“Hopes and dreams come alive through saving.”
October 31 was World Savings Day. The slogan above, from a website promoting this event, is stirring stuff, but how realistic is it in South Africa, where most people are drowning in debt and feeling the effects of a struggling economy?
Surprisingly, research shows that even the poorest are saving. FinScope 2017 reported that engagement with the informal financial service sector had grown slightly to 56%, even as the percentage of adults with a bank account remained static, at 77%.
SaveAct’s experience is that there is a huge demand for its main product, a savings group (SG) model that incorporates financial education in its processes. Perhaps this has something to do with the evident progress made by its members: the average annualized savings per member in SaveAct is R6215.84 ($424), versus the rest of Africa that saves on average R1076.04 ($73.4) a year.
Why is saving so high in SaveAct? Findings of a study evaluating impact on SGs and stokvels, conducted with FinMark Trust this year, point to several factors that make SGs an attractive option.
- In South Africa people have access to a regular income from social grants, so it is possible for them to commit to saving a regular amount in a group;
- They have limited ability and opportunity to convert this into businesses;
- There is a lack of appealing opportunities for saving through formal institutions like banks;
- There is distrust of the formal economy and the cost of doing business in the formal economy.
Once people become part of a savings group, they gain much more than just a platform for saving, viz:
- Social support from other members. The group also acts like a superego, keeping them on the straight and narrow while saving and borrowing;
- Social status when they begin to accumulate assets and gain social mobility;
- Empowerment —women in particular benefit from increased financial autonomy that in many cases means a realignment of power relations within the household, as husbands treat them more like partners. “We used to fight a lot over money but now we can sit and discuss what to do,” said a respondent;
- Financial knowledge — they become adept at juggling finances and making a small amount stretch further through SG loans and interest.
Members are encouraged to have a goal in mind for their share-out, a lump sum that they receive at the end of the 12-month savings cycle. Home improvement is the top item the money is spent on, along with education and food.
The FinMark study reports members’ satisfaction at the steady improvement in their lives.
“Before there were no trees because we used to chop trees for wood to cook outside, even if it was raining. Now people are at home because there is electricity … we used to smear dung on our floor and we would walk into houses that have tiles and wish to have them; now we have them. We are really living a comfortable life,” said one respondent.
Another respondent said she feels like “I do not struggle anymore. I am happy, I no longer stress when I go to bed about my life and my kids. I live a stress-free life.”
These are small steps, but they are hopes and dreams coming alive — through saving.
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