Savings and loans; drawing lessons from some experiences in Asia

This paper describes the role of community-managed savings and loan schemes in poverty reduction and how these are best supported by external agencies . It draws particularly on the last ten years work of the Thai government's Urban Community Development Office including how the 1997 financial crisis and the difficulties this brought to low-income savers was turned into an opportunity to rethink how to support savings groups. Community savings and loan schemes bring people together, helping them learn how to develop and manage their own resource base. They reduce individual vulnerability by pro viding an immediate lending facility the poor can access. They strengthen c ommunity processes so that other key issues can be addressed - for instance , developing plans for housing and negotiating with external agencies for l and and infrastructure. If savings groups are supported to learn from each other (through community exchanges), networks develop, creating stronger, l arger groupings of the urban poor with a greater capacity to negotiate with external agencies and develop a common fund. The possibilities for collabo ration with government increases greatly as these networks demonstrate chea per, more effective ways of addressing housing problems. Thus, community sa vings and loan schemes can reduce the poor's exclusion from formal politica l and financial systems by providing a bridge between these and the informa l systems from which most of the poor draw their living. They can also beco me the means by which the urban poor obtain good quality, well-located, sec ure housing with basic services, without the need for large subsidies.