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Savings and loan success in Ethiopia

In June 2009, Plan was involved in the launch of a savings and loan scheme in Genete-Mariam village in Ethiopia.

The savings and loans group hold a meetingNow 61 community members are developing small businesses and managing household needs through the scheme. It has significantly benefited local women and resulted in their increased empowerment - they are starting up businesses and improving their families’ circumstances.

Following an initial introduction to microfinance provided by Plan and a partner organisation, community members organised themselves into three groups and took up Plan's offer to equip them with the practical skills required for running saving and lending services, prudent financial management and group decision-making.

They then drew up specific rules for their groups – stipulating how much members needed to save, how much they could borrow and the relevant interest rates. Rules also governed what money could be borrowed for – it is allowed only for small profit-making businesses, healthcare and emergency situations.

Women support their families

The rules give priority to women and there are numerous success stories from the women in Genete-Mariam.

Amare, a mother of five, says: “I received a loan of 200 Birr (around £10) two months back. I started up a small coffee and salt business. I make a weekly profit of 50 Birr (around £2.60). I cover my family needs - food and stationery - with this money. In the future, I want to increase my saving so that I will have more loans to expand my business.”

Tsegaw Alemu, says: “My group loaned me 400 Birr (around £20). I bought lentils from local farmers and sold it in genete-mariam town for 700 Birr (around £39); I made a profit of 300 Birr (around £19). With the money I rented a room in genete-mariam town for my son to pursue his education comfortably.”

The saving culture is growing gradually among group members. And the groups are able to help the community in other ways while helping themselves. One of the groups set up an agreement with Plan to prepare and supply supplementary food to local health posts and clinics to help with child nutrition. While supporting local children, the group has also made a profit.

Future enterprise

The groups meet regularly to discuss progress and the way forward. Community-based village advisers provide support. The group dynamics and participation in decision-making are improving. The three groups now envisage forming an association to combine their human and financial resources to start a large-scale grain trade enterprise.

“The best thing that has been learned”, says Dereje Legesse, a Plan microfinance specialist, “is that the poor can save even at hard times. The groups have seen that they can make big differences to their lives through saving small amounts. Community managed microfinance groups can also be entry points for other community development work.”

Close to 42,000 households are members in 2,300 savings and loan groups in the areas where Plan works in Ethopia.

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