Kyenjojo, Uganda — This bank doesn’t have a soaring marble lobby or uniformed tellers speaking in hushed tones. This bank is a faded blanket spread beneath a mango tree where a circle of women, hardworking passion fruit farmers, sit with their feet tucked under their colorful skirts, tossing crumpled Ugandan shillings into the center. The accounting system is a well-worn ledger filled with painstakingly neat handwriting and few deposits over $2. Mabel Marunga, the treasurer, flattens each note and carefully enters it into the ledger, a separate page for each woman in the circle.
These women are part of a community-organized savings group, a fast-growing initiative in international development, which, in the words of one aid worker, creates funds out of thin air.
Dr. Muhammad Yunus, who won the Nobel Peace Prize in 2006, is credited with pioneering the idea of microfinance in his native Bangladesh, when he started giving loans of $27 to bamboo furniture makers in 1976. When poverty is so extreme, even paying for raw materials, like ingredients for selling street food or bamboo to make furniture, requires borrowing money. And when people are forced to borrow from predatory lenders, it is nearly impossible to make a profit to grow the business or move up the economic ladder.
According to Catholic Relief Services, most of the people in Uganda, 86 percent of the population, are subsistence farmers, struggling to grow enough food to survive.
The microfinance theory holds that amounts as small as $25 can provide enough momentum to push someone from precarious subsistence to generating a small income. According to global consulting firm Infosys, today there are 75 million people using loans from microfinance institutions, totaling more than $38 billion.
In Marunga’s savings group, small loans are used to purchase raw materials or goods to launch business initiatives, like making pancakes to sell at a local market, paying a laborer to help with planting a field, or buying chickens to produce eggs to sell.
But people in rural villages across Africa usually do not have access to loans, big or small. Banks are located in cities, sometimes more than a day’s journey away by foot, and securing loans is impossible due to distance, fees, or lack of credit. Additionally, banks are not willing to lend such small amounts of money. And extensive research into the NGO work of the developing world shows that when people depend on international NGOs for aid and financing, even in small amounts, it promotes financial dependence that is harmful to economic growth.
Over the past decade, Catholic aid groups in Uganda have started organizing more and more self-generating savings groups called savings and internal lending communities, or SILC. These “SILCs” combine the concept of microfinance – the concept it only takes a small amount of money to motivate drastic change in the poorest sector of the population – with training about how to save money, in order to achieve economic independence.
Global Sisters Report recently traveled to Kyenjojo, Uganda, to observe a savings and internal lending community in action and understand more about microfinance initiatives in Africa.
Power in numbers
“Here at the SILC groups, we’re making assets out of nothing,” explained Solomon Ruhundwa, the program manager for Caritas International SILC program in Fort Portal, the largest city in western Uganda. “We have power in numbers. None of these people in SILC can get a loan from the bank, but when they work together, now they can get access.”
Catholic Relief Services and Caritas International have trained 4,500 people in the savings and internal lending community methodology. Each trainer then helps create 10 savings groups around their village.
The premise is simple: The savings groups have 15-30 members for a year-long cycle. They meet weekly, and everyone brings a small amount of money to put aside, anywhere from 1,000 to 10,000 shillings (U.S. 35 cents to $3.50) into a community pool of money.
A group member who wants a loan, perhaps to pay school fees, buy produce to resell at the local market or start a hair braiding business, presents his or her loan request to the group. If the group approves the loan, the person must eventually pay back the loan with 10 percent interest.
Outside organizers from Catholic Relief Services and Caritas International help groups in an organizational capacity. They provide money management tips and training for accounting and ledger keeping, and they help groups write their own constitutions and decide how to elect officers like treasurers and secretaries. But the funds are all self-generated.
At the end of the year, the group divides up the savings according to how much each person saved throughout the year, plus the interest. “The more you save, the more profit you get at the end of the year, because the money you invested is gaining interest,” Ruhundwa said. “The group decides their own interest rate. They create their own loan fund.”
“At the end of the cycle, they can buy a big asset, like transportation,” a bicycle or motorbike, Ruhundwa continued. “If you are on your own, it can be difficult to save money; that’s the logic of SILC.”
Other organizations that want to provide information about health, HIV, nutrition and women’s rights have piggy-backed onto the weekly accounting meetings as a natural entry point into the community.
Ruhundwa notes that savings groups usually have more women than men, because women are “more loyal,” he said.
Saving for the farm
Agriculture is the major driving force in Uganda’s economy, with 82 percent of the labor force working in agriculture, according to CIA World Factbook. Because agricultural initiatives are the natural choice for many microfinance investments, improved agricultural practices are often integrated with the savings groups to maximize profit and encourage saving.
“The idea was to partner with existing SILC groups and to add the idea of collective marketing,” said Angelica Amaniyire, the Caritas Fort Portal marketing facilitator. Since the savings group is already organized and meeting frequently, they can unite and sell their produce together, in order to leverage a higher market price.
“If people come together to do collective marketing, they have one voice,” said Amaniyire. “Selling collectively in a group means they can have more input [on negotiating a better price] than on an individual basis.”
If a farmer is located far from a paved road and wants to sell 100 kilos of maize, buyers are loath to drive far distances for such a small amount, forcing farmers to accept low prices for their harvest. But a village savings group selling 2 tons together can command a far better price for each member.
Because members of the savings group can access small loans, they are able to purchase improved seeds, which can sometimes double the amount of harvest, explained Amaniyire. This is especially important for families who have less land.
“There’s linkage, because if you give people improved seeds so they have a higher yield and a higher profit, but they don’t know how to save their money, it doesn’t help,” added Amaniyire.
Catholic Relief Services and Caritas International run two agricultural/savings programs: ASPIRE (Agro-Enterprise and SILC Project in Rural Economies) and GAIN (Girls Agro-Investment Project). The ASPIRE project, for community members of all ages, has a three-year, $1.3 million budget that is benefiting 19,200 SILC members.
The GAIN project is dedicated to helping young women who have not completed high school learn how to grow passion fruit. GAIN has a three-year $382,000 budget, which eventually will assist 1,500 young women.
Ruhundwa hopes after the programs end, other communities interested in starting their own SILC groups will pay the trainers to organize groups in their village.
Many savings groups also choose to continue beyond the year-long cycle. Some in the area have been saving together for more than 10 years. The process is slow but organic.
Sisters across Uganda are also utilizing the SILC model to improve their own communities. A hospital in Luweero run by Missionary Sisters of Mary Mother of the Church is combining SILC savings groups with a program that distributes milking goats to the caretakers of orphans, in order to encourage families to raise babies who were abandoned by their relatives. Sr. Pauline Acayo, Little Sisters of Mary Immaculate of Gulu congregation, helped organize the Catholic Relief Service SILC programs, among her many other jobs for CRS.
I’ve seen fire, and I’ve seen rain
Recruitment of members was the trickiest part, according to facilitators with the projects. Encouraging community members to save for the future is difficult when many struggle to feed their families on a daily basis. Some members were burned by “savings initiatives” from unscrupulous people or organizations that stole the money, so they were worried about losing their money again.
Because the savings groups do not utilize banks, they must keep all of the group’s money in cash.
According to Ruhundwa, the most successful savings group he ever saw raised 27 million Ugandan shillings in a year (U.S. $10,000). That’s a large amount of cash to be lying around in an impoverished village.
Theft, including from treasurers, is a significant problem. CRS and Caritas train their groups to have a metal cash box with four different locks. The group elects four members to act as key holders, so the box can only be opened when all four members are present. The treasurer is not a key holder.
As with any community-based initiative, there are quite a few challenges. “We’ve had some loan defaulters – not a lot, but it happens,” said Ruhundwa. “Also, there are problems and disagreements at the share-out time. There have been a few instances of robbery from the cash box, including two instances where the cash box was stolen, but that’s only two cases out of more than 1,000.”
Mabel’s passion fruit
Ugandans don’t really like passion fruit.
The tropical fruit is finicky: it needs just the right amount of fertilizer, just the right amount of pruning and just the right amount of sunlight. It also requires a complicated trellis system and constant monitoring and protection against pests, aphids and fungus. Even though the crop pays a high yield – nearly $1 per kilo compared with a tenth that much for a kilo of maize, it’s prohibitively expensive to buy the seeds and get started. The fruit is also too expensive for the average Ugandan, so very few people eat them.
But KADAfrica likes passion fruit. The company, founded in 2010, encourages small farmers to grow exotic fruits and vegetables not normally grown in Uganda, like cherry tomatoes, yellow peppers, red cabbage and passion fruit, both for export as well as local use in high-end hotels and supermarkets.
Joseph Katsube is an agronomist from KADAfrica who teaches the 38 women in the Kyenjojo GAIN project how to grow passion fruit. “Previously, they lacked the technical support about irrigation and disease,” he explained. “Now, people are turning away from planting maize. Maize sells for 300 shillings per kilo and takes five months to grow. Passion fruit also takes five months to grow, but sells for 2,500 shillings per kilo.”
Katsube also teaches the women how to create a drip irrigation system out of used plastic bottles, enabling them to harvest fruit continually once the plant reaches maturity.
Currently, KADAfrica exports the passion fruit that the Kyenjojo women grow to England and Saudi Arabia. Future plans include expanding into the American market and building a juicing plant in nearby Fort Portal, so they can turn the reject fruits into juice concentrate for export.
Mabel Marunga’s savings group meets every Monday. Around 11 a.m., the women are already making their way to the Iborooga Catholic Church, which donated five acres behind the church for a demonstration garden where Katsube teaches the women how to grow the passion fruit. Today’s lesson is about proper spraying techniques for the anti-fungal chemicals. He shows them how to mix it in the dispenser and where to apply the spray: to the stems, not the fruits or flowers. It’s the end of the harvest, but the women are still able to harvest 250 fruits from their rows, which Katsube sells for 100 shillings, or 3 cents, apiece (at the height of the season, passion fruit can fetch 300 shillings apiece).
At 1 p.m., after the harvest they gather under the tree to deposit their week’s savings. The Kyenjojo women have two SILC groups, one with a group fund of more than 500,000 shillings and the other with 2 million.
Then Doreen Kabajwisa, the group facilitator, leads a life-skills program. She’s in the midst of a 14-week course teaching life skills, including public speaking, communication with intimate partners, how to prevent unwanted advances, and planning development. Today, the women engage in a number of dramatic exercises where they explore gender roles. “What is ‘men’s work?’” she asks the group, as they act out construction and driving cars. “What is ‘women’s work?’” she asks, as they mimic cleaning and cooking. “It doesn’t have to be this way,” she tells them. “You can do whatever you want to do.”
Mabel Marunga was one of 13 children whose father did not make enough money to send her to school, so she dropped out after 7th grade. Now 20 years old, she’s a single mother to 7-month-old Isaiah Ryan. She joined the passion fruit program after hearing about it at church and was elected treasurer.
Previously, she made $18 per month as a part-time cleaner at the town’s municipal building. Now, she makes almost $30 per month from selling passion fruit. Her income from the passion fruit allowed her to buy a large number of flip flops, which she sells at the local Friday market. On a good day, she can sell up to $20 of flip flops, meaning her monthly income is now reaching around $80.
“This [SILC group] is important to me because it helps me to save money,” she said. “At the end you can get a lot of money and do something big, which you couldn’t have done otherwise. Now when I have 1,000 shillings, I save it. Other times, I used to get 1,000 shillings and use it for food – I couldn’t save it. But this has helped me so much. I’m not destroying my money. I’m even saving 100 shilling notes [instead of spending them].”
“The whole group has changed, their life has changed because they are getting daily income,” she said.
Marunga noted that some of the men in the community were jealous of the women’s success with the passion fruit. Many women have transplanted seedlings from the demonstration garden to their own homes and have started raising their own gardens, or selling the seedlings for a tidy profit.
Katsube watches as the women intently tally up the week’s savings under the mango tree. “These girls,” he said, shaking his head in admiration. “These girls are so serious. And they should be, they have a lot of money.
“They started with just 100 shillings, 200 shillings a week, and now they have millions. I hope this will continue for years to come.”
For a dynamic view of the GAIN project, watch this CRS promotional video, featuring Mabel Marunga.
[Melanie Lidman is Middle East and Africa correspondent for Global Sisters Report based in Israel.]
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