During its decades of microfinance practice, CRS has focused on serving the poorest of the poor, primarily women and vulnerable populations living in remote rural communities for whom the cost of accessing financial services is very high. CRS began its microfinance work in 1988 by building the capacity of local partners to own and manage credit-led microfinance institutions, and since 2006 has helped established MFIs continue to serve those most in need through promotion of a Social Performance Management approach to their business. Today, CRS’ most impactful microfinance interventions are through Savings and Internal Lending Communities (SILC) programs.
CRS’ microfinance staff supports local organizations that implement SILC programs in 53 countries in Africa, Latin America, Asia and the Middle East. More than three million SILC group members have gained access to savings and credit services through CRS-supported programs as of 2017. SILC groups also serve as a platform for the introduction and delivery of complementary products and services including financial education, business training, agricultural finance, microinsurance, and last-mile product distribution.
CRS maintains a vigorous research and learning practice in support of its microfinance programs, and CRS projects utilize standardized, evidence-based approaches. Highly trained staff at the headquarters, regional and country levels have developed a dynamic microfinance community of practice. Learning is shared among our staff as well as our local partners and the communities we serve.
Microfinance Institutions (MFI)
From 1988 to 2004, CRS’ microfinance interventions focused on institutional development. CRS supported dozens of implementing partners who created a total of 27 microfinance institutions (MFIs) during this period. The MFIs provided loans to members using external funds, and secured them with compulsory savings and a group solidarity guarantee. CRS supported the MFIs until they were formally registered within their country’s legal framework and transitioned to local management.
In 2005 CRS began to move away from direct lending to and oversight of its microfinance partners, and since 2006 CRS’s MFI interventions have shifted to a focus on Social Performance Management (SPM). It was noted at that time that while many institutions continued to assert their commitment to goals such as providing access to financial services, generating employment, and serving poor communities and marginalized groups, they had no means to monitor or measure the effectiveness of these efforts. In most cases, partner MFIs had invested heavily in systems to measure their financial performance, but had not made similar investments in their ability to measure their social performance.
By introducing SPM systems, CRS was able to provide the MFIs practical measurement tools to monitor and evaluate their social performance. Integrating social and financial indicators into a unified performance measurement system has created a “double bottom-line” culture that measures success in terms of both profitability and positive social impact. This changes the way institutions make strategic decisions and aligns their goals with their social mission. Overall, SPM helps MFIs achieve a greater balance between financial sustainability and the goal of making positive social changes in the lives of their clients.
In Latin America and Africa, CRS has been a leader in working with national microfinance associations to secure the adoption of SPM measures by member MFIs. CRS’ MISION II (Latin America) and MISION Africa projects enabled microfinance associations in 12 Latin American and six African countries to bring SPM to scale. These projects created centralized SPM resources owned and managed by national microfinance associations, and built the capacity of 212 member MFIs to implement SPM systems and expand the use of SPM practices.
Women in Momostenango Guatemala gather for a Savings and Internal Lending Committee (SILC) meeting. The woman save small amounts of money that later help meet family needs as they arise. Photo by Oscar Leiva/Silverlight for CRS
CRS pioneered its savings-led work in the early 1990s using the Self-Help Group (SHG) model in India. SHGs built a solid base of financial and social assets for their members, typically 20 to 50 in number. They have since blossomed into advocates for good community governance, and become implementers of local disaster prevention and response in their communities. At their peak, CRS India-supported SHG groups had more than 700,000 members with accumulated savings in excess of $16 million.
Since the Savings and Internal Lending Communities (SILC) methodology was introduced in 2006, it has reached 3,293,808 members comprising 134,991 groups in 53 countries worldwide. A 24% increase in members during fiscal year 2017 reflects the strong demand for SILC services. The 770,689 newest (first cycle) SILC members have $22,292,997 in savings, $16,561,385 in loans outstanding, and $1,509,027 accumulated in their social funds.
For the most recent SILC data, please see the online dashboard, which is updated quarterly.
How SILC Works
In Sierra Leone, members of a Savings and Internal Lending Community meet weekly to pool their resources and make small loans to fellow members. Photo by Michael Stulman/CRS
SILCs are community-based, user-owned, self-managed savings groups that are designed to serve communities and individuals with little or no access to formal financial services. SILC groups can easily be created in remote rural areas that are beyond the reach of formal financial institutions. SILCs offer poor families the opportunity to safely make frequent small transactions conveniently in their local community. Mutual support among group members reinforces positive financial behaviors such as saving regularly, and gives members the confidence to explore other financial services.
SILCs help members learn to plan for the future and save the usefully large lump sums needed to exploit investment opportunities or to deal with cash shortages. At predetermined points in the SILC cycle, members can easily access small, flexible loans without collateral from the group’s accumulated savings. At the end of each cycle (typically 12 months), members may start a new cycle, add new members or leave the group.
Loans are calibrated to each member’s savings to prevent over-indebtedness and manage risk to both the borrower and the group. Loans are an important function of the SILC model, as they generate profits for the group and provide members an alternative to withdrawing money for unexpected expenses or investment opportunities.
Each SILC also maintains a separate social fund to support members in crisis by providing small grants or interest-free loans. All savings and lending activities are carried out with the participation of the group, assisted by the group’s field agent.
Field agents are recruited from the community, trained to meet the the long-term demand for SILC services, and are responsible for forming and supporting SILC groups during their first cycle. In 2017, CRS partnered with 204 local organizations in 45 countries to recruit, train and supervise the work of these community-based agents. Field agents contribute to the SILC model’s proven sustainability. SILCs may choose to continue their work autonomously after they complete their first cycle, but have the option of asking the agents continue to train and support them on a fee-for-service basis under the Private Service Provider (PSP) model developed by CRS.
Private Service Providers (PSP)
CRS pioneered the Private Service Provider (PSP) model with the aim of ensuring the long-term (post-project) availability of SILC services in a given area. The PSP model prepares field agents (who are recruited from communities) to become independent providers servicing SILC groups on a long-term, market-driven basis. Local CRS partners provide technical and financial support to agents until they undergo the examination process to be certified as PSPs. After certification, PSPs continue to form and support SILC groups on a fee-for-service basis, without the need for further project funding. PSPs form peer networks for mutual support and quality assurance, and recruit apprentices to increase delivery capacity and achieve community saturation. The PSP approach leads to sustainable SILC groups, self-sufficient agents and communities with the capacity to maintain and spread the savings-group model.
- The PSP model was developed with $9.7 million in funding from the Bill and Melinda Gates Foundation as part of the four-year SILC Innovations project (2008-2012), which reached 375,000 members across Kenya, Tanzania, and Uganda. The SILC Innovation Project produced the PSP Implementation Manual, which includes the standard tools needed to plan and implement SILCs within integrated projects.
- More recently, the MasterCard Foundation provided $12.3 million in funding for the Expanding Financial Inclusion (EFI) in Africa Project (2013-2017) in Burkina Faso, Senegal, Uganda, and Zambia. In four years, EFI reached 543,000 members, two-thirds of whom came from the poorer half of the income distribution in their home communities. The EFI project has developed a pro-poor package that helps implementing partners achieve inclusive saturation of SILC within hard-to-reach populations, particularly the ultrapoor. The EFI project has also produced a set of training guides to ensure a more systematic and consistent delivery of the SILC-PSP model.
Using the tools developed in the SILC Innovations and EFI projects, CRS has implemented a SILC-PSP Master Trainer Program to certify and mobilize a network of regional and country-level trainers who deliver standardized, high-quality SILC-PSP training to country programs and their partners. The Master Trainer Program has enabled CRS to further scale-up the PSP delivery channel in Latin America and Asia. To ensure that SILC training fully addresses group members’ financial and business needs, CRS has moved to a SILC Plus approach, which is delivered by PSPs. The SILC Plus package is designed to enhance specific project outcomes among members. In addition to the savings-group methodology, the package includes:
- Financial education curriculum, focused on setting goals, financial planning, budgeting, savings, and borrowing within the framework of the seasonal calendar by identifying the availability of and demand for financial resources.
- Marketing basics curriculum, helping SILC members and smallholder farmers to understand the principles of marketing and agro-enterprise development, supply and demand, types of markets, and how to develop an effective marketing strategy.
- Business basics for microenterprise curriculum, teaching entrepreneurial skills, business planning, production, sales, and money management practices to enable SILC members to start and grow successful and scalable businesses.
- Behavior change messages on positive parenting, health, nutrition, support for orphans and vulnerable children, water and sanitation, etc.
SILC’s primary purpose is to provide appropriate financial services tailored to the needs of the poor and underserved, but its use of conventional banking principles has made many Islamic communities reluctant to participate because of their religious prohibition against interest. To address this issue, CRS has developed and tested a Sharia-compliant version of SILC. Under this model, loans to members have no interest, no penalties, and no compulsory fees. Instead, members can make a voluntary “sadaqa” (charitable) donation in addition to repaying the loan principal to acknowledge their benefit from the loan, and support all group members’ financial development. Sharia-compliant SILC focuses on the economic benefits of saving and borrowing, the spiritual benefits of using money in compliance with the Sharia, and the social benefits of participating in the group.
CRS capitalizes on the network of PSPs and their trusted relationship with SILCs to fill a last-mile distribution gap for socially-useful products such as solar lanterns, which are frequently unavailable in rural areas. PSPs market these products, diversifying their income stream and making their offerings more relevant to mature SILCs. Members can purchase the products using loans or payouts on their share in the group. This approach creates economies of scale in communication, training and product supply, with PSPs benefitting from the aggregation effect of working with dozens of groups.
Jessica Valesca Saquic, 16, and her daughter Astrid López, 3, at the Nicaja Community in Momostenango, Guatemala where she participates in a Savings and Internal Lending Committee (SILC) meeting. Photo by Oscar Leiva/Silverlight for CRS
CRS recognizes that youth have unique needs that require tailored approaches due to the perceived risks and legal barriers involved in serving the youth market. CRS incorporates SILC in its orphans and vulnerable children (OVC) programs as a foundation of household economic-strengthening interventions. CRS partners with vocational training institutions to equip OVC program participants with technical and life skills that increase their employability, in addition to offering them SILC to address their financial needs. CRS’ YouthBuild approach, initially developed in Latin America and expanded to Africa, keeps youth in school, highlights values, develops leadership skills, and encourages civic responsibility. Again, SILC is often available within these programs to improve their financial skills. In Uganda, the Girls Agro-Investment Project helped adolescent girls to form savings groups, acquire life skills, and commercially grow and sell passion fruit. CRS has introduced an intensive entrepreneurship program that organizes youth into teams that create and run small businesses. These youth (who may or may not attend school) use SILC to access and manage additional financial resources to invest in their businesses, and participation in SILCs helps them develop the habit of saving regularly, while improving their household money-management skills.
CRS convenes savings groups implementers at a national level, to promote quality implementation, ensure effective coordination, and advocate for the inclusion of savings groups in national development strategies. In Madagascar, this has resulted in the creation of a formally registered, national association of savings group promoters, which has engaged the government to include savings groups and the national association in its latest financial inclusion strategy.
Linkages to Formal Financial Services
Group formal accounts
Where feasible, CRS encourages SILC groups to open bank accounts in order to protect their cash savings, in particular at the end of cycles. Increasingly, groups transact to and from their accounts using mobile money platforms or bank agents. As members become familiar and comfortable with group accounts, they will begin using individual products from financial service providers and mobile money operators.
In Zambia, CRS is helping SILC households save to pay school fees using a mobile-enabled group savings account. Members make regular contributions to the SILC education fund, then transfer the accumulated savings to the group bank account. When school fees are due, the SILC group transfers the money to the school’s bank account to cover the fees.
Since 2010, CRS Benin has been developing a framework for a cost-effective health microinsurance. While SILC groups’ social funds are useful, they are too small to cover substantial, unexpected medical expenses. This project is designed to link mature SILCs to a national insurance company that will provide affordable health insurance that is specifically designed for these households.
Water and Sanitation Loan Products
CRS worked with microfinance institutions in Madagascar to create and implement loan products for water and sanitation. This initiative is based on a market-demand approach to increasing both access to and use of clear, potable water and the construction of latrines for improved sanitation.
Research and Learning
Mlumun Shachia sells at the market near her home in Akata, Nigeria. A loan from her Savings and Internal Lending Community helped her establish a business and pay her childrens’ school fees. Photo by Laura Elizabeth Pohl for CRS
Our practice builds on a rigorous research and learning agenda that includes comprehensive data collection using the SAVIX MIS as well as field experiments.
- Under the SILC Innovation Project, CRS conducted a randomized control trial in three countries to assess the efficacy of the PSP model. The study demonstrated that PSP-supported groups outperformed paid agent-supported groups on all financial indicators. Research findings informed the refinement of the PSP model and allowed CRS to adopt the PSP model as the agency’s standard.
- The EFI project used Innovations for Poverty Action’s Poverty Probability Index as well as participatory wealth ranking and financial diaries to compare four different approaches to achieving deep poverty outreach.
CRS conducted a 24-month financial diaries study in Zambia with both SILC and non-SILC households to better understand how members use and benefit from SILC financial services. The results showed that SILC groups generate large and useful lump sums, which increase members’ resilience and allow for asset accumulation over time. It was also found that the poorest members of SILC groups receive the greatest benefit from the program.