About Community Savings Pools
What is a Community Savings Pool?
The short answer… A Community Savings Pool is an accessible mutual aid tool for saving and lending. Each pool is made up of 10-25 people or families who pool their individual savings and then collectively loan money to each other for personal needs and goals, community projects, business startups and expansions, and so on.
The longer answer… Community Savings Pools (CSPs) are relatively informal private groups of people who pool their savings and make loans for each other to use. Members can contribute any amount, either lump sums or regular savings.
CSPs can be any size, but they are often kept small (10-25 members) to foster trust. Most pools have a shared bank account requiring multiple signatories and regular real-time meetings (such as shared dinners) as well as ways to communicate between meetings. They often naturally develop a group culture of mutual support beyond financial savings and loans, for example through home improvement support, no-charge equipment loans, and other ways of lending a hand.
Pool members decide individually (or as households) how much money to save with the group. Members may also request to borrow, suggesting their repayment schedule. The group as a whole decides whether to grant each request, and they may request security, especially on larger loans.
The pool supports its members by making interest-free loans. Rather than paying interest borrowers pay back their loan plus an additional amount towards their savings. This strategy supports the pool because it makes more money available for lending to other members as well as supporting the borrower in building their savings.
In New Zealand, where they developed this strategy, they call the additional payment the “reciprocity”. The idea behind it is that the member is contributing to the health of the group, just as the group is supporting them with the loan. And when the loan term is finished the borrower has access to their money in the pool to either take out or leave in as savings. The result is that the borrower has savings in the bank, instead of empty pockets from paying interest to another lender. Everyone wins!
CSPs require good communication, cooperative decision-making, and mutual commitment. If you aspire to develop these qualities, you may find that a savings pool is a good tool. Your savings pool can include members who do not have any money to contribute at the outset.
We are adapting CSP model that was originally developed by Living Economies in New Zealand.
Why start or join one?
Imagine getting together regularly with a group of people you trust and care about, sharing a meal, possibly doing a work project, and managing your pooled savings to benefit yourself or family and your community.
In addition to the social connection and support, community savings pools create resilience and economic agency as they do not rely on access to conventional financing avenues with conversative lending behaviors that often exclude historically marginalized and low-wealth people and communities.
Community savings pools have the potential to create real change in the lives, neighborhoods, businesses and communities they serve through investment in and control of businesses, housing, land and farms, energy infrastructure and grassroots healthcare enterprises.
How do I start one?
Start the Conversation
Engage your trusted friends, family and community members in conversation about starting a community savings pool and gauge the interest. Start with open, honest, and empathetic curiosity about each individuals’ needs. If there’s enough interest, bring the group together for deeper conversation. At this time it will be important to:
Assess shared reality and the level already established trust within the group
Establish the goals of the group (is there a specific mission or values that the group is working toward?)
Identify possibly challenging group dynamics that may arise
Create the Pool and Make Agreements
This step involves customizing the operating agreements to meet the needs and goals of the group and opening a bank account with 2-3 signatories from the group. Savings pools are constructed using contractual agreements between all the members. The signatories are bound to by the group’s decisions as regards deposits and withdrawals from the bank account. This relatively informal model allows the group to save and lend money without having to incorporate into a legal entity (subject to taxation and lending regulations).
An important part of the agreements are the rights and responsibilities of membership which often include:
Respect the confidentiality of the accounts and proposals of our pool’s members
Be bound by any pledges or decisions I may make as noted in our pool’s records
Accept a Savings Pool Association ruling if I am otherwise unable to resolve a dispute
Advise other members in advance if ever I am unable to meet an obligation
Contribute in such ways as enable our pool’s members to cooperate
You’ll also need to commit to a regular meeting schedule, establish individual monthly savings goals, identify who will manage the record keeping on behalf of the group. This an ideal time to gather strategies for healthy relating and group dynamics to address the possible challenges you previously identified.
Then you’ll start gathering on your meeting schedule. Maybe you’ll have monthly dinners together, rotating from one members’ house to the next. Or you could meet for brunch, or include a work party component to expand your commitment to mutual support beyond finances. It’s up to your group to determine what kind of regular schedule will meet your needs. The important part is that you agree on it and commit to attending.
Start Saving and Lending
Once agreements are signed and your bank account is opened, you can start saving. Whether it’s direct deposit, monthly checks, or even cash, each member contributes monthly (or on whatever schedule you establish) to the pool.
Once you have some money in the bank (might be after a few months), you’ll be ready to receive proposals from members regarding loans. You’ll all get together and discuss the loan proposal and decide how you can best support the member. Sometimes that includes other types of support instead of or in addition to the loan. If all members are in favor of giving the loan, the signatories are empowered by the group to withdraw money from the account.