FAQs
On this page, we have covered some of the questions we often find our supporters asking. You'll find detailed responses below, but if you can't find the answer you're looking for please reach out to us via our contact page or via Facebook, Instagram, Linkedin or Twitter.
What is savings-led microfinance and why do you do it?
Historically, Five Talents operated both credit and savings-led microfinance programmes. Over time we found that our savings-led programmes in Kenya and Burundi were far more successful than the credit-led ones. Independent evaluations of our programmes revealed that 82% of members in Kenya had increased their household expenditure, and in Burundi, 88% had increased their household assets. Savings Groups have further proven to be more cost-effective and sustainable since we do not provide any loan capital and, after 2-3 years of training and support, Groups can operate alone. Therefore, we have phased out of all Five Talents credit-led programmes and now all of our programmes operate on our innovative savings-led model. You can read more about savings-led microfinance here.
See our Seven Steps Model.
How do you choose who gets the loan?
The short answer is that we don't! In savings groups, of course, the loan capital itself is owned by the Group and so they are solely responsible for deciding which of their own members takes a loan next and on what terms. Our local partners with their teams of expert staff guide and facilitate this process because of the Group guarantee system, each member of the group effectively has to approve the loans to fellow-members too, so it's a very 'bottom-up' and democratic process.
All of our partners exist to build sustainable livelihoods and transform lives so we seek to ensure that your donations are used to deliver savings and loans training to our target member-base, those who have been marginalised with limited access to financial services and education. We often refer to the areas where we work as: ‘smaller and riskier’ as they are regions that larger NGOs may not reach. It is the job of our local partners to guide the Groups to ensure they make, for example, minimum savings balances accessible and ensure gender balance on the leadership committees.
How do you assess the difference you are making?
We measure financial and social performance, using both quantitative and qualitative indicators. Financial indicators and outputs are of course much easier to track; we measure number of members, number and value of loans made (cumulatively and the current portfolio), value of savings, portfolio at risk, repayment rates, average loan sizes and operational sustainability, to name a few. We also receive regular income and expenditure statements from our partners. These chart the success of our partners themselves, as to microfinance practitioners.
Our real objective is to make a difference to the people who use Savings Groups. Of course we need to make sure we work with strong partners so that they can serve the members well; that's why we track the performance of our partners carefully and regularly.
We also work with each programme to develop a number of indicators which are relevant to the local context and can be used to track change in the communities. These vary depending on what the programme staff, Board and communities themselves see as positive change. They can include, measuring the number of literacy learners who become readers in their Church or village health advisors if this is what the communities hope to achieve. In other places we measure changes in how able women feels to be involved in making financial decisions within her household.
Another vital way of measuring the difference we are making is by meeting the members and hearing their stories. You can read more about our approach to measuring social impact here.
How Christian are you?
Five Talents was founded on Christian principles. This leads us to honour and serve all peoples – irrespective of ethnicity or religion. The global network of Anglican churches provides an excellent springboard and infrastructure for the programmes we support. The church is trusted by communities in remote regions - often Savings Groups meet at their local church but our programmes do not evangelise. You can learn more about our church connection here.
How are local partners chosen?
Before a local partner is identified we are invited to help begin a new programme - we want to ensure that we are welcomed by the community that the programme will support. We identify local partners after a rigorous assessment process. The criteria include vision, community assessment, market competition, delivery aspects, local church links, leadership and governance. We are often asked to establish work in new countries, but establishing new ventures is very expensive and we are currently focusing on utilising existing partners to expand in new regions of the eight countries where we work.
What interest rate do you charge?
Interest rates vary across programmes but are typically 1% per month on a flat or declining balance basis. Loans are normally repaid over a term of 4-6 months. Interest rates are set by the Savings Group’s themselves when they start up. The interest is divided amongst the members at the year end in the form of a dividend.
These rates of interest are far below what Group members would pay at a bank or a loan shark, infact, members tell us loan sharks charge up to 20% interest per month! Since the groups are self-managed, there is no external pressure on the credit decisions made by the group.
What are the repayment rates?
The repayment rates within the programmes are very high. Since the group's capital is made up of their own savings, they are incentivised to ensure good management of the loan fund. Generally, a group will prefer to restructure a loan rather than to write it off and will assist a member to come up with a plan to repay.
Savings Groups can grow to have up to 100 members but within this, there are ‘Cell groups’ of between three and five people. These people know each other well and co-guarantee one another’s loans. This helps to ensure that even as they grow, Groups make good credit decisions.
What happens if a member can't repay?
The strong advantage of our approach in this situation is that loan management is handled primarily by the group members themselves. Grace periods are given to members if the group knows that there is a good reason that they are unable to repay (e.g. illness, a death in the family etc).
If the group feels that the member may not have a good reason for not repaying, they normally choose to involve the programme staff. This provides someone from outside of the Group to help the resolve the issue. The member who isn’t repaying will then be visited by the staff. Generally, an agreement is then reached about how the situation can be resolved.
It is very rare that a resolution is not reached at this point. However, if that happens, the Group prioritises recovering the value of loan above the savings that the member has contributed. This allows them to remove the member without other Group members losing any of their share in the Group.
How big are the loans?
The loan fund is generated through the pooled member savings. Therefore, the loans vary depending on the amount of savings pooled. In addition, most Groups choose to start by allowing members to borrow two times their savings and increase this to three times the savings as the group matures.
The loans may initially be as small as £15 allowing for members to increase the amount or variety of stock in their shop for example or buy seed before the planting season. Loans can grow to be several hundred pounds as the communal fund grows and business demands increase.
What are the ratios between your charitable expenditure and fundraising costs?
In our latest (2021) audited accounts, the amount spent on charitable activities was 87%. This is made up of the grants sent to programmes as well as the costs of the programme management staff in the UK. The programme costs in the UK include the work that Hannah from the Global Programme Team, and the other programme staff do in ensuring good reporting, long-term sustainability & shared learning.
All charities however incur costs for necessary admin and governance, in 2021 ours was 3%.
The cost of raising funds last year was 10%.
Total expenditure for 2021 was £920,081
Total charitable activities in 2021 was £798,637 (87%)
Microfinance terminology
We have an entire glossary of terms to explain some of the jargon that gets thrown around in the microfinance sphere.
What sort of training do you do?
Providing rural entrepreneurs with savings and loans is not enough hence giving communities the infrastructure to pool their resources is a start. And that's why each of our programmes are build around a core of financial literacy and business training. Depending on the needs and history of each community, our partners may also provide literacy/numeracy training and trauma counselling prior to starting our programme. We have found that both illiteracy and trauma as a result of conflict, prevent people from fully participating in our programmes. Therefore, our programmes in Karamoja (Uganda), South Sudan, Burundi and DR Congo include these additional training elements.
Our unique combination of experienced local partners, Savings Groups and Anglican Church reach, provides a great platform for training and reduces the costs of administration, monitoring and follow-up. Each Trust Group is trained by our local partners in savings processes, basic business skills, financial literacy, financial planning, bookkeeping, diversification and marketing.
Where does my donation go?
All programmes are supported by a Programme Coordinator and board, but the day to day running of programmes is carried out by a team of trainers from the communities they support. This team of trainers train new members in Group formation, business, literacy and numeracy training, how to effectively manage the Savings Group and perform Group monitoring and evaluation. Your donation supports the training and management of Savings Groups across eight different countries.
Where do you have programmes?
Where do you have offices?
We work through independent implementing partners who each have their own offices in the communities where we work. We also have registered Five Talents offices in the USA, UK and in Kenya, federated under the umbrella of Five Talents International.