How to run a savings and credit group

A savings and credit group is made up of 10 to 20 people who meet regularly to save money together. They then use these savings to make small loans to individual members that are repaid over an agreed time period.

Key considerations

1. Facilitation

Groups often report that they are more effective and sustainable if a facilitator helps them to get started, and visits them regularly to help identify further training or support that is needed.

Facilitators help each group to develop healthy relationships, set up a savings and credit scheme and establish by-laws on how they will operate.

Facilitators should help groups to plan, make decisions, act and learn for themselves. They should see their role as helping to unlock people’s potential in these areas, not provide answers.

2. Membership

To start a group, you will need several people who have all decided to be members of a savings and credit group. Groups can be made up of people of the same sex or age, or they can be mixed.

Take the time to work out who in your community would benefit most from being part of a group. For example, women often have limited access to – and control over – money, credit and assets. Because of this, they should normally be prioritised when setting up savings and credit groups. 

Other people who might particularly benefit are people with disabilities and ethnic or religious minorities. 

Strong relationships and trust between group members help to ensure that people do not misuse or try to steal or control the money. Good relationships also encourage people to be accountable to each other, and to repay loans on time.

3. Roles and responsibilities

Most groups elect a number of people to carry out specific roles. These usually include a chairperson, treasurer and two or three people to have the keys to the padlocks on the cash box. These roles can be rotated between different group members. If the group is mixed, make sure men and women are equally represented. 

It is important that groups learn to make decisions jointly. If they are unable to agree on something, they may wish to use a voting system to help them reach a consensus. 

Groups should agree on a set of rules – eg how often to meet – so that everyone knows how the group works. This may be referred to as the group’s constitution, or by-laws, and it provides the structure within which all decision-making takes place.

Meeting regularly – weekly, every two weeks or monthy – helps to build relationships between group members. Often groups decide that members must attend a minimum number of meetings in a row to remain part of the group. They may also decide to ask people to pay a small fine if they are late for meetings, or miss meetings without good reason.

4. Savings and loans

Group members need to agree how much they want to save each time they meet.

It is easier if everyone saves the same amount. However, as the group becomes more confident and develops their bookkeeping skills, the amount each member saves can be varied if the group wishes. 

When applying for a loan, members can propose to the group an amount they would like to borrow and the reason why. Often this needs to be agreed by a minimum number of other group members before it is granted.

When a group is first set up, it is better if members only borrow small amounts of money. Once people have successfully re-paid several small loans, they have shown that they can be trusted with a larger amount.

When loans are made, groups usually charge a small amount of interest, although this is not essential. The interest can be used to cover group costs, such as record-keeping or refreshments, or kept and divided up among the members at an agreed time.

Some groups might decide they want the loan-taker to identify a piece of property that they will have to give to the group if they fail to repay the loan, eg a radio or bicycle. If they do not repay the loan, the piece of property can be sold to cover the loan amount.

Alternatively, the amount owed can be recovered from the loan-taker’s savings, or the loss could be shared by the group. These decisions need to be made by the group at the beginning.

5. Social fund

Many groups set up a social fund so money can be given to members if they have a particular need, for example medical expenses, or a birth, wedding or death in the family.

Some groups set up a social fund for the whole community so they can support people who need it most in times of crisis.

6. Accountability

The treasurer should keep careful records of how much each person in the group has saved, who has taken loans, and for how much. Members can also keep their own records. 

Sometimes groups ask a non-group member with good reading and writing skills to help them with the record-keeping. 

Most of the money that is saved will be distributed to group members as loans so it will not remain in the cash box for long. However, it is important to keep the cash box safe as it also contains the records. 

The cash box should have several padlocks, with the keys held by different people. This means that the box cannot be opened without all of the keyholders being present.

Opening a bank account to hold group funds is also a way of keeping the money safe from theft and loss. Increasingly, groups are using online banking and mobile phone applications to help with financial management.

7. Associations

If a lot of savings and credit groups have been established in an area, they may decide to use some of their money to set up an association to represent or oversee them. Two members of each savings group should be included in the association. 

Associations can support savings groups by identifying and providing training, auditing accounts and encouraging accountability. They may also set up new groups using their own resources.

A group of associations might form a federation. By representing the size and assets of multiple associations and groups, federations may be able to influence local decision-making, jointly open a school or business, or take out a large loan on behalf of all of the groups.

The information in this article is based on Savings and credit groups - good practice guide from the Reveal Toolkit