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

This case study examines FSD Kenya's efforts to strengthen semi-formal rural delivery channels and link savings groups to formal financial services using a 'making markets work for the poor' (M4P) approach. It details the transition from donor-funded pilots to fee-for-service training models and the use of technology and banking partnerships to increase financial inclusion for rural populations and women.

• FSD Kenya significantly reduced the cost of forming and training savings groups through the COSALO 1 initiative. By streamlining the formation model, using community-based trainers (CBTs) managed by faith-based organisations or franchisees, and introducing commission-based incentives, average costs dropped from a prevailing USD 50 per member to USD 8.4 per member.
• The initiative achieved substantial scale and organic growth. By 2015, partnerships with CARE and CRS helped form 15,288 groups serving over 400,000 people (81% women). Additionally, an estimated 7,644 groups were formed through copying, bringing the total to nearly 23,000 groups and approximately 600,000 beneficiaries.
• FSD Kenya tested two different training delivery models to ensure commercial sustainability. The CARE model used a fee per member and a percentage of the final share-out, resulting in larger groups with higher lending activity. The CRS 'private service provider' (PSP) model used set fees per visit, which proved more commercially viable, with almost all groups paying their trainer after graduation.
• Savings groups were effective in reaching the financially excluded, particularly in challenging regions. In Marsabit, 11,000 people joined groups within two years, and 77% of these members fell below the national poverty line, with most having had no previous access to financial services.
• To bridge the gap between informal savings and formal banking, FSD Kenya partnered with Postbank in 2012 to create 'M-Chama'. This pilot involving 118 savings groups aimed to improve security by reducing cash holdings and increase the credibility of groups to attract other formal financial service providers.
• FSD Kenya developed a smartphone application for e-recording to improve transparency and accuracy in savings groups. This tool is intended to create transaction data that can attract formal financial service providers and reduce the risk of money loss due to poor record-keeping or dishonesty.

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} }