Capital, capacities and collaboration : the multiple roles of community savings in addressing urban poverty

This paper discusses ideas and methodologies on reducing urban poverty, paying particular attention to the changes that can be triggered by the practice of community savings. As local communities struggle to improve their development options, this practice has demonstrated staying power and relevance in many different nations, cities and contexts, in some cases producing lasting transformation. Community savings are collective financial accumulations accrued by a defined (but often not formalised) group of people. The process involves the establishment and strengthening of local savings groups, in most cases residentially based (i.e. spatially defined), although similar systems have also been explored with trade or enterprise-based groups. Within these groups, members, often primarily women, pool small amounts of finance, in some cases with a defined savings period such as once a week or once a month and in other cases whenever income is available. Although the savings are individual, with each person recording and "owning" their own savings, there is a collective accumulation and management of the monies. The paper describes recent experiences in collective savings among low-income urban citizens in towns and cities across the Global South, most of them residents of informal settlements. The practices of some of these groups have evolved into substantive institutional innovations centred on community savings funds. The changes in individual and collective relations, capacities and assets catalysed by these practices have raised incomes, consolidated and protected individual and collective assets and reduced political exclusion. The benefits extend beyond the immediate impacts. The practice can stimulate changes in a number of aspects of urban poverty, encouraging multiple reinforcing effects that help to move households out of poverty and demonstrating alternative relations with local government and other state agencies that support a more effective pro-poor and accountable state.