Savings

"It's about collecting people"

All Federations in the SDI network are collectives of slumdwellers whose central activity is the operation of savings and credit schemes. As the basic unit of collective action, each savings and credit scheme is comprised of slumdwellers living on the same street. Leaders walk door-to-door gathering small change from neighbors, and conducting daily community needs assessments.

The entire process is designed to maximize the contact that people have with each other, enabling strong bonds to form around their shared identity as poor people. When people interact with each other every day - whether it be over savings and loans or the threat of eviction - their sense of being a community intensifies. As members say, "Daily savings is a ritual that is not just about collecting money, it is about collecting people, collecting information about their lives and learning how to best support them."

Apart from encouraging savings, these women's collectives also offer access to cheap credit by issuing crisis, consumption and income generation loans. The point here is that the urban poor are completely excluded from the formal financial market and are often forced to borrow from moneylenders who charge extremely high rates of interest. This leads to vicious cycles of debt and ever-deepening poverty. Therefore, offering cheap credit fulfils a critical need for the urban poor and is an important entry point for Federations to build united communities.

Through savings and loan schemes, trust is built up by a system which allows a member to take a loan for any purpose whatsoever to buy one's freedom as a prostitute or to get one's husband out of jail. The idea is that women should not dip into their slowly growing savings when facing a crisis, but should take small affordable loans. Contrary to prevailing micro-credit logic, most Federations in the SDI network will not punish women who cannot repay immediately. Instead, after assessing the reasons for delay, the group will issue a second loan, and a third. This will continue until the member is strong enough to start earning an adequate income once it is clear that the member can stand on her own feet, Federation leaders will visit her every day to help her repay.

At a purely economic level, SDI's effectiveness to mobilize savings can be measured in numerical terms: how many savings schemes, how many savers, how much money saved, borrowed and repaid, how much capital geared up through savings. From a developmental perspective, however, the basic equity inherent in savings is the cohesion, understanding, trust and confidence generated. The trust built thorough savings is not only essential to the formation of a strong and active Federation, but also critical to take pro-poor development initiatives to scale.