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Plan Well, Retire Well

Saving and investing your money
Sierra Leone 2012

Lessons Learned from a Savings and Lending Group in Southern Sierra Leone

In January 2012, as part of my ACES in Sierra Leone Study Abroad course, our University of Illinois students worked with World Vision of Sierra Leone to assess their project to develop inland valley rice swamps and farmer groups since the war ended. Sierra Leone suffered a horrific 11 year-long civil war through the 1990s but since 2002 the country has been working to rebuild, heal, and get the economy going.

As a part of the World Vision work in southern Sierra Leone we learned about their use of savings and lending groups to build trust among community members and to build some assets. Even a small amount of funds, on the order of $10, can make a huge difference in the life of a family in rural Sierra Leone. The way the savings and lending groups works is that each week the group has a meeting (a group consists of between 15 and 30 people) and each member contributes about 50 cents per week. The money is deposited into a wooden lock box with three padlocks on it: one controlled by the World Vision development facilitator; one by a teacher; and one by another local leader. This way all three people need to be in the same place for anyone in the group to access the money and no one person can divert the funds without others knowing about it.

Contributing weekly to build savings gives the group members an asset base and it also provides a sort of insurance, like an emergency fund. One group member related about how having access to the fund helped when his wife had an emergency hospitalization. This man said if the group funds were not available he would have had to sell a bag of cocoa at a very low price to a middle-man, thereby losing much of its value. Another person said the funds allowed a low-cost loan that permitted their family to pay school fees. The savings and lending group also helped create group cohesion and the group reported they are building plans to do agricultural businesses together with rice production and marketing.

What are some lessons we can take from the savings and lending group? First, save regularly! Even if it is a little amount. Little bits add up and accumulate into useful amounts. Second, check your insurance. For the savings and lending group members, their funds served first as a kind of insurance for health expenses and other unforeseen expenses. Third, build up your emergency fund. Finance experts recommend having between 3 and 6 months of funds in a readily accessible form saved. Last, check your credit. Make sure you have access to credit in order to make a needed large purchase such as a home or car or to take advantage of a small-business opportunity.

The people in the Sierra Leonean village along the dusty and bumpy road between Segbwema and Kono give us an inspiring example of building financial assets through workable, small steps.

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Thanks for telling us about this, Paul. This is very interesting. I've heard about tanda groups and Asian versions of this idea. But this one has a different twist, with access to the money being carefully controlled. And it sounds like the money accumulates and all members might have access to it, rather than the monthly collection being given to the members on a rotating basis as in the tanda.
by Karen Chan on Friday 6/22/2012