Microfinance: Training Should Extend Beyond Savings Groups

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

The 2007/2008 Human Development Report’s statistics on Guatemala are pretty depressing. Approximately 54 percent of Guatemalan children under age five are under their height for age (a sign of malnourishment), almost one in three individuals over age 15 cannot read or write, 32 percent of Guatemalans survive on less than $2 per day, and 56 percent of the population lives below the national poverty line. CRS addresses these issues through a variety of projects, including nutritional and health monitoring of mothers and young children, technical assistance to small farmers, and educational scholarships for poor students.

Nevertheless, CRS has observed that even when these projects are successful and families improve their economic situations, many Guatemalans do not access formal financial institutions—including banks and microfinance agencies—due to unfamiliarity with the services they offer, fears of being manipulated, or high barriers to entry.

These obstacles prevent them from earning interest rates on their savings deposits, accessing pension and insurance products, and receiving more affordable credit to purchase homes, open small businesses, or fund their children’s education. Furthermore, most poor Guatemalans have never received any type of financial education. They might not know how to develop a family budget, may not understand the terms of their loans, and do not make it a habit to save money.

CRS has reached out to the poor and marginalized sectors of the Guatemalan population through savings-led microfinance, which operates through the formation of autonomous savings groups. Group members receive training on the principles of savings and loans, interest rates, and other basic financial tenets. This financial training ensures that group members possess the skills they need to successfully manage the group’s fund and make responsible financial decisions when, for example, they evaluate loan requests.

Members have improved their financial skills through their participation in the savings groups, but we wanted to think bigger by resolving two main questions: How can we standardize the financial training? And how can we extend it beyond the savings groups? After all, members are not the only ones who could benefit from learning how to manage their money and develop clear financial goals.

As a result, CRS is currently exploring the idea of creating a formal financial literacy curriculum. The curriculum would include information about savings concepts, budgeting, and basic banking instruments. In addition to using it with savings groups, we would seek to implement a financial education program in several public secondary schools. CRS would conduct training-of-trainer workshops for teachers and animators, who in turn would teach the curriculum to students and savings group members.

In the United States, personal finance classes often include stock-market simulations that teach students how to invest and track stocks. Although this can generate interest in finance, it can also encourage risky behavior. Combining financial education and savings groups, on the other hand, teaches valuable lessons about savings, loans, and responsible money management. It also builds decision-making and leadership skills, promotes teamwork, and instills students with self-confidence.

– Ben Hess

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