In one year, Jihan Bakir was able to get her successful project up, running and profitable. It became only possible through the informal savings group started in her village, Al-Hakamna, in Beni Suef province.

In one year, Jihan Bakir was able to get her successful project up, running and profitable. It became only possible through the informal savings group started in her village, Al-Hakamna, in Beni Suef province.

She joined a group of 25 women to save money in a box equipped with three locks. The purpose of the locks – whose keys are divided among three of the women – is to make sure the money inside stays safe. The group is part of the Village Savings and Loan Association (VSLA) initiative launched in several areas across Egypt, mainly targeting – but not exclusive to – women.

Women get to save money in this box. But it is not only a savings scheme, there is also the loan component where women wanting to start their income generating project are entitled to take out loans – three times the amount of their savings.

Bakir managed to take out three loans in a little over a year to expand her business of selling fruits and vegetables in her village of 15,000 people. While the idea of informal savings is not new, experts and NGO workers believe it proved successful in Egypt in a short time.

“I believe this approach is very good because it helps women in hardship, helps women improve their financial situation and helps them to start a small enterprise,” said Dr Safaa Shaaban a lecturer at the British University in Egypt, whose research focuses on the VSLA model.

“But it is also very good, because it has more advantages. This approach helps create more cohesion, solidarity and empowers women in their community by giving them more tools for decision-making and participation in the financial resources of the house,” Shaaban added.

Bakir has not only expanded her project, but also managed to attract three people to join her: her husband, mother-in-law and sister-in-law. “My husband does not have a stable job. When my project became successful, he liked the idea and joined me,” she said. “Now, all four of us work together.”

Banking that fits to the demographic

The initiative is supported by many organisations including the National Council for Women, UN Women and Care International. It is also successful because only 14 per cent of the population owns a bank account. Most banks require clients to have a steady income to open an account and at least 1,000 LE (US $113) to open a savings account. It would have taken Jihan four years to save this amount, since she managed to save 250 LE (US $28) in her first year with the group.

In a country where around 27.8 per cent of the population currently lives below the poverty line, this amount remains a challenge. Hanaa, another member of the savings group in Al-Hakamna village, would also have a difficult time saving this amount.  “I used to save 5 LE (US $.56) every week from household expenses,” she said.

“Then I got some financial training, which helps you save the smallest things at home, such as leftover food. Instead of throwing away the breadcrumbs after the meal, I dry them and sell them for 1.5 LE (US $.17) per kilo. Another example, they teach you how to buy or cook the exact amount of food needed for every meal for your family,” said the mother of two.

The World Bank identifies that there are issues of trust and understanding on both the sides of the banks and women. Women customers are often perceived as risky by banks and women prefer to get loans from friends and families.

In Egypt, debtors may face up to three years in prison. There is no reliable data on the number of women imprisoned because of unpaid debts, but charity organisations have been increasingly focusing on helping incarcerated women pay back their debts, so they can be released.

In July, one charity organization said it helped more than 35,000 people – men and women – get out of prison and pay their debts. This is one of the reasons why Dr Safaa Shaaban believes this model of informal savings is successful and has provided a replacement for the banks for many Egyptians – especially women.

“This is replacing the banks because of what happens in the banks… Women if they face hardship in (repaying) their loan, they go to the prison; but for this one, no, they get support from their community,” she said.