Building towards a better future

Savings and loan groups help women and youth in rural Jordan

For many Jordanians, the ideas of saving, and using a bank to do so, are unfamiliar concepts.
People who earn money on a seasonal basis spend in the winter what they have earned in the summer. Wealthier Jordanians may save a significant portion of their income, investing in gold or land. Others just try to get by.

A 2017 financial inclusion report by Jordan’s central bank found that only 33 per cent of adults reported having an account at a financial institution. In rural areas, “people are not aware of the importance of saving,” says Eithar Ghouli, access to finance specialist with MEDA’s Jordan Valley Links project. Only once children graduate from public schools and start going to universities do families realize the need for having extra money. Lacking access to capital also prevents people from starting businesses that could raise their family’s standard of living. MEDA and two other organizations have partnered to improve access to finance for 10,000 women and youth. The Jordan Development Foundation and the National Association for Family Empowerment are working with MEDA to create 500 savings and loan groups. The effort aims to have 15 to 26 youth and women in each group. Those groups will meet weekly for a year, to save, make loans and learn new skills to overcome issues that limit them from having their own businesses.

MEDA staffer Eithar Ghouli (right) explains savings and loan boxes to clients as a visiting MEDA group looks on Photo by Anwar El Halah/MEDA Jordan

Ten per cent of the group will move to working with banks and microfinance institutions to gain access to even more capital.

The savings and loan circle approach strives to create and mobilize local resources instead of looking to an outside source of finding money. Another goal is to get participants to work together collectively. In Jordan, people tend to focus more on individual work.

Groups are self-selecting, which builds trust. And the meetings are serious affairs. Some groups fine members who come late, fail to attend or talk during meetings. A leader, treasurer and secretary are elected for each group. They help to make decisions on the amount of each share of savings, loans once enough money has been saved, and details of the bylaws. Participants learn skills needed to start a business: marketing, innovation, market assessments, packaging, feasibility studies and cash flow. Another area of training encompasses soft skills such as communication and problem solving, working with clients. Each group has a savings box that is secured by three locks. Each of the three group leaders have a key to one of the locks. All the locks are different, and the box is opened only at meetings. Every member gets a passbook that is stamped to record their deposits. Even women who cannot read and write can understand the stamps.

Women save between one and five Jordanian dinars ($1.41 to $7.05 USD) each week. After the group has built its collective savings to 800 or 900 dinars, likely in three months time, it will begin lending. The group approves loan requests, typically in the range of 100 to 200 dinars. Within the first six months of the two-year effort, organizers have reached 30 per cent of their target population. Shekah Malkany is a farmer who has volunteered in various community initiatives. Eight savings and loan groups have developed out of one that she started in her village of Koura, population 4,000, 80 kilometres (50 miles) north of Amman. “She started with one group, and the other seven were (developed out of) the reputation of other people telling about the group,” Ghouli said. “Each group was becoming easier.” Groups appeal as people want to form businesses but realize they can’t do it on their own, she said.

Shekha Malkany holds a lockable box used in village savings and loan groups – Photo by Mike Strathdee

Malkany found that mobilizing women is sometimes challenging. When the project discussed shares, women thought that means investment in stocks and needed convincing. Of the eight groups, only three women have dropped out. Two groups formed late in 2018, with the rest being formed in January.
Malkany, a mother of nine, had three years when she had three children in university. There are now two teachers, three engineers, a nurse and a doctor in her family. The average family in Jordan has four or five children. People who live in Amman may have only one or two children, while those who live in rural areas have six or seven. There are a variety of reasons why many Jordanians lack access to banking services, Ghouli said.

Taking deposits and loans are considered Haram (an Arabic term that means forbidden) in Islam due to the role of interest. Islamic financial institutions “take more interest, under another name” and will not calculate the total cost of their service fees, she said.

Lack of trust in the system is one of the problems. In rural areas, there are no banks. Electronic banking is available through a mobile phone-based system called JOMOPAY, which stands for Jordan Mobile Payments. But this app-based system is not connected well to other telecom systems, can only be used to send money to other JOMOPAY users, and is not user-friendly, Ghouli said. People’s reluctance to adopt technology is an additional hurdle to wider adoption of this system, she said. In many cases, they prefer to hand off cash.

“People are not open to technology,” she said. “Technology in general is new to the country.”Many of MEDA’s rural clients have smart phones but use them just for taking photos, not for exploring new opportunities.Helpful as the savings circles can be for participants, the project has faced challenges. Other non-profits have offered financial incentives, such as transportation money, for attending training sessions.

The Syrian crisis has played a role in this problem. Large amounts of short-term relief money is coming into the country to help Syrians, funds that are desperately needed since Jordan is one of the countries most affected by the number of displaced Syrians.
Jordan has the second highest share of refugees compared to its population in the world, 89 refugees per 1,000 inhabitants, United Nations figures suggest. Almost 90 per cent of the 751,000 refugees living in Jordan are from Syria. Nearly 50,000 refugees have active work permits, the UN High Commission on Refugees says.The inflow of relief money upsets development aimed at Jordanians, Ghouli said. 

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