Digital savings groups

In 2010, World Relief Rwanda launched its Savings for Life programme. The aim of the programme is to improve economic opportunities by increasing access to financial resources, building community resilience and encouraging a culture of saving. 

By 2019, we recognised the need to innovate, and we made a strategic move to bridge the gap between traditional savings methods and modern financial and digital technologies. This led to the launch of the digital savings group initiative in collaboration with the computer technology company, Mvend Ltd. 

Unlike traditional savings groups, where financial records are kept manually and transactions are done in cash, digital savings groups carry out and record all group and financial transactions electronically, using mobile phones or tablets.

Mvend set up the digital platform according to the required specifications including:

• personal and group financial records 
• limitations on the amounts group members can save or take as loans
• separate digital accounts for the social fund and the loan fund
• easy financial calculations.

Challenges

The move to digital savings groups was not without its challenges. Technical issues, such as the upgrade of the digital platform, caused some initial difficulties. Limited mobile phone network coverage in rural areas and low levels of phone ownership, particularly among women, also caused some problems.

Perhaps the greatest challenge was the uncertainty of group members and resistance to saving digitally.

One group member reflected on this, saying, ‘At first, we were afraid, wondering how we would save money without knowing where we were sending it to, and whether our money would come back to us! We thought it was a fraud, but after we found out that the system shows our personal savings and our group’s savings, we reviewed all the loan requests, applied for loans, and they were granted. We realised that this method of saving using technology is reliable.’

Benefits

Despite the challenges, the benefits of digital savings groups are significant. Membership in any savings group brings financial inclusion and access to a safe place for saving and obtaining loans. However, digital savings groups offer even greater advantages: 

• better security for members’ savings
• transparency in transactions
• ease of record-keeping
• time-saving in making transactions digitally. 

One of the most notable benefits of digital savings groups is the flexibility they offer. For example, members can save or even access a loan without having to attend a meeting in person. As one group member shared, ‘If I am on a trip and have an emergency need for transport costs, I can immediately call the leaders of the group, explain my problem, and they will lend me money right away. In other groups, you need to wait for the day of the meeting to get a loan.’

Finally, digital savings groups simplify the process of sharing out funds, which is often the part that savings groups find most difficult and where mistakes are most likely to happen. The digital platform handles these calculations effortlessly and accurately, reducing the burden on group members and leaders.

Navigating the risks

As with any innovation, the digital savings group model comes with risks and we are still learning and adapting the programme to address these challenges. 

One issue we have observed is that many groups, especially after their first saving cycle, choose to meet only once a month, or even less frequently. While this may seem beneficial, allowing members more time for income-generating activities, it can also encourage irregular saving, either by not saving at all or by saving more than the groups’ policies allow.

Additionally, infrequent meetings threaten the social cohesion of the group, which is one of the foundational principles that enables the success of savings groups. 

The digital model also raises concerns about transparency and democracy within the group. In traditional savings groups, a majority of members must be present to discuss and approve loans, ensuring that everyone’s voice is heard. However, in digital savings groups, loans can sometimes be approved and allocated by a single individual, potentially undermining group transparency and collective decision‑making.

Balancing innovation with tradition

We are undoubtedly in an increasingly digital world, and the savings sector has responded very well to these changes. The digital savings group model represents a significant step forward, offering numerous benefits such as enhanced security, convenience and flexibility for members. However, it is crucial to balance these advantages with the challenges and risks that digital groups present.

Organisations using digital models must invest in proper training for savings group members, and encourage them to uphold best practices and policies that protect members and their financial resources. By doing so, digital savings groups can be a powerful tool for financial inclusion and economic empowerment, while maintaining the community cohesion and trust that are the foundations of successful savings groups.