More on savings pools
What is a savings pool?
Also known as the genuine wealth system, savings pools are informal private groups of people who pool their savings together for each other to use. Members can contribute any amount, either lump sums or regular savings.
From this pool, members can support each other by making interest-free loans. When members borrow, the loan is interest-free, but the other members also benefit because the lender pays back the loan plus an equal amount in savings. During the repayment term, those savings are available for others to borrow. This is called 'reciprocity'. When the loan term is finished the member has money in the pool to either take out or leave in as savings. The result is that the member has money in the 'bank', instead of empty pockets from paying interest to the bank. Everyone wins!
Pools can be any size, but they are often kept small (10-20 members) to foster trust. They often naturally develop a group culture of mutual support beyond financial savings and loans, for example through shared meals, no-charge equipment loans, working bees, and other ways of lending a hand.
Why form a savings pool?
Savings pool participants often value:
- access to interest-free loans
- a
lower-risk option for helping friends who
need money
- reciprocity
in lending (see
below)
- increased capacity to build collective wealth when working
cooperatively
- the security that comes with investing in one another instead of making bank deposits
- the security that comes with being part of a group where everyone is committed to helping each other out
Savings pools 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.
How does a savings pool work?
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. Those who are saving own their personal contributions, but these may not be immediately available due to group loans.
When borrowers repay a loan, they pay back the loan principal, and the also deposit savings in the group for an agreed amount of time. These reciprocity savings allow others to borrow too.
Most pools have a shared bank account requiring multiple signatories. Most pools have regular real-time meetings (such as shared dinners) as well as ways to communicate between meetings.
Where can I go to learn more?
- Read Organic NZ Magazine (March/April 2016) for a feature article with a solid introductory explanation of savings pools
- Read our online collection of personal savings pool stories
- Contact the LE team for more support