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Connecting the World’s Poorest People to the Global Economy: New Models for linking savings groups to formal financial services

Despite the many benefits that CARE’s Village Savings and Loans schemes bring to poor communities, they are not a panacea. As groups mature they seek the security of a bank account, or wish for larger loans than the group can provide. This report looks at eight different models that CARE has explored to connect savings groups with formal financial services. Including Barclays, Vision Finance, Vodacom and Mwanga Community Bank, Orange and Equity Bank and Jubilee Insurance.

High uptake of savings, credit and insurance products have allayed concerns that products might prove too expensive for very poor communities. A total of 4,200 groups, or 105,000 individuals have been linked to the new products developed. Businesses too are benefitting, with increased customer bases and strong repayment rates. The report does recognise however, that overall transaction costs of linking savings groups to formal institutions remains high, albeit mobile banking offers opportunities to reduce this cost. The report also recommends that customer protection must be maintained. It outlines a set of ‘Linkage Principles’ that CARE has designed to help guard their interests.

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