Digital Savings Groups for Refugees in Uganda

Together, the Cash Working Group in Uganda (CWG), the Livelihoods and Resilience Sector Working Group (LRSWG), The United Nations Capital Development Fund (UNCDF) and U-Learn conducted research on Digital Savings Groups for Refugees. This is a fantastic model for garnering a diversity of evidence and perspectives around a key issue.

The research included a desk review, key informant interviews, and a workshop with over 160 participants. Please find the full report and conclusions here: Digital Savings Groups: A Learning Brief (July 2022). 

Here are also some key insights from the work:

1.      Digital is not Better than Informal: Digitalization may bring benefits for some groups. However, it has a cost, and the process is a journey that can be quite cumbersome for some groups and/or specific members of groups like those with low literacy and women. Thus, the costs and benefits should be weighed by specific groups before deciding on digitalization.

2.      Customization is Key yet Difficult: There are a myriad of different models for savings groups. There were five distinctive models identified in Uganda. Further, geography seemed prominent since savings groups in some areas saved more, while those in others borrowed more. Finally, gender matters. Women are more likely to join savings groups (72% of members in Uganda are female), however, male members save larger amounts than women. Therefore, hyper-customization might make sense, but doing it cost effectively is a challenge.

3.      Savings Groups are Prolific: In Uganda there are almost 66,000 active savings groups with almost 1.8 million members. 6,000 of these groups are formed by refugees, amounting to 150,000 refugee members, which is approximately 10% of the refugee population in Uganda. Further, 40% of refugees in Uganda have had experience with savings groups in the past.

4.      Groups are Recovering from COVID-19: During the COVID-19 pandemic there was a “noticeable decrease in savings”. However, savings rates seem to be increasing in the recent past. Currently, members are saving US$73 and borrowing US$43 on average per year. However, there is a large variation between groups.

5.      Big Challenges Remain (Infrastructure): Many prominent challenges are mentioned, but the ones that stood out on the infrastructure side were that the quality of connectivity is still problematically low, and it is still not very affordable. In 2021, 1GB cost 16.2% of the average Ugandan’s monthly income. This is almost double the cost of sub-Saharan African average.

6.      Big Challenges Remain (Demand-side): On the demand side, less than half of Ugandans have an internet subscription. Digital and financial literacy are still paramount issues and smartphone ownership is low. While 65% of refugees in Uganda now have a mobile money account, there is a large gender imbalance (75% of males vs. 59% of females), and female refugees still prefer cash for transactions over mobile money. 

7.      Salient Benefits for Groups: Many potential benefits are cited, and those most salient seemed to be in terms of security gained, time saved, and education provided. Digitalization reduced meeting times from an average of three hours to 30 minutes, giving members back valuable time. The research cited funds potentially being more secure when held digitally vs. being kept in a hidden lockbox at a member’s house. Lastly, one fintech reported that group member’s confidence in using mobile apps increased from 3% to 59% of members after six months of using their solution. Therefore, increased digital literacy might be a positive externality of digital savings groups.

8.      Digital Savings Groups for Refugees are New: While Digitalizing savings groups has been a focus of work for approximately a decade, in Uganda, digitalizing refugee savings groups is still in its early stages. There are limited fintech solutions available, and those on the market is still unlikely to meet the needs of the diversity of savings groups in refugee contexts.

9.      Digitalization Introduces Operational Costs: It is common for non-profits to support set-up costs for savings groups. For analog groups this is generally a paper ledger and a lockbox. For digital savings groups this is smartphones. However, with analog groups there were generally not any further recurrent costs. With digital savings groups operational costs include electricity, data, mobile money and/or banking fees, and transport to CICO agents. These costs are significant and need to be carefully weighed before digitalization is decided.

10.  Digitalization Can Compound Gender Inequality: While savings groups have always been predominantly female, there is commonly an overrepresentation of males in the leadership of the groups. Given males are more likely to own phones, use mobile money and have higher levels of confidence using smartphones, digitalizing a savings group may inadvertently make it less probable that women will serve in the leadership.

Please find the full report and conclusions here: Digital Savings Groups: A Learning Brief (July 2022).