Description of Informal Savings and Credit Groups

In Accumulated Savings and Credit Associations (ASCA) groups, members are the only customers, responsible for owning, managing and operating this joint savings entity. Members usually meet on a weekly basis. During these weekly meetings, members’ savings in the group (i.e., members’ contribution to the group) is done through purchase of shares on a weekly basis.

In most groups, the price per share is equivalent to 63 cents U.S. For example, when a member is contributing, he or she is actually buying shares. Members can purchase from 1 to a maximum of 5 shares per week. That’s to avoid wealthy members from dominating the group. The maximum loan a member can borrow is 4 times the individual’s total savings. For instance if a person’s total savings over time has reached U.S.$ 100, then he or she is eligible for a maximum loan of U.S.$400. That means members contribute/save small amounts over time, buying shares from the group. After a certain period, if everybody has been saving, a sizable group capital would have mounted. 

At the end of the year, members get dividends, then, either the group ceases or they restart a new round and/or reconstitute with some members leaving and new members joining. Similar to the traditional profit-making corporate entity, dividends per member depend on the number of shares he or she has accumulated over time. In some cases, the entire profit or some of the profit is retained to boost the group capital for the next term. Group cash and management records are usually stored in a metal cash box. Any excess cash not lent out to members is stored in the box. Opening and closing of the box is done during the weekly meetings in the presence of attending members.

In addition to the role of financial intermediation these groups also maintain social and welfare functions. Members are obliged to contribute the equivalent of 75 cents U.S. every week. The social fund provides credit to members who have experienced social and/or economic shock. While no interest is charged, members can borrow to a maximum of three times a year from this fund. Punishment is one of the common behaviors inside weekly meetings. Groups apply penalties when group rules are not adhered to. There are financial reparations and are administered based on offences stipulated in group constitutions. There are basically two types of punishment categories; those related to an offence of defaulting and those associated with non-defaulting offences (e.g., lateness in weekly meetings, sleeping and phone ringing during meetings, lack of purchasing shares consistently etc.).

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