Posted on August 12, 2015

Explainer: Savings groups in Kenya

A brief overview of the use of savings groups in Kenya and the apps FSD Kenya developed to support them.
What are savings groups?

The savings group is a simple financial intermediation model where members of a group contribute an agreed minimum amount of savings during regular meetings. Locally, savings or investment groups are known as chamas.

In some groups, members save more than the agree minimum. The funds are then lent out to members based on demand. This goes on for a period of 9-12 months when lending stops and outstanding loans are repaid in readiness for share out when all the savings are paid back and interest earned distributed to members. Groups that do this are commonly known as terminating Accumulating Savings and Credit Associations (ASCAs). The groups then restart afresh in a new cycle. Groups that do not share out after each cycle are referred to simply as ASCAs. These groups however share out the income generated over the cycle but retain the savings.

Rotating Savings and Credit Associations (ROSCAs), also known as merry go rounds, are another form of savings group in which members contribute regularly, usually but not always a fixed amount and take turns giving the entire pot to one member each round. In addition to groups that serve the explicit financial function of savings, arrangements that serve an insurance function are also common. For example, welfare groups or simply “welfares” collect contributions from members into a group fund that is used during emergencies or members may be required to contribute only the event of an emergency.

Evidence from household surveys and in-depth interviews suggest that even people who use formal services such as bank accounts, find savings groups a useful complementary service. For many, savings groups provide a structure that helps convert small sums of money into larger, more useful lump sums, they help with discipline to commit regular savings and create opportunities for sharing knowledge and providing support to peers.

How prevalent is the use of savings groups?

In 2013, about 1 in 4 adults at or above the age of 18 (5.6 million people) reported using a ROSCAs or ASCAs to save or borrow – a slightly lower share of the population than was observed in 2006 and 2009 (Table 1). 

Who uses savings groups?

At around 25 percent of the population, use of savings groups is fairly uniform across urban and rural areas and across age groups though only 14 percent of individuals at the ages of 65 and above use them. Surprisingly, individuals with primary school educational attainment or less are not as likely to use savings groups compared to individuals with secondary or higher attainment. While 31.6 percent of females use savings groups only 18.3 percent of males reported using them suggesting an important gender dimension to membership in savings groups.

Table 1.
Share of adult population (age 18+) using savings groups overall and by sub-group
Population subgroup Year/Category Mean value 95% Confidence Interval
Kenya – overall 2006 32.4  (30.7-34.1)
2009 36 (34.6-37.5)
2013 25.2 (23.9-26.5)
2013 summary statistics by population sub-groups
Age group [18-25) 23.4 (20.4-26.3)
[25-45) 27.7 (25.9-29.5)
[45-65) 25.2 (22.3-28.1)
[65+] 14.4 (10.5-18.2)
Educational attainment Complete primary or less 22.6 (21.1-24)
Secondary 30.5 (27.9-33.1)
Tertiary 27.2 (22.5-31.9)
Gender Male 18.3 (16.5-20.1)
Female 31.6 (29.9-33.4)
Relative income group* Bottom 20% 16.6 (14.2-19)
Middle 60% 26.5 (24.9-28.1)
Top 20% 30.1 (26.6-33.6)
Residence Urban 24.3 (22.8-25.8)
Rural 26.8 (24.6-29)
Source: 2006, 2009 2013 FinAccess, *Based on self-reported gross monthly income
 How is FSD Kenya supporting savings groups?

FSD Kenya has been supporting savings groups since 2008 in partnership with CARE and later with Catholic Relief Services. The initiatives undertaken with FSD support from 2008 to March 2015 have reached about 14,730 savings groups serving over 384,000 members as at March 2015. Recently, FSD Kenya has developed two mobile phone apps to support the operations of savings groups and bring added benefits to members. The e-recording app was designed to improve the recording of transactions during meetings and enhance the transparency and security of each savings group collective transaction history. The saving groups e-kit is an android-based app that provides training on how to organize and operate a savings group. The app contains five lessons in the forms of interactive videos along with quizzes to test knowledge of the concepts covered.


You might also like
_DSC4777 (FILEminimizer)

PICTURES: John Kay gains perspective on rural finance in Ndenderu


An overview of the Kenya Financial Diaries research program

John Kay signs the visitors book at Haki Group offices as the Chief Executive Officer, Charles Ogutu looks on.

Kay gets perspective on informal sector in Kibera