About 37% of adults in Uganda are members of savings groups, making the country a leader in financial inclusion across Africa. These groups, which pool resources and provide loans to members, have gained popularity globally, with many adopting digital tools to enhance security and efficiency. Savings groups are particularly vital in impoverished and rural areas, offering financial services where banks and other institutions are inaccessible or nonexistent. With more than 1.4 billion people worldwide lacking access to formal financial systems, these groups offer a lifeline for promoting financial inclusion and reducing poverty. In Uganda, the community-driven model has become a powerful tool for building resilience and strengthening communities in the fight against poverty.

Types of Savings Groups

There are three main types of savings groups and their use depends on factors such as living standards, the amount of money involved and the participation agreement among members.

1. Rotating Savings and Credit Associations (ROSCAs). It operates on a simple principle that every member contributes a fixed amount of money, usually agreed upon before formal meetings. Once all members have contributed, the pooled funds are handed out to one person on a rotational basis. In contrast,
2. Accumulated Savings and Credit Associations (ASCAs). ASCAs, in contrast, do not distribute funds routinely. Instead, the collected money grows over time and members can request loans as needed.
3. Village Savings and Loan Association (VSLA). The most common type of savings group in Uganda is the Village Savings and Loan Association (VSLA), according to a survey by Financial Inclusion Insights (FII) conducted across 12 countries, including Kenya, Uganda and Nigeria. Like ASCAs, VSLAs allow members to borrow from a shared pool of funds. However, VSLAs differ by equally distributing any interest earned on loans among group members. In Uganda, 11% of individuals involved in savings groups belong to VSLAs. Additionally, 4.7% of those using VSLAs or ASCAs are more likely to live in rural communities than in urban areas, highlighting the significance of these groups in supporting rural financial inclusion.

Driving Financial Inclusion

Promoting financial education globally is essential in the fight against poverty. Savings groups offer individuals opportunities to learn about key financial concepts such as saving, interest rates and loans. These groups also bridge the gap for those without access to traditional financial institutions, providing a pathway to greater financial inclusion and stability.

The World Bank reports that about 50% of Uganda’s population has access to financial institutions. However, 37% of adults in Uganda are involved in savings groups, highlighting their importance in advancing financial inclusion and reducing poverty. Beyond financial education, saving groups empower individuals to understand various social and economic issues. They build partnerships within communities, raise awareness on critical social topics and even contribute to community building and infrastructure development. 

Empowering Women Through Savings Groups

Women face disproportionate impacts from poverty globally. At least one in 10 women live in poverty and women are seven times more likely than men to experience extreme poverty. In Uganda, savings groups play a vital role in empowering women by offering safe spaces to save money and access loans. These loans help women start businesses, provide for their families and meet personal needs, fostering financial independence and stability.

According to a survey conducted by the Fin Mark Trust across 30 countries, including Kenya, Uganda and Nigeria, Uganda has the highest proportion of women engaged in savings groups, with 39% of women participating. Gender inequality remains one of the leading causes of poverty and addressing wage gaps and promoting social benefits for women is critical in reducing poverty among women. Uganda’s savings groups act as a powerful tool in fighting against poverty among women, breaking down barriers they face in corporate, social and family life and building economic empowerment.

Challenges Facing Savings Groups

Despite their benefits, savings groups face several obstacles:

• Resource Limitations: Many groups in rural areas lack infrastructure and secure storage systems, exposing funds to risks such as theft or mismanagement.
• Reliance on Physical Meetings: Regular in-person meetings, while essential, can pose logistical challenges compared to the convenience offered by formal financial institutions.
• Digital Divide: Urban savings groups increasingly use mobile money and digital tools, but rural groups lack access to digital infrastructure, hindering modernization and long-term sustainability.

A more pressing challenge for savings groups is the need to adopt digitized systems. While urban savings groups have started using mobile money and other digital tools, rural communities often lack the necessary digital infrastructure. This gap highlights a growing divide and raises concerns about the long-term sustainability of savings groups in an increasingly digital world. Tackling this issue will require innovation within savings groups and proactive government initiatives to expand digital infrastructure in Uganda’s rural areas.

Sustainability Through Innovation

Organizations like Plan International play a pivotal role in strengthening savings groups. By introducing mobile money and secure savings solutions, it addresses critical challenges and improves efficiency. Plan International, for instance, has supported 1.5 million individuals across 76,000 savings groups in 28 countries, demonstrating the potential for scalable solutions.

Moving Forward

Savings groups in Uganda are transforming lives by providing financial inclusion, empowering women and fostering community resilience. These groups offer a lifeline for individuals lacking access to formal financial systems, enabling them to save, borrow and invest in their futures. While challenges such as resource limitations and the digital divide remain, ongoing innovation and support from organizations and governments can strengthen the sustainability of these groups. Uganda’s savings groups serve as a global model for tackling poverty through grassroots financial solutions, demonstrating the power of community-driven change.

– Zacc Katusiime

Zacc is based in Kampala, Uganda and focuses on Business and Good News, Politics for The Borgen Project.

Photo: Flickr