Self-Financing Groups in Europe

I worked 4 years with traditional village banking programs in indigenous communities in Guatemala  and discovered the power of savings and the possibility of groups to be self-funded and self-managed. Looking for a self-funded model, I learned the Self Funded Groups methodology in Venezuela (2002), where Salomon Raydan, a social entrepreneur, had created hundreds of groups, with no external money. In 2004, Salomon helped me to create a pilot program to create completely self-funded groups (10 to 30 people) in Barcelona (Spain), my hometown. After the pilot with migrant communities (mainly people coming from Africa and Latinamerica), we created ACAF, a not for profit organisation dedicated to spreading the methodology to Europe. Now there are groups in eight cities in Spain and in four European countries. As far as I know, it is the only model like this in Europe, though you can imagine that there are thousands of Roscas in migrant communities.
We then tested the model with other communities: people with mental disease, young entrepreneurs with no access to formal banks, women who have sufferred gender violence, young boys who have just left prison,…
As you all know the model in Southern countries, I can briefly tell you the 5 big differences when we adapted it to Europeam western countries:

• Education and time: as there is more literacy here, and also less time available, it should not take so long to train the group. Actually, in 2004 we were spending 6 months to train the groups. Now we just need 2 sessions of 2 hours, and afterwards there is a learning-by-doing process. Most of the groups do not need our assistance after 2 months. There are even some groups that have been created only with virtual assistance (internet and phone) with similar results to those with physical support.
• Smaller groups: as there are not big social networks with enough trust, groups have an average of 15 members. So there are less operations each month. We have then simplified the model and now with four documents they can start managing the group. For a better follow up, group leaders meet every six months to exchange ideas, meetings in which we participate (and learn about improvements in the methodology!).
• Technology: as you know, use of technology is higher here. Most of the groups use an online platform to manage the group. They all have smartphones and a lot of them use facebook! In our Facebook page (comunidades autofinanciadas) people can participate.
• Diversity: In one city, you can find groups of more than 30 nationalities (and cultures). We have had to adapt the methodology to each group: muslims, mental disease, etc.
• Importance of social networks: in a recent study we did, 60% of the members told us that the group was the only trustful social network they have in the city. For most of them, this is more important than having a savings or a credit program. This emotional part of the model is key for us, even more than finance.

After these 7 years, there are some results that can be very familiar to you:

• Groups are completely self-funded (no Banks or IMFs participating) and self-managed (they do not need us anymore). More than that, after six months there is more money in the box (or in their bank account) than demand for credits.
• Savings! In the first 12 months, the savings in the group increase from 200 euros (average starting capital) to 680 euros (average capital at month 12). It is more than 3 times more. More than savings, they call it investment, cause they get a good return at the end of the year and they really feel like owners.
• Credits: The average credit in Europe is 400 euros per month, and the máximum 2.000 euros. The repayment rate is close to 100%, though some months there are a lot of cases of delays in payments.

Next steps:

Group Savings/Investment Movement: With Salomon, our teams and other people we replicated the model to other countries. Incredibly, we did not know about VSLA, Hugh Allen, the Arusha Movement and all of you
until one year ago, though the model has won different European Awards and appeared in mass media all over Europe (European CNN, Le Monde, El Pais,..). When we met Hugh Allen in his home in Germany, we were just
so excited to know that there is such a huge movement where we share the same principles. So you can imagine that knowing Bill and Jeffrey in Valladolid was so much fresh air after some years of feeling a bit
alone in the “traditional” Microcredit Movement in Europe. We would love to be part of this big (revolucionary) movement, collaborate in what is necessary, and exchange knowledge, resources, etc.
Replicating the model to other Western countries, including US: I guess we share the same dream that the methodology is spread all over the world. Our knowledge in ACAF is the adaptation to Europe, which
probably can help to the implementation in US. In Europe; UK, France, Italy, Germany and other countries are asking for the methodology. Technology: we are developing an online platform very much focused on members (more than NGOs) to spread the methodology, consisting in three big parts (some things have already been proven): a Do-It-Yourself application, a Management Tool for groups and members (very easy to use) and a social network for members to use with members of their own group but also with members of other groups.

Reader Comments (1)

I would like to know if there are other movements of savings groups in Europe different from CAF, I heard something about MAG in Italy but I can't find what it is.
Thanks

Tue, March 13, 2012 | Vanesa