Microfinance in Guatemala: Promoting a Culture of Savings

Ben Hess is a CRS international development fellow living in Guatemala and working with savings-led microfinance programs.

One of the first things I ask participants at the CRS microfinance trainings is: “How many of you save money?” Invariably, I am told that that they cannot afford to save. When pressed, some concede that, although they do not have formal bank accounts, they do have small amounts of money that they can access if necessary. Yet the tendency to set aside a specific amount usually does not exist, especially when they face significant barriers to formal or informal savings mechanisms.

The next question I ask is: “How can you save more?” The two most common responses are “increase income” and “reduce expenses.” For families living in extreme poverty, however, both of these are difficult to do. Adults—and in some cases, children—are probably already working full-time, while the vast majority of family income covers basic expenses such as food, medicine, and lodging.

Even so, we try to help participants understand that small adjustments in how they spend disposable income would enable them to save more. For example, transportation costs could be reduced by making trips to the market every two weeks instead of weekly, and purchases of nonessential items like ice cream or beer could be scaled back slightly. Often, creating a budget that tracks income and expenses helps identify areas where families can save money.

It’s important to stress that we’re not telling participants that they can no longer buy ice cream. We are simply trying to get them to reflect on where their money goes, and whether opportunities exist to increase savings. Though the savings might amount to just $1-2 a month, these often constitute the minimum contributions required by savings groups and can make a big difference over time.

Above all, we try to promote a “culture of savings” among poor families. In El Salvador and Guatemala, I’ve noticed that children often accompany their parents to the savings group meetings. They observe the sacrifices their parents make to save and, hopefully, the fruits of those sacrifices in times of need. Just as parents in the United States teach their children the importance of saving money as an important component of good financial habits, so parents across the globe can impart these same concepts to their children so that they learn to effectively budget and manage their money.

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