Formalising Informality: Savings Groups, Community Finance and the Role of FSD Kenya

The document examines FSD Kenya's intervention to scale savings groups in Kenya by reducing formation costs and improving sustainability. It evaluates these efforts through the 'Adopt-Adapt-Expand-Respond' (AAER) framework, highlighting the transition from donor-funded pilots to fee-for-service models and the attempt to link informal groups to formal banking services like Postbank.

• FSD Kenya significantly reduced the cost of forming and training savings groups through the COSALO 1 initiative, lowering average costs from USD 50 per member to USD 8.4 per member. The most efficient delivery channel was private sector franchisees at USD 6.7 per member, followed by faith-based organisations at USD 9.5 per member, and CARE staff at USD 12.5 per member.
• The intervention expanded the reach of financial services to approximately 600,000 people by 2015, with 15,288 groups formed through partnerships and an estimated 7,644 additional groups created through copying. 81% of the members in the partnered groups were women.
• In Marsabit, a region with high poverty and infrastructure challenges, 11,000 people joined savings groups within two years, and 77% of these members fell below the national poverty line. However, delivery costs in this area were four to six times higher than in other regions, making further scale-up unfeasible without new innovations.
• Two different training models were tested for sustainability: the CARE model (commission-based) and the CRS private service provider (PSP) model (fee-per-visit). The CRS model proved more commercially viable, with almost all groups paying their trainer after graduation, whereas only half of the CARE groups did so.
• FSD Kenya attempted to link savings groups to formal financial services through a two-year pilot with Postbank involving 118 groups. This aimed to improve security by reducing cash holdings and increase the credibility of groups to attract other formal providers.
• The document concludes that 'big push' interventions often fail in complex systems and that long-term market functions, such as training and support services, must be established. It suggests that development agencies must 'right size' support to ensure it can be replicated by local service providers.

APA

Gibson, A., Elliott, D., & Johnson, D. (2016). Formalising Informality: Savings Groups, Community Finance and the Role of FSD Kenya. FSD Africa. https://fsdafrica.org/wp-content/uploads/2025/05/Savings-Gr_Briefing-final_digital.pdf

Chicago

Gibson, Alan, David Elliott, and Diane Johnson. Formalising Informality: Savings Groups, Community Finance and the Role of FSD Kenya. FSD Africa, 2016. https://fsdafrica.org/wp-content/uploads/2025/05/Savings-Gr_Briefing-final_digital.pdf.

Wikipedia

{{cite report |last1=Gibson |first1=Alan |last2=Elliott |first2=David |last3=Johnson |first3=Diane |title=Formalising Informality: Savings Groups, Community Finance and the Role of FSD Kenya |publisher=FSD Africa |date=September 2016 |url=https://fsdafrica.org/wp-content/uploads/2025/05/Savings-Gr_Briefing-final_digital.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{gibson2016formalising, author = {Gibson, Alan and Elliott, David and Johnson, Diane}, title = {{Formalising Informality: Savings Groups, Community Finance and the Role of FSD Kenya}}, institution = {FSD Africa}, year = {2016}, month = sep, url = {https://fsdafrica.org/wp-content/uploads/2025/05/Savings-Gr_Briefing-final_digital.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }