Funded by Strengthening Product Value Chain of Agro Business Enterprises in South Nyanza European Union

CEFA is an Italian Non-Government Organization of International Voluntary Service. CEFA’s goal is that everyone everywhere in theworld can become a protagonist of development and an active agent of democracy and peace. CEFA – Comitato Europeo per la Formazione e l’Agricoltura Onlus (European Committee for Training and Agriculture) Via Lame, 118 - 40122 Bologna – Italy Tel. 039 051 520285/520068 - Fax:0039 051 520712 E-mail:[email protected] website:www.cefaonlus.it

C-MAD is a Kenyan based Non-Government Organisation. C-MAD envisages a world where men and women live dignified and prosperous lives with a mission of enabling communities in Kenya to improve their livelihoods, live dignified, healthy and prosperous lives through capacity building, collaboration and service delivery. C-MAD – Community Mobilization Against Desertification P.O. Box155, Rongo, KENYA Tel. +254-203582502; Fax+254-203582502 E-mail:[email protected] website: www.cmadkenya.org

GROUP SAVINGS AND LOANS BOOKLET (GS&L) Leading Agency and co-funder

Partner

C-MAD Design, Layout & Print

PROLOGUE m e d i a

l t d

(+254) 722 . 78 15 01

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

Strengthening Product Value Chain of Agro Business Enterprises in South Nyanza

Editor: Daniel Nyambok Co-editor: Ednah Okello Art Direction and Design: Moses Musyoki – Prologue Media Ltd Coordination: Maurizia Sandrini

This work is licensed under a Creative Commons Attribution Non-Commercial No Derivatives 2.5 Italy License. To view a copy of this license, visit: http:// www.cefaonlus.it/biblioteca/biblioteca.asp

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

INTRODUCTION Group Savings and Loans (GSL) are considered as a vehicle for empowering rural poor. The basic idea behind the Group Savings and Loan Programme is that communities are trained on how best they can effectively mobilize and manage their financial resources in order to improve their household livelihood coping strategies. The beneficiaries of the practice are the group members and their families, as well as non group members benefiting from group services. Saving and credit schemes, in particular, have been shown to not only help broaden and strengthen individual and group’s economic base, but promote group cohesion and development of the member’s management skills. Like most people in rural Kenya, residents of the project area had never cultivated a culture of saving part of their incomes thus making them very vulnerable to economic shocks. The project therefore decided to initiate this form of savings culture. The group savings and loan schemes enable the farmers to adopt a culture of savings, and build up savings from which they can get loans to expand their activities. A part of the proceeds from their improved income is deducted to service the loans but eventually all contributions are shared out to all members. For the poor and vulnerable households, belonging to a savings and loaning group enhances their social capital within the community and make them have a higher self esteem and sense of belonging which are necessary for these categories of persons to get involved in mainstream development activities. In most of the countries where the methodology is implemented there exists traditional savings mobilization strategies, which form a good foundation to build on innovative financial mobilization and management strategies. These traditional approaches function in different ways from region to region. This idea therefore forms the foundation by which this booklet has been developed. It is therefore imperative that each area looks at how they can adapt and build on to this existing knowledge. It is generally easier for people to accept and participate in a programme that has some relationship to what they already know and have been practicing. The methodology of strengthening the people towards this venture involves step by step training programme in areas of Member Self Selection, Groups dynamics & Leadership, Constitution making, Group Fund Development and Record Keeping.

3

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

1. INDIVIDUAL SELF- SCREENING To be a member in the Group saving and loan scheme one needs to consider herself or himself in search for a suitor. This is like undergoing self screening by looking at oneself in the mirror. Because you are looking for the best suitor, you need to start by yourself by asking and considering what could be the best qualities of a good suitor. Consider what goes on in the minds of the two women in the pictures below and make decisions in your heart if they are right to be your suitor.

 They are too ignorant; they do not know anything  Others need to listen to me first  Others must do the work?  If there is a problem, I must keep quiet?  If they oppose me, I will leave the group  If I misuse the money who cares  Why should they tell me what to do?  My husband can do everything

I I I I I I I I

4

can not accept other peoples ideas can not share with them my private life do not have the time to meet with other people do not have to be there in time do not care about rules do not care what problems they have am the one who makes the group work am the one who knows how to use money.

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

Qualities of a good GSL member Each GSL member needs to honestly look into their personality and character in terms of whether they are:

Willing to share knowledge/ information

Honest

Trust worthy

Having an objective in their life

Positive towards group work

Patient

Easily approachable

Responsible, mature and integrity

Knowing one another very well

Key Pillars of GSL group

Disciplined

Fair and just

+

Discipline

+

Trust

When all the above qualities have been considered a good GSL group should possess the following features: • • • • • • • • • • • •

With a common purpose and objective Disciplined members Certain number of members Members work together Have constitution Keep records, minutes of meetings Have long-term goals Meets on a regular basis Active participation of every individual Information is shared United and reach agreements as groups Problems are resolved amongst group

2. GSL LEADERSHIP Group Leadership A leader is an individual elected by their group to perform on behalf of the group functions/tasks that cannot be done by all members in a group. GSL required good leadership.

5

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

There are different types of leaders. The table below differentiates leaders people want and those that they don’t want. Match the pictures with the characteristics of leaders you want on the right. Give reasons for your choice.

• • • •

Picture 1: Member are sitting and are not active

• • • • • • • •

Picture 2: • Leaders are sitting and not active • and let only others do • Members are pushing

• • • • • • • • • • •

Picture 3:  Members are all active equally  Leaders support group effort by steering

6

Commanding / giving orders Sole decision making Over confident Communicate downwards and seek no feedback Expect explicit obedience from their subjects Enjoy punishing and threatening They are the “I want Type” Destroys unity Biased Inflexible

Exchange ideas before decisions are made Ensure freedom of speech and appreciate others’ ideas and contributions Admits mistakes Ensures majority satisfaction Two way communication, ensuring feedback Motivates Emphasize the “WE” Unites Treats everybody equally Observant

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

GLS Group Leaders

Chairperson = manages the group meetings, makes sure everyone gets to speak, leads and guides the group, leads discussions and maintains control, Sees that there is discipline and order according to the constitution, e.t.c

 

Secretary =keeps records of attendance and decisions, and also writes letters for the group, records important events, calls meetings at the advice of chairperson



Treasurer=keeps track of the savings, fines, social contribution and ensure finance records are open to members to see and be checked by appointed bodies



Controller =keeps the group disciplined i.e. ensure members keep rules and regulations during meetings



Member = must participate actively in all meetings, take part in all decisions,carefully observe all transactions and be sure all records are checked by the officers, they must fill out their own passbooks and keep notes onwhat happens at the meetings

7

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

3. GROUP FUND DEVELOPMENT Groups are viable mechanism through which savings can be mobilized and utilized for the satisfaction of multiple needs within a community e.g.  Increase the capital base of households  Sources of investment capital to start-up or expand IGAs  A cushion and security against risk and emergencies  A source of future consumption Setting a Group Savings Fund Before members start saving they must agree on:  The purpose of the group fund  The fund size target that they want to reach  When they want to achieve that fund target  How much each member can afford and will contribute  The frequency of contributions per member How savings can grow Group savings can grow by:  Joining fees  Savings contributions  Saving profits from IGAs  Interest charged on loans  Penalties and fees  Buying assets Types of group funds A group may have two types of funds: Loan Fund: money borrowed for productive purposes A loan is money given to someone for a given period of time and is repaid with or without interest. Interest is the price a borrower pays after receiving a loan or credit. Money paid by borrowers on top when they return the borrowed money. Why do people borrow? Consider the pictures below and suggest the purpose for borrowing the loans

8

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

Social Fund: money set aside to meet emergencies like illness, death, and education of household members. Both loan and social funds can be got through:  Internal loaning i.e. GSL group where group members contribute savings into a common fund  External loan i.e. another organization or individual’s resources not one’s own resources. Internal loaning is preferred over external loaning because: Internal borrowing • • • • • • • • • • • • • •

The capital is owned by the group Interest is determined by the group Group is within reach to every members Capital and Interest from loans owned by group Interest earned builds the groups fund and group savings Your savings increase from interest Each member has equal chance Small amounts Individual borrows what one can afford Motivates continuity Facilitate gradual growth Easy and readily available Fast growth of fund Motivates business growth

External borrowing • • • • • • • • • • • • • •

The capital is owned by an outsider Interest will be determined by the outsider Difficult to access loans Interest will go to the outsider Interest earned increases the outsider’s profits Your savings are at risk as collateral Funder may reject Larger amounts Loan amount determined by lender Personal and property risk Over-borrowing and overburdening Difficult to access Slow growth of fund Business risk inherent

9

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

Whether it is an internal or external loan: (a) Loans are a risk and liability (b) Individual borrowing must use loans for the indicated purpose. Managing social funds In order to come up with a social fund and to manage it in a way that benefits all, a group must think through and agree on the following. • Understand the social needs and trends of members • Groups must know the number of members and the frequency with which the needs may arise for members i.e. per week, per month or per year. • The group agrees on the minimum amount that they need to have to be able to meet the social needs. • Members must agree on the amount that each member must save and how often for them to reach the minimum target. • The group must agree on a consistent payout method for each problem • In the event that the social fund is not used for a long time can a group use the money to give out productive loan Safety of Group Funds For • • • • • •

the safety of the group funds, the following can be considered: Issuing of loans on available savings Having a cash box and with three padlocks Banking Sharing out Buying group assets Rotational meeting places

10

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

4. Constitution A constitution is a set of rules, guidelines and conditions (normally written) that govern the relations, functions and rewards or punish members that set them or falls within its jurisdiction. Constitution is what will govern all the operations of the savings and loaning group’s activities hence should be developed before starting the operations. Constitutions are written by each specific group. All group members should participate actively towards constitution development.

Pictures showing members of GSL group discussing and agreeing on their constitution GSL Constitution Framework A sound GSL scheme constitution should cover the following:

a)Introduction:

b)Objectives:

c)Membership Criteria:

• • • • • • • • •

Group’s Name Date of Formation Location Date of Registration What do they want to achieve as a group What do they want to achieve as individuals Activities of the group Who can be a member? What do we do when someone wants to join when the group is already functional?

11

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

d)Committee:

e)Election Procedures

f)Meetings:

g)Savings and Loan Fund:

• • • • • • • • • • • • • • • • • • • •

h)Social Fund:

• • • • • • • • • •

i)Bank Account:

• •

12

Who does it consist of? What are their responsibilities? How are positions taken? How long is the term? How many members must be present? Who presides, co-ordinates? How long is the nomination of candidates and actual elections? How will voting be carried out? Time Duration Attendance How much are the contributions? When and where are they collected? What is the purpose of the savings? Types? Productive loan, social fund or both? Within which timeframe do they have to be taken to the bank? Where our money should be kept? What happens in case of lost money? When shall dividends be paid out? Will all the savings be paid out as dividends? How much are the contributions? When and where are they collected? What is the purpose of the social fund? Types of payouts from the social fund? Death, illness, drugs, education, transport etc…? How much do we pay-out per each type What do we need before a pay-out is made Where is the social fund cash kept? Where the money should be kept? What happens in case of lost money? At which bank will the group open an account? At what point will a bank account be opened? Who are the signatories?

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

j)Loans:

• • • • • • • • •

k)How big should loan amounts be? l)Penalties/Fines: a)How are conflicts managed by the group: b)Separation/ Dissolution/ Dropping out: What happens to the savings, interests and penalties in case of?

c)Amendments to the constitution:

• • • • • • • • • • • • • • • • • • • •

Who is eligible to borrow? At what point should loans be given? How much of savings will be used to give loans? How much interest will be charged on loans? Loans are repaid after how many weeks or months? What do we do when a member has family/marital problems How much can one borrow? What happens to savings contributions once the lending starts? How do members repay, monthly or what? Do we repay interest at the same time? What happens if members fail to repay? What is the security on loans? Who appraises? What is needed? In which cases and how much? Unexcused absence? (Excused absence: what is a valid excuse?) Who must be informed first? When should a meeting be held in case of a conflict within the group? Who should be at the meeting? Misconduct Incapability Resignation/relocation A member withdrawing Expelling a member from the group Misuse of money Death Dissolution of group When do we make amendments? How many members have to be present?

13

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

5. RECORD-KEEPING For transparency and accountability of the group activities, a GS&L scheme should have proper records. The records are kept by the secretaries of the group. However, every group member is equally important and must know record keeping and the kinds of records kept. Why should GSL keep records? • To know who has saved and borrowed? • As reference guide for members • Give transparency in the conduct of the group activity • In demonstrating member participation in group activities GSL should keep the following records Type of record (a)Registration book Why kept? Kept when members of the group agree to pay a given amount of money for them to be members of that particular group.

Example No

Name of members Amount Date

Signature

1 2 3 4 5

Elizabeth Oyugi Kimani Mungai Kiama Wanjau Pascal Masila Susan Onyango

xxxx xxxx xxxx xxxx xxxx

100 100 100 100 100

1/2/99 1/2/99 1/2/99 1/2/99 1/2/99

(b)Register of Attendance Why kept? Know members who are present during every meeting

14

Name Elizabeth Oyugi Kimani Mungai Kiama Wanjau Pascal Masila Susan Onyango

Date 1/2/99 1/3/99 √ √ √ √ √ √ √ √ √ √

1/4/99 √ √ X √ √

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

(c)Savings Book Why kept? Giving clarity on amount(s) saved by each member

Name Elizabeth Oyugi Kimani Mungai Kiama Wanjau Pascal Masila Susan Onyango Total Signature (Treasurer)

Date Total 1/2/99 1/3/99 1/4/99 KSh 250 KSh 250 KSh 250 KSh 750 KSh 250 KSh 250 KSh 250 KSh 750 KSh 250 KSh 250 KSh 250 KSh 750 KSh 250 KSh 250 KSh 250 KSh 750 KSh 250 KSh 250 KSh 250 KSh 750 KSh 1250 KSh 1250 KSh 1250 KSh 750 fin ine fie

(d)Fines Book Why kept? • Being late to group meetings. • Late repayment of loans or savings • Talking while a meeting is in session without going through the chairperson. • Gossip

Date Name Reason for fine Amount Paid (Kshs) 1/2/99 Elizabeth Late loan repayment 50 Oyugi 1/2/99 Kimani Late to group meeting 20 Mungai 1/2/99 Kiama Late to group meeting 20 Wanjau Total 90 Signature fine (Treasurer)

(e)Social fund book Why kept? Money kept to meet emergency costs for illness, death, and education of household members

Date Name Amount Paid (ksh.) 1/2/99 Elizabeth Oyugi 50 1/2/99 Kimani Mungai 20 1/2/99 Kiama Wanjau 20 Total 90 Signature(Treasurer)

Signature xxxx xxxx xxxx

15

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

(f)Loans Book Why kept? • To know which member within the group borrowed what amount? • The amount of money that a group is owed by a members • The interest that is owed by a member after receiving a given loan amount. • The time when a loan is due for repayment. • Good and bad payers within the group. • Use of the loan(s) No. Name of loanee

Date of loaning

Purpose of loan

Amount Interest Total of loan amount amount to (10%) be repaid

Date to be repaid

Signature Amount Outstanding Remarks of loanee repaid balance(Roll over loans

1.

Elizabeth Oyugi

1/1/10

Selling cereals

2000

200

2200

1/2/10

XXXX

2200

0

Good

2.

Kimani Mungai

1/1/10

Retail shop

4000

400

4400

1/2/10

XXXX

2000

200

Fair

3.

Kiama Wanjau

1/1/10

Paying school fees

6500

650

7150

1/2/10

XXXX

0

7150

Poor

4.

Kimani Mungai

1/1/10

Retail shop

200

20

220

1/3/10

XXXX

220

0

Good

5.

Kiama Wanjau

1/1/10

Paying school fees

7150

715

7865

1/3/10

XXXX

7865

0

Good

(g)Savings shares Why kept? • Giving clarity on dividends paid out to members • Show how dividends for members are growing Name Elizabeth Oyugi Kimani Mungai Kiama Wanjau Pascal Masila Susan Onyango

Date 1/2/00 1/3/01 1/4/02 KsH 5,346 KsH 10,692 KsH 16,038 KsH 5,346 KsH 10,692 KsH 16,038 KsH 5,346 KsH 10,692 KsH 16,038 KsH 5,346 KsH 10,692 KsH 16,038 KsH 5,346 KsH 10,692 KsH 16,038 KsH 26,730

KsH 53,461

KsH 80,191

Signature (Treasurer)

xxxx

xxxx

xxxx

Total

16

Total KsH KsH KsH KsH KsH

160,382 160,382 160,382 160,382 160,382

KsH 160,382

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

(h)Cash Book Why kept? • Summarizes the movement of cash IN and OUT of the group fund. Date 2/5 3/5 4/5 5/5 6/5 6/5 7/5 7/5 8/5 9/5

What happened Money In Money Out Savings contributions 4000 - Loans to members - 4000 Fines 200 Ticket to and from - 100 Matanga Buying a drink - 30 while on business Savings 2000 - Buying of pen 20 Fines 100 - Bought a - 150 hard cover book Loan to member 1500

Balance 4000 0 200 100 70 2070 2050 2150 2000 500

Note: All records must be: • Recorded immediately when an activity has occurred • Recorded in the presence and view of every member • Every member within a group should know all the group records kept by the group

17

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

6. MEETING PROCEDURES There are 2 main meetings in a GS&L scheme: 1. Savings only meetings 2. Savings plus loaning meetings 1. Savings only meetings In these meetings, members meet for the purpose of saving only. No other activity is carried out during these meetings. Steps in savings only meetings: Step 1: Prayers by any member of the group Step 2: Opening remarks from the chairperson Step 3: Chairperson welcomes the secretary to take the roll call Step 4: Members bring savings and hand to the money counter who then gives the treasurer Step 5: The secretary calls out the names of those who have been fined to hand over the money then the treasurer confirms. Step 6: Contribution of funds such as social fund, educational fund. Step 7: Reading of the total amounts of money collected. Step 8: Closing of the meeting by the chairperson.

2. Savings and loaning meetings In savings and loaning meetings all the group activities are carried out. Steps in savings and loaning meeting Step 1: Chairperson calls meeting to order and invites a volunteer member to offer opening prayer.

18

GROUP SAVINGS AND LOANS BOOKLET (GS&L)

Step 2: Roll call is taken by the secretary Step 3: The chairman calls for the box to be opened. Secretary asks members how much money was left in the box. The money counter is called to confirm Step 4: The previous balance is announced by the money counters i. The secretary calls out the names after the money has been counted and confirmed by the treasurer. ii. Savings, fines, loan returns plus interest, social fund/educational fund are collected. Step 5: Secretary announces the total amount collected Step 6: The secretary asks who among the members needs the loan. Step 7: The Secretary announces the balance after loaning out then the book is closed. Step 8: A.O.B Step 9: Closing prayer and announcement of the date of the next meeting

19

NOTES

NOTES

NOTES

NOTES

NOTES