Savings groups can help reduce the financial barriers to education

By Stuart Cameron, Consultant, Oxford Policy Management, and Karen Moore, Economic Security Adviser, Plan UK

planSavings groups are a low-risk form of microfinance used in many countries by Plan and other international NGOs. Do they help families keep their children in school? Stuart Cameron, and Karen Moore, both formerly of the EFA GMR team tell us in this blog that they do, at least in some contexts, by protecting children’s education from the harmful effects of official and unofficial school fees.

Despite the introduction of free primary education in many developing countries, households continue to have to pay for education, to cover the costs of unofficial fees, school uniforms, and books, for example, as described in the 2012 Education for All Global Monitoring Report (pp69-79). Particularly at higher levels of school and for poor communities still dependent on subsistence farming, these costs are a barrier to learning. Could access to better, village-level facilities for saving and borrowing money help lower these financial barriers?

Savings groups – a low-risk form of microfinance based on members’ own savings, often known as Village Savings and Loans Associations – are a key strategy employed by Plan to enhance household economic security. Savings groups are an effective way to foster a savings habit, smooth household income, and build household financial assets. These groups meet periodically (usually weekly), require members to contribute savings, allow members to take loans with interest, and ‘share out’ the accumulated savings and interest to members at the end of a cycle (usually annual). Plan International has facilitated savings groups since 2003, reaching about 850,000 people – around 82% of them women – in 25 countries.

A new independent study commissioned by Plan UK, published as a research brief and a report and comprising a literature review and qualitative research in Ghana, finds that savings group members use both loans and ‘share outs’ to pay for educational expenses and keep their children in school, at least in some countries.

A randomized controlled trial of one programme in Burundi identifies large increases in educational spending across the board during 2010-11, but with largest increases among savings group members. In northern Ghana, among those in savings groups, there was a significant increase in primary school enrolment for both boys and girls, and in secondary school enrolment for boys.

Interviews with parents, children and teachers in two villages in Ghana showed how saving groups could have this impact on education. Parents interviewed were keen to get their children though school, relying on education to diversify their future incomes as it becomes increasingly hard to grow enough food to live on through subsistence agriculture.  But their children were regularly sent home from school because they were unable to pay small unofficial fees at primary and lower secondary level, missing classes until their parents could earn enough cash to send them back.

Savings groups helped families pay the fees quickly through a small loan so that children could stay in school while their parents found the money to pay back. Improved attendance rates are an important outcome – especially if it helps improve progression and learning outcomes. The savings groups also help girls and young women access money for school fees in ways that don’t put them at risk of violence, abuse or pregnancy.

Now any time I go for a loan, it’s for the payment of my child’s school fees.

Adult savings group member, Central region, Ghana

Conversely, other rigorous studies such as this one in Mali have not found such direct educational effects, and the impacts seem to vary between countries, no doubt depending on the economic context, school fees, and how the savings groups are managed.

However, there are other reasons to be optimistic about savings groups in the longer term. In the Ghana fieldwork, many participants said they were investing more in their farms or in small businesses, which was slowly raising their incomes. In Burundi, the loans were found to improve household wealth and child well-being. In Mali, food security improved. In Malawi women in savings groups had more influence over household decisions. All of these are likely to be good for education in the longer run.

I use [loans and share outs] to hire labour on my farm which increases my productivity…
I can now also cater for my children’s educational expenses.

Adult savings group member, Central region, Ghana

Some people do not use savings groups because their incomes are too low, or because they migrate for work. Savings groups may not be the best instruments for reaching the very poorest, and not all studies have found the types of impact expected of them. Clearly, they should not be seen as a cheap substitute for other interventions that are needed to ensure that children’s rights are fulfilled, including free access to a quality education.

Nevertheless, savings groups appear to hold considerable potential, especially by enabling participants to pay official and unofficial education fees in a more timely manner, thus reducing student absenteeism. The effects may often be seen at the margins: the households that are not quite able to afford fees or school uniforms every time they are needed; the children who do not drop out altogether, but whose future prospects are gradually eroded by time out of school.

For further details, please contact Karen Moore, Economic Security Adviser at Plan UK.


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