What is the SCG model?
The savings and credit group model introduced by SaveAct is an innovative hybrid financial services model known as group-based savings and lending (GBSL). The model takes the shape of a triad, which incorporates access to basic financial services (savings, credit and emergency funds) with life skills training (financial and economic literacy and HIV/Aids awareness) and enterprise training (known as Isiqalo).
The model, which has proved to be uniquely responsive to poor and vulnerable groups, anticipates that the savings-led community based financial services will be a catalyst to sustainable livelihood development at individual, household and community levels.
In South Africa, the model builds on the well-known concept of the stokvel but pushes the concept much further through its credit and training components.
Different models of the GBSL have been adapted to suit local conditions, have been implemented throughout the world by organisations such as Care International.
The SCGs have been embraced in both rural and peri-urban settings where the model has proved to be both robust and trusted as a model for increased financial security and growth.The model uses savings as a catalyst for mobilising poor and vulnerable groups into participatory processes, people-driven asset-building, learning and action.There are no handouts. Rather, the model offers a set of choices, or a stepped approach, to the thousands of South Africans actively seeking to take control over their lives and implement sound financial management and growth strategies.
How sustainable are SCGs?
SaveAct is experiencing a close to 100% rate of SCGs advancing from one annual cycle to the next, i.e. a group dropout rate of well under 1%. Individual dropout rates are also less than 1% (including cases of death).
Groups conduct annual share outs of capital before proceeding into a new cycle. Most groups appear to pick up several new members at this point, and sometimes have to morph into two or more groups to maintain a manageable size. Groups are cohesive and motivated, and look to be in operation for years to come.
How does the model actually work?
A SCG is made up of between 10 and 25 voluntary members who meet once a month. Membership is 90% women, but men are not excluded. Each member makes contributions into a collective fund from which members can borrow and pay back with interest. Each group has its own constitution which guides the operation of the group.
A new cycle of lending and savings is established every year with an agreed yearly payout date. Members of the SCG receive returns on their savings that range from a low of 30% to a high of just under 100% -- far higher than any formal bank.
Groups are encouraged to establish a separate fund, known as the social fund, to support members in emergencies, such as medical crises. Each group draws up its own constitution within set parameters which establishes its own rules for the social fund.
Each group appoints office bearers such as treasurer, secretary and chairperson, each of whom has specific duties. All transactions are conducted in the full view of all members and are carefully recorded. The padlocked savings box is only opened at meetings in full view of all members.
Penalties are imposed for late arrivals and for non-attendance, but generally commitment to the group is exceptionally high.
SaveAct field officers train new members in the setting up of SCGs and regularly monitor their progress. More capable SCG members are mentored to become local promoters and trainers.
What are the advantages of SCGs?
What kind of training does SaveAct provide?
In addition to training in GBSL, SaveAct provides life skills training (LST) and enterprise (Isiqalo) training.
LST is focused mainly on financial literacy, which provides poor people and vulnerable households with the knowledge, skills and attitudes to adopt good money management practices for earning, spending, saving, borrowing and investing.
Isiqalo training is offered to members of mature SCGs and on payment of a nominal amount of R50 per person. The course, over five days, offers excellent grounding in the principles of designing and running a small business.