This savings aspect of UGAFODE has only recently been a possibility and after much hard work and restructuring of the organization. This field partner only became a Micro Deposit Taking Institution (MDI) on September 23, 2011, but they are moving quickly to utilize this capacity in the products they offer to their clients.
Now, back to the training we received on Savings Mobilization. I was impressed that the first half of the training was dedicated to training all ~135 employees in personal savings practices and recommendations. The reason being, “How can you tell a client to save when you yourself don’t know how?” Although, some of the tips were quite basic they were good reminders of how and why we save.
Next, we split into groups to discuss the different forms of savings that clients utilize and why they do this. I knew that micro business clients use often unorthodox forms of savings, but this really opened my eyes to other barriers that institutions have to encourage and educate people toward savings. Although, saving in a bank is not always the best option, many times it is a far better option then the alternative. In Uganda, with an economic history of bank closures and untrustworthy institutions, many people are hesitant to trust their money with an organization. One of the facilitators shared a story that he had a group of woman that he was helping open savings accounts for. When he filled out the paper work and took their cumulatively substantial amount of $6,000 he brought back passbooks (small ledgers recording account activity) that were worth $0.25. The women were confused and angry that they gave him all that money and they only got a cheap book to replace it.
I have learned that this is the kind of context that many of the rural branches of UGAFODE deal with on a daily basis. When improving the financial literacy of low-income clients it is not telling them that saving is a good habit, but rather how will they directly benefit from savings. The credit officers’ job is to not only to disburse loans and savings accounts, but to educate clients on the benefits of savings. What they call customer sensitization was heavily emphasized in training, to not only explain the benefits, but also the step-by-step deposit and withdrawal terms of any given account.
I was somewhat unaware of the marketing aspect of savings accounts, but now totally understand that savings accounts not only benefit the borrower with safe and secure savings but also with interest. And while this is a great social mission for UGAFODE, it makes sense for them to increase their clients’ savings portfolio, so that they have access to this cheaper form of capital that they can then lend to other borrowers.
I love these win-win situations for all parties involved! Now, I’m currently compiling a report to propose to UGAFODE to give back to their Kiva borrowers by opening a fixed deposit savings account for 3-6 months that would be given to Kiva clients who make all their repayments on time. Therefore, only clients with good repayment histories would receive a reward by a portion of the interest charged by UGAFODE deposited into this account at the loan-end date. The fixed term of 3-6 months would inherently teach clients the benefits of savings and hopefully encourage continued utilization.
Please share with me any ideas or recommendations for this!
Jon is a second-term Kiva fellow volunteering in Kampala, Uganda with UGAFODE. From the desolate plains of Mongolia to the lush jungle and mountains of Uganda, Jon has been experiencing much of the amazing world of Micofinance. If you like what he has said about UGAFODE, make a loan to any of their clients here.