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Individuals who are low-income earners can only save small amounts individually, which is usually not enough to invest in productive activities so alternatively they join savings groups or save as a group.

Moreover, by saving as a group, they can accumulate a larger amount of money more quickly by pooling their savings in a common fund, which the group uses for productive investment.

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However, savings groups are self-directed informal financial cooperatives designed for unbanked or underbanked populations. Members of these groups meet regularly to save together and lend to one another, allowing the group’s deposits to earn a return. It involves small groups of 15 to 25 members that have well-defined procedures, allowing members to make basic rules about saving and borrowing and operating in transparent and democratic ways. At the end of a savings group cycle, members get back their deposits, plus any interest earnings.

Savings groups are the first step to financial inclusion as they provide a mechanism to save money while building financial knowledge and skills.

There are pros associated with savings group and they include:

By saving in a group, the low-income people can help each other learn basic financial skills. As a group, they can easily receive literacy and money management training from group promoters and learn from other literate members.

A low level of literacy makes it difficult for them to keep track of their savings and manage their money.

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Savings groups protect their members against vulnerability to risks like bad harvest, flood, income shortage, and many other problems. By saving as a group, these risks are shared between the members. Individual members can rely on other members for help in time of need. Savings groups can be used as an insurance scheme to help members deal with these emergencies when they arise.

Sometimes individuals do not have access to safe saving facilities such as banks but by saving as a group, these individuals can create a safe place to put their money.

By saving as a group, the low-income earners can protect themselves from accusations of being selfish, since the savings belong to many individuals, not just one. Therefore, the threat against a single member of the group is a threat against all members.

However, despite their successes and intrinsic benefits several problems are involved in the savings groups and they include:

Lack of independent record keeping:

Handwritten record keeping can be sloppy, inaccurate, and can cause problems. The social stipulations associated with tracking each member’s deposits are very high; all members must be seen depositing their cash or they risk facing exclusion or reputational damage.

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Security risk:

The method of saving cash presents a high-security risk. There are also security concerns, as one person, usually in a box, holds the physical cash while another person holds the key. There is a high risk that the cash could be stolen, misplaced, or lost.


Bonds of trust are fragile and as in any relationship, trust is easily broken. In addition, the relationship of 15-20 people poses a greater risk of distrust.


Convenience issues include the need for consistent proximity and regular meetings. Savings groups require a physical presence that is not always feasible, convenient, or even in the best interest of the group’s financial situation. If someone moves away, it is difficult for them to continue participating.

In rural areas, it can be difficult to hold regular meetings due to distance. In times of conflict, disaster, or displacement, the savings cycle will stop at the time when they are needed most.

In conclusion, saving requires discipline since it means withholding something for future use instead of consuming it right away. Therefore, everyone must have discipline and agree on a common set of rules to follow depending on whatever saving platform that you chose.

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This article was first published on 30th May 2022


Grace Christos Is a content creator with a proven track record of success in content marketing, online reputation management, sales strategy, and so much more.

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