SILC – Savings and Internal Lending Communities

I am getting debriefed on HOPE's savings-led programs every day, but while that picture comes together I am also looking at other models. SILC is a model very similar to ours, and it is outlined clearly and I just read it, so here is the synopsis:

SILC, a soft approach to microfinance, is a Catholic Relief Services (CRS) model of an accumulated savings and credit association (ASCA), developed by Guy Vanmeenen. The notes below are sometimes paraphrased, sometimes direct quotes, of Guy's paper:

Guy Vanmeenen, Savings and Internal Lending Communities, a basis for Integral Human Development, Nairobi, Kenya, Catholic Relief Services, October 2006.

Guy is the Senior Technical Advisor for microfinance in Africa, and he is based in the CRS East Africa Regional Office in Nairobi. He also attended the SEEP conference and was very helpful; I plan to visit their savings-led operations here in Rwanda at his invitation.

So, the guidelines below for SILC are very representative of the ASCA models we use.

Group Formation

• 10-25 individuals, self-selected: trust, honesty, reliability, punctuality, hard working, savings potential, similar social stratus.
  
• If mixed gender, at least 3/5 elected committee members should be female; members who hold some public office outside the group are ineligible for committee leadership but their advice is welcome.
  
• Groups that grow larger than 25 are encouraged to split.

Fund Development

• Members' savings becomes loan capital for group members.
  
• Savings-led finance provides access to financial services otherwise limited by high transaction costs or other entry barriers.
  
• When savings are sufficient, members can borrow and repay with interest so the fund grows as do members' share values.

Ownership

• Groups are owned and managed by their members.
  
• Self-reliance is the basis for group operations and long-term sustainability leading to group and financial independence.
  

Governance

• Members elect 5 governing committee members: chairperson, secretary, treasurer, and 2 money counters.
  
• Committee members are reelected annually at the start of a new cycle, or by extraordinary means when necessary.
  

Self-regulation

• Members agree on a constitution that governs the committee members and provides a framework for dispute resolution.
  
• The constitution specifies terms and conditions of savings and lending, and the operations of any special funds.
  
• Each group member has one vote.
  

Transparency and Accountability

• All transactions are carried out in front of the group during meetings.
  
• A lockable cash box holds excess cash and record books.
  
• Loan requests are made publicly before the entire group.
  
• The group approves loans for consumption, investment, or household expenses, depending on the terms set in the constitution.
  

Duration

• Savings and lending cycles are time-bound for an agreed upon operating cycle.
  
• At the end of each cycle, accumulated savings, interest earnings, and earnings from other economic activities of the group are disbursed to members according to shares.
  
• A minimum of a 6-8 month cycle is recommended, and meetings usually occur weekly.
  
• Regular meetings and a longer cycle are important for the first cycle, after which groups may graduate to more custom schedules.
  
• At the end of a cycle, groups may reorganize and individuals come or go.
  
• New cycles may correspond to seasonal needs.
  

Insurance

• Groups are encouraged to create a social fund with some agreed upon regular contribution.
  
• Social funds may address emergency assistance, educational costs, funeral expenses, et al.
  
• Social funds are not included in end-of-cycle share-outs and not included in lendable funds.
  

Savings

• Minimum and maximum savings contributions per meeting are set by members and fixed for the entire cycle.
  
• The maximum permissible contribution should not exceed 3-5 times the minimum amount.
  
• Members may agree to suspend savings during lean periods, though loan or social fund activities may continue.
  
• Weekly contributions in Africa tend to be from $0.20 to $0.60.
  

Credit

• Members' savings and group earnings become funds for internal lending, and members set the loan terms.
  
• Loan terms typically span from 1-3 months; agricultural loans may require up to 6 months.
  
• Interest on loans falls due every 4 weeks, normally set as a flat rate from 5% to 20% as set by the group.
  
• Fines and accrued interest are assessed if the principal is not repaid on time.
  
• The amount a group member can borrow is something more than that member's total savings, but less than double or triple (some agreed proportion) of that member's savings.