TIPSHEET: Savings Groups in Humanitarian Response Lessons from Northeast Nigeria with Displaced Populations FEBRUARY 2017 Background Income inequality and conflict over resources have contributed to significant ethnic and religious violence throughout Nigeria, Africa s most populous country. Mercy Corps operates a large-scale humanitarian response in northeastern Nigeria for populations displaced by the Boko Haram insurgency and government forces. Of the 1.9 million Nigerians displaced since 2014, 92% live in host communities. 1 In partnership with USAID s Office for Foreign Disaster Assistance (OFDA), Mercy Corps meets immediate needs and restores livelihoods for over 120,000 Nigerians from displaced households and host communities in Gombe and Yamaltu Deba local government areas within Gombe State. Introduction Mercy Corps took the innovative approach to test the use of savings groups with displaced households (IDP) in Gombe under a humanitarian response program. IDPs in Gombe-based savings groups represent Nigerians from four northeastern states: Adamawa, Borno, Taraba, and Yobe. All have lost livelihoods and productive assets including food stocks, livestock, and agriculture inputs, rendering it difficult to re-engage in productive activities and meet household needs. IDPs in Gombe purchase food directly in local markets but many have unstable cash flow. Mercy Corps directly formed 40 savings groups with 800 participants across 12 communities by early 2016. This number further increased to 56 savings group with 1500 members by early 2017. Savings group members are 62% female with an intentional mix of IDPs and host community (HC) members. The average IDP household in Gombe has 5.52 members and commonly includes a male-headed household with several wives and children. Savings groups, a type of community-level financial mechanism, serve several objectives for IDPs Informal social safety nets that allow group members to save set amounts at agreed-upon intervals Provide cash flow through small, short-term loans Build savings to cushion potential shocks and stresses, assets and strengthen savings behaviors Create or strengthen social bonds and networks (social and business) building cohesion between group members This document is a brief overview of the savings group model for IDPs used in northeastern Nigeria and recommendations for replication. 1 http://www.globaldtm.info/dtm-round-xiv-report-february-2017 2 Ibid
Interventions Mercy Corps Nigeria used the VSL Associates savings model 3 as the training guides were available in Hausa, the most common language in the region. There are five sections detailed below: Savings Group Cycle Products Meetings/Operations Constitution Staffing This is not an attempt to cover every point in the VSL Associates training guide. Rather this document highlights areas Mercy Corps diverged from a traditional savings group model to accommodate the emergency nature of the Nigeria programming. Savings Group Cycle Recommendation: Reduce the initial savings cycle to six months for IDP and host community mixed groups to allow a full-cycle with trained village agents. In subsequent cycles, the group can maintain a six-month cycle (i.e. quicker access to savings and shorter-term loan cycles) or increase to a traditional nine-month cycle, as they prefer. 1. Savings groups with higher number of IDPs prefer the six-month, shorter timeframe. This allows them to complete a full savings cycle with technical support from Mercy Corps. Due to the emergency nature 4 in Gombe, it is critical for a savings groups to complete a full cycle with technical guidance on group formation, elections, constitution development, loan disbursement/repayment, share-outs, and audit. The shorter timeframe allows Mercy Corps and the savings group to jointly conduct process stress-tests for their specific circumstances and jointly determine and suggested adjustments to the second cycle (i.e. IDP and host community composition, gender, age, income type) and cycle timeframe. 2. Savings groups should be encouraged to synchronize their share-out date to mirror member s savings goals. If this is not possible during the initial cycle, then encourage for the second cycle. For example, if the savings goal is to cover school fees for most group members, the cycle should end immediately when schools fees are due to minimize money diverted for another purposes. Family members or neighbors may know the payout schedule and pressure the saver to lend them money or to pay off debts if there is too much time between payout and applying the savings. Remove that pressure to the extent possible. In Gombe, many savings groups started their second cycle to synchronize with harvest periods to buy food in bulk to resell immediately, store, or resell during lean season. Members indicated the ability to save more during December to February and less from June to August. 3 VSL Associates Field Officer and Village Agent Guides Version 1.04, April 2011. Guides are available in Arabic, English, French, Hausa, Kiswahili, Portuguese, and Spanish. 4 Both for the IDPs timing and emergency funding MERCY CORPS Saving Groups in Humanitarian Response: Nigeria 2
3. Within the first cycle, encourage savings groups to register with the Nigerian Ministry of Cooperatives and Poverty Alleviation. Once registered, groups can open a bank account or potentially qualify for other funding through the government or humanitarian agencies. Products Recommendation: Group members can save but not be required to take a loan. 1. One-third of IDP group members chose not to borrow, as they were not confident in their repayment capacities. Savings-only must be agreed by the group and included in the constitution. By not taking loans, there are less interest fees, lowering the overall share-out amount. 2. During the first cycle, savings groups followed the traditional VSL Associates model: (i) set minimum and maximum shares 5 to purchase per meeting; and (ii) penalties for not bringing identification to the meeting or not saving regularly. After the initial cycle, groups can adjust these amounts up or down prior to the second cycle. 3. The loan term was a maximum 12 weeks maximum. Members could borrow up to three times their shares. Group members agreed on the interest rate (or flat service fee) before the initial cycle. The village agent provided scenarios on group member debt and potential group profit based on various interest rates. 4. Many groups followed a sharia-compliant model with three adaptations: Members paid a lump-sum reward at the share-out in lieu of interest paid to the group. This reward was to the greater group for their savings. Members simply converted the potential value of interest into a flat service fee paid in a lump sum. Groups combined their savings to purchase shared assets. This included assets such as motorcycles to rent for weekly income and purchase livestock to fatten and resell at profit to increase group savings. Mercy Corps neither encouraged nor discouraged shared assets but if common is an opportunity to leverage economies of scale to help groups buy in bulk and negotiate prices. This is an example of social bonding and trust within groups and mitigates individual group members fear of inability to repay In future programming, Mercy Corps will obtain written approval of respected religious leaders so group members are confident the model is ethically appropriate. 5 The average minimum number of shares each member had to purchase each week was Nigerian Naira (N) 200 (US$1) and maximum N1000 (US$5) (December 2015). Members could purchase up to five shares per meeting. MERCY CORPS Saving Groups in Humanitarian Response: Nigeria 3
Meetings and Operations Recommendation: Groups should follow the VSL Associates model to ensure structure and transparency. 1. Groups successfully mirrored the VSL Associates model in terms of elected leadership, physical layout of the group meeting, and public presentation and documentation in passbooks. 2. In a traditional model, savings groups meet at the same time and location each week. Due to the high number of IDPs and limited public space in Gombe, groups met at the same time each week but had to be flexible on location. IDPs in Gombe live in private residences rather than an IDP camps but move housing locations often due to short-term leasing, fluctuating rent costs, and moving between the homes of family and friends. If no permanent space is available, it should be a rotating responsibility of the membership to secure a weekly meeting space in the same general location. Constitution Recommendation: The constitution should follow the traditional VSL Associates model with the one exception. Members must decide prior to the first savings cycle if they will allow an IDP member to withdrawal savings early if they are further displaced or decide to return to their home state. Several savings groups did allow IDP group members to leave mid-cycle due as they had the opportunity return home or the needed to relocate outside of Gombe. Groups followed four different methodologies: Allow IDP members to withdrawal their savings but not receive the share-out profit or their social fund contribution. Allow IDP members to withdrawal their social fund contribution and savings but not receive profit from the final share-out. Allow another group member to buy the IDP s shares and replace that person in the savings group. All IDP member savings go towards any outstanding loans (this should be standard for all). Staffing Recommendation: Hire a full-time savings group coordinator, full-time program officer, and pay village agents stipends for at least three to six months. 1. Mercy Corps hired 20 village agents on three month contracts to form and train savings groups. MERCY CORPS Saving Groups in Humanitarian Response: Nigeria 4
2. Savings group coordinator and program officer positions were required for data collection, quality control and to hire and supervise village agents. 3. In a traditional VSL Associates model, village agents charge savings groups a service fee rather than receive a stipend from a third party, such as Mercy Corps. The village agents should be paid a stipend (ideally though the first cycle) to build their skills, ability to market these skills to the savings groups, build their reputation in the community. Due to (often) short timeframes of emergency programming compared to traditional saving group environments, Mercy Corps ability to provide technical assistance will be limited so the initial six months is important to ensure groups continue once Mercy Corps programming ends. 4. Village agents should be a mix of IDPs and host community members. They should not be Mercy Corps employees but rather on short-term contracts. Village agents should not receive Mercy Corps ID cards so it is clear Mercy Corps role in groups will be short-term, focused on the first savings cycle. Adjust if savings groups are associated with a longer-term initiative (beyond 9-12 months). Monitoring and Data Collection Collect minimum data requirements (see Table 1) for the first savings group cycle ideally through a second cycle. Disaggregate data by age, gender, IDP/host community member ratio, and length of time each IDP has been in the community. Data allows Mercy Corps to track trends and understand any differences between IDP and host community members savings and loan rates. With regular analysis, trends such as dips in saving volume may indicate the need for cash transfers or increased support from other emergency program components to complement the savings groups. Mercy Corps should track any other services savings group members receive from Mercy Corps programming to understand larger impact. For example, this allows Mercy Corps to explore if IDP saving group members that receive cash transfers or food vouchers has higher savings levels or feel more confident in taking in a loan due to the potential cushion the cash transfers provide. Table 1: Minimum Data Requirements Group Member Satisfaction Attendance rate Retention rate Membership growth rate Financial Performance Average savings per member mobilized to date Return on savings Average outstanding loan size Portfolio at risk Average write-off per graduated group % of members with outstanding loans Loan fund utilization rate Mercy Corps Efficiency Caseload: Groups per paid village agent Caseload: Members per paid village agent Ratio of all paid village agents to total staff Cost per member assisted Collect qualitative data using small subsamples through (1) site visits and observations; (2) semi-structured stakeholder interviews; (3) focus groups; (4) facilitated workshops; and (5) staff interviews. Mercy Corps staff and village agents should observe any increase in business networks formed between host communities and IDPs. This is an opportunity to map relationships and networks as numbers of IDPs increase or decrease. MERCY CORPS Saving Groups in Humanitarian Response: Nigeria 5
Potential questions at baseline: Motivation to join the savings groups; members self-selection process; determine if selection of group members was linked to home of origin or length of time in Gombe; and other factors Did social bonding or social cohesion with other IDPs and host communities play into the desire to join a savings group? Was there an existing trust (trust mechanisms) in place? Questions at regular intervals: What role does social bonding or forming business networks with other IDPs and host community members play into desire stay in the savings group? Has built trust within savings groups? If not, what has damaged trust? What expected and unexpected conflicts or problems have arose? What is the expected life cycle of the savings groups? Does membership in the group influence the decision to stay within Gombe versus attempting to return home or relocated to a third location? How savings are are used at share-out by IDPs versus host communities; disaggregated by home of origin, gender, age, and source of livelihood income. The assumption is market prices (i.e. food, transport, and temporary shelter) will be high when/if IDPs return home due to limited supply, damaged infrastructure, and volatile prices. High much are IDPs saving (in volume of percentage of savings) to cushion against this potential shock and ensure adequate savings for food consumption needs versus savings for working capital? Linkages to Financial Services Many savings groups have opened bank accounts to deposit their savings. Several groups in urban areas had the equivalent of thousands of US dollars in savings (in physical cash) demonstrating, within some groups, the ability to save and potentially leverage their savings as collateral for loans from financial institutions (banks, microfinance institutions) or market traders. Mercy Corps wants to avoid the scenario where group members are required to take loans to reduce the physical cash on hand from group savings. Mercy Corps should build relationships with financial institutions and mobile wallet providers (where available) to link interested savings groups, including Sharia-compliant financial institutions. Ideally, savings groups will move onto mobile money platforms (i.e. mobile wallets and sub-wallets for each member). However, at present there is not sufficient mobile infrastructure available to make this an option in Gombe. MERCY CORPS Saving Groups in Humanitarian Response: Nigeria 6
CONTACT Ghilda Chrabieh Director Humanitarian Programs Mercy Corps Nigeria gchrabieh@mercycorps.org Thea Anderson Director Financial Inclusion Markets, Economic Recovery, and Growth Technical Support Unit tanderson@mercycorps.org About Mercy Corps Mercy Corps is a leading global organization powered by the belief that a better world is possible. In disaster, in hardship, in more than 40 countries around the world, we partner to put bold solutions into action helping people triumph over adversity and build stronger communities from within. Now, and for the future 45 SW Ankeny Street Portland, Oregon 97204 888.842.0842 mercycorps.org MERCY CORPS Saving Groups in Humanitarian Response: Nigeria 7