EDWON - Group Economics

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The amount most members can save may seem small—just 10-25 cents a month—but the savings group model is surprisingly effective in accumulating a decent sum available to members. One well-established group’s savings has grown to $1,800 in eight years.

The following conservative example shows collective savings of a fictional group of 20 women over five years. The entire fund is out as loans at all times. Repayment is 100%. The interest can be relatively high (24% per year), because the duration of each individual loan is relatively short.

Year	Saving Per Member		Collective fund at start of year	Income from interest (2% /month)	Collective fund at end of year	Equity/ member — savings + interest
Year	Monthly by Member	Yearly by Group	Collective fund at start of year	Income from interest (2% /month)	Collective fund at end of year	Equity/ member — savings + interest
1	15	3,600	1,500	360	5,460	273
2	15	3,600	5,460	1,310	10,370	518
3	15	3,600	10,370	2,489	16,459	823
4	15	3,600	16,459	3,950	24,009	1,200
5	15	3,600	24,009	5,762	33,371	1,669

With an exchange rate of 75 rupees (Nepalese currency) to the dollar, the total savings of this group, after five years, amounts to $445—a sizable sum in rural Nepal, where this amount of money could buy three goats for every member in the group. In addition, the women can raise about 5,000 rupees a year through fundraising efforts. Typically, the women will sing and dance at festivals and weddings, where people are generous with contributions.