This week's Financial Inclusion story was contributed by Fundación Capital in the framework of the call for short stories on local public-private partnership initiatives for financial inclusion directed at disadvantaged groups.
This is the third in a 4 blog series in commemoration of our Financial Inclusion Month 2014.
According to a recent survey for the 991 beneficiaries of the country’s Conditional Cash Transfers program (ProSoli) in 5 regions of the country, 80% of the population turned out not to be saving at all even if 42.2% reportedly holds savings accounts. Hence, about 50% of savings accounts stay dormant and holding savings accounts does not necessarily mean that people will automatically save for their future, accumulate asset, protect themselves against possible risks or that they will have a better and prosperous future. In fact, many financial inclusion programs have been focusing first on opening savings accounts and then on fostering savings habits by financial education so that people can use the savings accounts.
Fundación Capital in the Dominican Republic decided to try out a reverse approach: first savings habits and then savings accounts. To foster savings habits, a savings groups methodology developed by VSLA was adopted and simplified for the local conditions. The pilot took place in partnership with the local government of Mamá Tingó, a Municipal District of Yamasá in October, 2012. Eugenia Beltrán, the Vice Mayor learned how to form savings groups from the staff of Fundación Capital, and started training groups by herself. In a year and half, the population of savings groups grew to 70 groups with 1,800 members including children, youth women and men.
In 2013, with the support of Fundación Capital, Mamá Tingó’s local government started promoting bank accounts among members of savings groups. ADOPEM bank also took part in the partnership, by helping savings groups’ members fill the forms and open bank accounts. In about 3 months, the number of bank accounts opened increased. This financial inclusion process was entirely done on a voluntary basis, which means that the accounts were opened not to be kept dormant, but out of genuine interest to be actively used. Right after opening their accounts, people started separating money to deposit in their bank accounts. Yet, the main obstacle for those wanting to save in the bank was the cost of getting to the bank. Given the rising interest in saving, ADOPEM is now planning on opening a small branch in Mamá Tingó.
Eugenia appreciates the savings groups not only in its economic benefit, but in its social benefits. The following testimonies are what she often hears from people on the road: I am better in health, my business is more stable, this is the door for development, I was able to improve my home, I am now precious, saving turned into an habit, now I understand what is solidarity and companionship, our children save for the future, I drink less alcoholic beverage, I do not waste my money in lottery, the group freed me from high interest loans, I have a comfortable and quieter life, I learned responsibility, honesty and punctuality, I didn’t know I had the ability to save.
Currently Eugenia, together with Antolin Beltrán, Mayor of Mamá Tingó, are working with Senator of Monte Plata Province on a plan to disseminate savings groups to the entire province. Fundación Capital discovered that savings groups led financial inclusion is feasible and a sustainable strategy for genuine financial inclusion. Also, collaborating with a local government is a cost effective way to scale up a savings groups methodology, and a partner like ADOPEM responds to the growing need of locals.