Despite all of the criticisms leveled against microfinance, pundits have been unable to suggest a viable alternative. Oxfam America thinks it has one.
The nonprofit has been able to roll out a savings and credit scheme in developing countries, one that has gone “viral.” Dubbed Saving for Change, the initiative has spread to reach 500,000 women in five countries in Africa, Asia and Central America.
The scheme, first implemented in Mali in 2005, is similar to both traditional forms of microfinance and community rotating savings and credit associations, or ROSCAs. But there are differences.
Unlike traditional forms of microfinance, the initiative doesn’t call for the establishment of institutions. SFC simply gives a group of women the basics of running a savings association. No meddling, no interference.
But these women aren’t running the association blindly. They elect a set of officers, draft bylaws, keep records and meet weekly. And, unlike in ROSCAs where members have a rotating schedule of when they will receive a pot of money, women in SFC groups can take out loans whenever they want in any amount they need. They then, of course, pay back the loan with interest. In Mali, the return on savings is at least 30 percent.
Duncan Green, Oxfam GB’s head of research, quizzed Jeff Ashe, who runs the initiative, on costs per member ($20), its impact on women (randomized control trial is under way) and, naturally, the criticisms thrown at the scheme (just a few).
The initiative receives funding from the Bill & Melinda Gates Foundation. Green asks, what happens when funding runs out? Stay tuned.
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