When Ana joined our Soledad de la Cruz community savings group she had no bank account and could not access a bank. As a result she had nowhere safe to save her money, no financial security, or access to reasonable credit or insurance. This is what is known as financial exclusion.
Ana is financially excluded because she lacked savings to meet minimum deposit requirements. On top of this, banks rarely have branches in rural areas and many women lack literacy skills so they are even more inaccessible to women in these circumstances.
Financial exclusion is worrying because it makes people vulnerable. When unpredictable problems strike such as illness, unemployment or natural disaster, people who are financially excluded have few options. In these instances, women cannot seek help from banks in terms of credit or a loan, so they often fall prey to money lenders who, in our experience, charge 10% percent to 20% interest per month - which is 120 - 240 % per year . Rather than stabilizing the women’s financial problems, these money lenders put them into a cycle of debt that becomes hard to escape.
For these reasons the United Nations (UN) named financial inclusion as one of the 17 goals for sustainable development. The Sustainable Development Goals is an agenda set by the UN which focuses on ‘people, the planet and prosperity’. As such, according to the UN, all countries should seek to ‘promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for allreate world prosperity is through entrepreneurship. In Nicaragua, due to a lack of a formal job market in many places, people, like Ana, must create their own businesses. But this is very hard without savings, so Ana and others like her rely on credit.
Microfinance is often promoted as the solution. This system gives small, short-term loans to people on low incomes. They then invest these loans - usually in businesses - and begin to pay it back with a high interest rate. While it is an important tool, microfinance has severe limitations - namely that the interest rates are too high and the loans are too short and not suitable for other purposes, such as home improvement.
Women holding their box of savings at a community savings group meeting n Soledad de la Cruz
Fortunately, we have another solution. Ana joined one of our community savings groups. Our community savings groups seek to empower communities of women financially. These are groups run by the community of women rather than big corporations. Because they are run by themselves, the women pick the interest rates, which are often much lower than microfinance, decide who receives a loan as well as the amount of interest. As a result, a cycle of debt is prevented because the conditions of the loan are based on a person's capacity and altered accordingly by their own community. Afterwards, all interest collected is put back into the group savings where it can be given back to the community.
After joining the savings group Ana could take out a loan to begin her homeware business. With the money she and her husband bought stock - tables, chairs and beds - and began selling them door-to-door in neighboring towns. After a short while Ana and her husband saved enough to repay the loan to her community with a small amount of interest, and re-invest into her own business by buying more stock.
Loans are used for a variety of reasons. Whereas Ana used the loan to buy stock for her business, other women use our savings group to become certified in specific skills. Ernestina, and her daughters Digna and Mary hope to open a bakery in 2023 in order to become more financially empowered. They have taken out community loans so they can get certified as bakers. Lucila and other women in our Siares group worked towards getting food safety certificates. Lucilla wants to use this to begin making and selling smoothies. Candida learned how to sew through her community group and now runs a successful sewing business. These new skills enable the women to make a living for themselves and escape cycles of poverty as well as financial exclusion.
Anyeli and her two children at her kiosk
Many of the women already have business or just business ideas but need the help of the community savings group to make things happen. Anyeli in our Soledad de la Cruz group already ran a cosmetics business door-to-door but as more people moved to the area her job became more challenging. With the help from her savings group she was able to open a kiosk. Since then Anyeli can support her two children and also improve her home.
Mary Luz is another example. Mary works by selling clothes and food in neighboring communities. She has to travel for extremely long distances all on foot making her job very challenging. With the community savings groups she hopes to invest in a motor-bike so she can cover these large distances in a much quicker and efficient way.
Mary Luz (right) and her pulperia (above).
Despite challenges, 74% of the women we work with have achieved some kind of personal goal. Over 80% of the women regularly track their families and businesses finances and make budgets. However, most importantly, 100% of the women we’ve worked with have said that their participation in our groups have improved their quality of life. Whether they use our groups to build safer, morestable homes, or start their own business or get an education - they feel more financially empowered and less vulnerable.