that, while loans from their MFIs were great when things were stable—once there was a crisis, the loan became a terrible burden. We made recommendations in our study on policies that MFIs could put in to place that would maintain their integrity, while avoiding over-indebtedness amongst clients—but again the microfinance industry was not interested. 

So began my disillusionment with microfinance as a tool to help poor people out of poverty. I began to question whether it was a sound practice to fight poverty through debt. I came to see 'microdebt' instead of 'microfinance'.

In 2001, I accepted a job with Catholic Relief Services (CRS) as a regional advisor for their microfinance programs. It was in Zimbabwe that I first came across CARE International. They were running a savings group initiative called "village saving and lending association" (VSLA). The more I looked into it, the more I was impressed by how a savings-led, community-managed approach seemed to reach more deeply into the survival economy and helped people avoid debt. CARE and CRS formed a partnership and we brought the VSLA model to our CRS church partners. It was wildly successful — during the depths of Zimbabwe's economic crisis, it was one of the few financial services able to adapt and continue to meet the needs of its members. 

Jump to 2006 in Jeffreys Bay, South Africa. I moved here in 2004 from Zimbabwe and began scheming ways I could start up a savings group project in the area townships. I soon met several people active in community development and we formed an advisory group. We had all noticed a recurring theme across our work, which was the issue of alleviating poverty. Activities existed to assist vulnerable families with grants and charitable donations of food, clothes and medicines, but building the economic resilience of vulnerable families by helping them to help themselves was neglected. I described to them the savings group approach, and they all felt that promoting savings groups could fill this perceived gap. However, since we wanted to start this initiative in urban townships, we called it community managed savings and lending (CMSL). 

In October 2006, we met with the head of the Department of Development Studies at the Nelson Mandela Metropolitan University (NMMU). He agreed to assist in getting the CMSL Project off the ground and to mentor our organizational development. A grant, managed by

NMMU, was secured in early 2008 from World Vision and Kellogg's Foundation and the project was launched under the auspices of NMMU. During 2009, the CMSL Project was registered as the CMSL Trust, and approved as a tax-exempt, Public Benefit Organization. Although CMSL Trust is our officially registered name, everyone in the community knows us as Mpendulo Project. Mpendulo means 'the answer' in the South African language isiXhosa. 

It is now 2012 and we have grown from strength to strength. At the end of 2011, we had 102 groups with 1024 members (mostly women). During 2011, our groups saved over ZAR 1.8 million (USD 225,000). The average rate of return on savings was 50% and total equity reached over ZAR 2.7 million (USD 337,500)! Members were able to pay for school fees, clothes and medical care for their children. Others were able to start or expand micro businesses. And everybody improved their housing situations. 

Despite everything I've said about microfinance, I still want to believe that credit-led microfinance has a role to play. However, I feel we need to broaden the scope of financial services offered to poor people and include savings-led approaches for people who are perhaps too economically vulnerable to absorb externally provided debt. 


** The information is taken from the website www.savings-revolution.org