Study: Evaluating Women-led Saving Groups to Stay Resilient in Malawi

By Julia King

In Malawi, a landlocked country in Southern Africa, agriculture is the primary industry and employs over 80 percent of the working age population. The country is now facing the worst drought its seen in 35 years and this challenge has led to dramatic crop failure and soaring food prices, with maize prices between 62-167 percent higher than the three-year national average.

Maize, a staple food item Malawians use to make “nsima,” (water and maize flour), has failed widely due to inconsistent rainfall and weather patterns. Smallholder farmers are struggling to adapt and overcome climate-change effects.

With such a dramatic loss in food and income, the question global development organizations are asking is, What can my organization do to help individuals stay resilient to shocks in the future?

Studies have been conducted on the ability of savings groups to help members stay resilient to shocks but there still remains room for further research on the subject.

Project Concern International (PCI) has created savings groups called Women Empowered (WE) groups in two districts in southern Malawi. By coming together regularly and entrusting each other with their money, WE groups build a strong social foundation of trust and cohesion.

The WE methodology focuses on financial and social empowerment, leading to increased amounts of social capital within their groups.

To determine how membership in a WE group can help members stay resilient to shocks PCI conducted a qualitative research study last month. Completing ten focus groups in ten different sub-districts (Traditional Authorities) across southern Malawi, PCI staff researched if and how members of savings groups cope with shocks.

The study asked: How does membership in a WE savings group improve members’ resilience to the current drought in Malawi? Research found that members of savings groups increase their resilience to shocks by:

• Using their loans to stabilize their businesses,
• Accessing funds for food purchases in times of hardship, and
• Engaging in group-income-generating activities to increase funds for all members of the group.

In areas hardest hit by the drought, however, members struggled to stay resilient. In these areas:

• Contributions to the bank were often too small for taking out business loans,
• Some groups were not as cohesive as expected, due to trust issues within the community, and
• Members still were able to take out loans for food, often prioritizing loans for members who were struggling most.

Overall, the study found that WE groups currently act as a safety net to help members stay financially resilient to shocks, as long as the group works together to find solutions and the shock is not extreme.

How can a savings group increase purchasing power to buy food in the face of a crisis?

In the study, we found members of the WE groups perceive themselves to be more resilient than their neighbors because they can access cash to buy food quickly. Loans provide members with the capital to finance their small businesses and allows members to buy more food in the short term. For example, one woman from TA Kachenga, in the Balaka district, used her loans to buy maize and cook fritters, which she sold and used the profits buy food. She also used loans to buy goats, which multiplied, and sold them to buy food. This woman is using her remaining funds to send her son to secondary school, and is saving for him to attend college.

Group members also take large loans and use the loan money to buy food in the short term, and to also invest in their businesses. This is a common coping strategy that helps members to provide food for themselves in the short term, while also giving them a way to pay back the loan in the long term.

A number of WE groups have worked together to stay resilient to the drought by starting irrigation projects and group businesses. Through their social ties in the group, they work together to use group funds and create small enterprises that can increase the money they have saved and in return provide extra income for their families. For example, a WE group in TA Sawali in the Balaka district, has a group irrigation project, that successfully grew maize to sell, and is now growing tomatoes, which will increase the savings for every member in the group.

Finally, members have access to their savings and profits during the time when they “share out” all of their savings. With these funds, households are planning to buy maize to eat and also fertilizer for the next planting season. Most groups generally share out in December, when they are planting. However, because of the drought this year, some groups have chosen to share out earlier in the year in order to buy food. Thus, the savings group acts as a safety net during this difficult year and helps the group members cope with food insecurity.

What happens when the shock is extreme?

WE group members also can face challenges using the savings group as a safety net when the shock in the region is extreme. Not all groups have been affected by the drought to the same extent and some areas have harvested nothing because of the inconsistent weather patterns. These challenging conditions make it hard for savings group members to sell their products in the market. Many community members have limited cash to buy their products. One young woman, in TA Nyambi in the Machinga district, who has a hat business she started with a savings group loan, expressed this sentiment by saying, “Why would anyone buy my hats? You can’t eat a hat!”

Accessing large enough loans to fund businesses also can be difficult because women are not contributing large sums of money to the group but the members are desperate to take out a loan. Members are saving less money now because members need to spend the little money they have on food, and also to use the loans they take out for food. We see that these small contributions make it hard to increase financial stability and prevent the WE groups’ loan funds from reaching their full potential.

Savings groups can encounter group mistrust and tension when members are struggling to survive. In TA Nyambi, individuals would take large loans and disappear because they were desperate for the money to buy food. This hinders the groups’ ability to work together as a unit and support each other during hard times.

Where do we go from here?

WE groups currently seem to be a key coping mechanism for group members to resist shocks. In particular, access to funds to buy food is critical during times such as droughts, and savings group loans and share outs can be a huge asset. However, when areas are struck hard by shocks, group contributions are smaller and therefore the ability for the savings group to act as a safety net is not as strong.

PCI Malawi is helping to increase the resilience of their group members by encouraging larger savings contributions during the harvest season and stimulating groups to work together on the income generating activities that can help them increase money in their loan fund. We’re also increasing messaging and training activities on group cohesion and trust. We’re working towards training all members on basic business skills, so that members are able to choose the right business and benefit from the loans they take out.

With additional support, WE and other savings groups have incredible potential to work together as a strong social unit, relying on each other to mitigate and recover from shocks and lean on the strength of the savings group as a safety net.

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Julia King is a fellow for PCI’s Women Empowered program.