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Savings Club Practice Guide: Solomon Islands



The Solomon Islands, with less than a million people scattered across 1,000 islands and speaking over 70 different languages, are among the most remote places on earth. Savings Clubs reflect the aspirations of the villagers to improve their lives, educate their children and develop their communities. This Savings Club Practice Guide has been designed for these unique conditions. Built around 'savings plans', it supports member desires to buy useful products like solar panels and outboard canoes. It uses 'oral information management tools' to make financial services more usable for a population where illiteracy remains common.
Savings Club Practice Guide
Solomon Islands
“No matter how much foreign capital comes into a country, the
people will never have the economic freedom they want, until they
are capable of managing their own affairs, making their own
decisions and taking responsibility for them.”
Sir Bishop Dudley Tuti
Final Edition
May 9, 2014
Preface 1
Introduction 2
The Savings Club 3
Structure 3
Products 5
Information System 7
Savings Procedures and Practices 9
Savings Plans 9
Current Savings 17
Balancing: Savings Only 20
Cash Management 24
Lending Procedures and Practices 24
The Lending Decision 24
Operating a Loan Fund 27
Balancing: Savings and Loans 32
Annual Election Meeting (AEM) 34
Annual Election of Officers 34
Distribution of Dividends 35
Action Audits 36
Appendices 41
1.The Balancing Process: Step by Step 41
2.Club Constitution 48
3.Club Forms and Registers 52
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The following is an operating manual for a permanent Savings Club. The manual has been
designed for the remote and distinctive village environments in the Solomon Islands.
Practitioners may use this manual as a complete guide to operations, without revisions.
This manual is organized so that users can also pick and choose from various components,
and integrate them into the many other Savings Club models to be found in the Solomons.
The operational system has been designed and is presented in a modular fashion that
permits experienced practitioners to adopt specific elements – such as the balancing box,
the purpose-based savings account, the current account or the action audit system –
without adopting other elements they do not wish to use.
Similarly, while this manual is designed to address the demand for permanent Savings Clubs,
practitioners of temporary Savings Clubs can also use it. In fact, the system presented here is
fully compatible with use by a temporary Club. Temporary Clubs are particularly encouraged
to consider the adoption of the purposed-based and current savings accounts, which can
strengthen member confidence, increase the practical usefulness of the Club to its members,
and refocus members on the core savings goal of the Club. For practitioners who are
concerned that a permanent Savings Club may not work in their project area, they may mix
the two systems by following this manual but scheduling action audits in the first few years,
until member capabilities and confidence are strong enough to support a permanent Club.
The author would like to thank Osbert Lalahu, Dr. Alice Aruhe’eta Pollard, Osbert Lalahu, Doris
Puiahi and the many other hard-working and often remarkable leaders who have clearly
shown, in their Savings Clubs and in their practices, their very strong determination to bring
financial inclusion to villages across the country. The ideas and practices that they have
developed, often in extremely challenging conditions, are an inspiration, and I was privileged
to observe many of them, during field work at the end of last year. During a remarkable
workshop in February, a group of 40 savings clubs leaders from around the country
convened at the Central Bank of Solomon Islands and provided feedback on the initial
version of the Manual. The guidance here has drawn on the deep experience and insights of
these individuals, and I have tried to consolidate it and supplement it where possible.
This manual is dedicated to them, and to the future they are striving to achieve. The methods
and practices presented here also draw heavily on the experience of several excellent
global practitioners, particularly Hugh Allen, Stuart Rutherford and Graham Wright; to whom I
will be forever indebted.
Finally, a very big ‘thank you’ to Caroline Kanoko and her team at the Central Bank of the
Solomon Islands. Their professionalism offers much hope for the future of Savings Clubs in the
Solomon Islands.
Errors and omissions are my responsibility alone.
Brett Hudson Matthews
Savings Club Advisor
Pacific Financial Inclusion Program
May 9th, 2014
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Savings Clubs in the Solomon Islands have historically tended towards dormancy. There are a
number of reasons for this, including the limited economic activity in rural areas, and a
concern among promoters that once money has been deposited, it not be removed. The
former issue has limited the funds villagers have available to deposit, while the latter issue has
limited their trust that they can get access to it when they need, or even get it back at all.
The traditional model also steered too closely to a credit union model designed for urban
areas, and that depends for success on urban institutions and capabilities. For example,
traditional Savings Clubs in the Solomon Islands have only one meeting of all their members in
a year (an ‘annual general meeting’). At this meeting they elect committees to manage the
Club until the next AGM. These committees are expected to meet monthly. But in practice,
members of the committees often feel that they have little to talk about, and most may
simply leave the work of the committee to one or two individuals who seem more willing to
do it. This encourages a drift towards domination of the Club by one or two individuals, a
devaluing of the capabilities of other leaders, and a lack of accountability between active
leaders and the membership as a whole.
The central task in building a financial services sector is building trust. Paper money is nothing
more than an unsecured promise with no tangible value. This is not simply a matter of getting
clients to trust the supplier of services. It is also about suppliers of services learning to trust
clients (not in every way, but in certain highly specialized ways that build the financial
It is sometimes argued in the Solomon Islands, as it sometimes argued everywhere, that
building a formal financial sector is really about getting people to plan for the future, and
getting them to think about the future. Human beings do struggle to plan for the future, and
vary widely in their ability and apparent motivation to do it. However, this problem is not
unique to the Solomons. Mechanisms like pension plans, automatic payroll deduction,
various forms of insurance, taxation at source, etc. seek to overcome precisely this challenge
in advanced economies. And conversely, evidence that villagers in the Solomon Islands
actually do think about the future is visible everywhere in their villages. However, their
situation is quite different from that of financial consumers in a developed economy. Not only
do they have no access to pension plans or other ways of signalling a preference for
illiquidity, they face another big challenge. They are not familiar with the technology of cash
– the most high-powered and flexible store of value to be invented before digital money –
nor are they practiced in its habits.
For villagers in the Solomon Islands value is not stored in cash. Their parents and earlier
ancestors didn’t store value in cash, and there are few if any village traditions that teach
people how to manage cash. Shell money, while somewhat related, is restricted in its uses by
tradition and is a far less flexible and accessible store of value.
Savings Clubs can very directly address several key barriers to financial inclusion – barriers
that cannot, for the present at least, be addressed any other way. These include:
accustoming people to using, managing and planning for stores of cash value;
helping people to overcome innumeracy; and
helping people to become familiar with the transactional interface used to process
These skills can help villagers to plan for a future that is very different than that contemplated
by their parents or grandparents. And these skills can broadly be thought of as conceptual
prerequisites to financial literacy. Without addressing them, more advanced financial literacy
initiatives can’t succeed.
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The Savings Club methods and practices proposed here ask a lot from villagers. Many
villagers in each Club – not just one or two, but all -- are expected to be able to find entries in
their passbooks and eventually to even be able to update their passbooks. At least 7 or 8
people in each Club are expected to keep records, and balance accounts. It could be said
that these expectations are unrealistic. However the design of the methods and practices
outlined here levers the internal systems of solidarity existing in both the villages and the
Savings Clubs to build these capabilities.
For villagers in remote and traditional environments, financial literacy cannot be acquired
through formal training programs. It is acquired, first and foremost, through practice. This
manual guides practitioners in building the practices that are required to help prepare
villagers to be effective players in the evolving cash economy and modernizing financial
The Savings Club
The Committee is composed of 5 individuals:
a Chairperson,
a Treasurer/Savings-Plan Record-Keeper,
a Secretary/Loan and Current Account Record-Keeper, and
two Money-Counters.
In addition, there are three Key-Holders and a Box-Keeper, who sit among the ordinary
The roles of the various office-holders are summarized in TABLE 1.
TABLE 1: Roles of the Club Office-Bearers
Chairperson conductsmeetingsinabusiness‐likemanner
Counters(2) keepcountsofsumsofcashinthedifferentaccountpouches
BoxHolder presentstheboxtotheClubmemberspunctuallyatthestartof
KeyHolders(3) opentheboxfortheClubmemberspunctuallyatthestartofeach
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Solidarity Groups
Each member of the Savings Club is also a member of solidarity group within the Club. All
members, including the Committee members, must belong to a solidarity group, and these
groups will usually have 4-6 members.
The solidarity groups have two main purposes.
1. The members help each other to learn financial literacy. In particular, members who
are unable to complete their passbook entries learn how to do it from other
members. There are keys to base-10 in the passbooks, and members can also learn
using other tools, such as finger math (the Korean chisanbop method). The passbooks
are held by the members throughout the meeting, so the more numerate and literate
members can help the less numerate and literate ones with reference to them at any
time during the meeting, before returning them to the cashbox when the meeting
2. The groups also support balancing, by summing totals by Club product within their
group and reporting them to the Club at the end of the meeting.
The Club can offer members a chance to select each other, or may simply assign members
to groups based on their Club numbers. In either case, solidarity groups should include a mix
of individuals with relatively more/less numeracy and literacy skills, as well as a mix by relative
Solidarity groups should each have a leader. This individual is responsible for the reports to
the Club at the end of each meeting. It is better if the leader is someone who is not on the
Record-keeping is a difficult and time-consuming task – and it is an important responsibility. It
is very important that the numbers are entered correctly. Errors in the numbers may seem
small, but they can lead to serious disputes, especially if they are not noticed quickly enough.
They can also undermine member trust, and cause the members of the Club to doubt the
usefulness of their work together.
It is helpful if those who have record-keeping responsibilities (treasurer, secretary and
chairman) have some education, but their schooling need not be great: if they have finished
primary school they can do the job. A natural interest in numbers can be helpful, but more
schooling is not very important. What is more important is that the Club members view these
individuals as honest, hard-working and reliable.
During the balancing process errors will be found in the records. There is no reason to blame
anyone for accidental errors. Bankers around the world estimate that record-keepers enter
about one number in every 100 incorrectly; no matter how hard we try to avoid errors, all of
us make them because we are all human!
However, errors are never a good thing, and there are ways to reduce them.
All Savings Clubs should round all transactions to the nearest dollar. This means that under
normal circumstances it should not be necessary to track any digits
after the decimal place in a passbook or ledger. In addition, there
are other things that record-keepers can do to reduce the number
of errors, and make errors easier to find. For example they can:
write numbers neatly;
always include commas in the correct locations (for
example: “1,200” – not “1200”);
always align numbers to the left, and use the guides in the
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if using digits after the decimal place, try to be consistent in each column about the
number of placeholders used – if recording up to the decimal place in the deposit
column of members’ passbooks (e.g. “800”) don’t add a number that tracks 2 digits
past the decimal place in the same column (for example, “1,200.00”);
The list of possible products that the Club may deliver appears in TABLE 2.
The core product, which forms the foundation on which the Club is built, is the Savings Plan
account. This product addresses the main need of most members: to be able to save safely
in an account-based format for goals that they set for themselves, according to a schedule
that is tailored to their individual and household needs.
All other products in the list are optional, even for a Club that treats this Manual as an
operating model.
Table 2: List of Possible Club Products
SavingsPlan saveforspecificpurposesand
Loans borrowformicroenterpriseor
SocialFund fundusedbytheClubtooffer
ROSCA fixedcontributionateach
SavingsClubPracticeGuide,SolomonIslands Page6
Savings Clubs may offer members the option of holding, at any one time, between one and
two Savings Plans. Members must maintain at least one Savings Plan, and contribute to at
least one Savings Plan at every meeting, as a condition of Club membership. While the
amount that they contribute is flexible, the Club may set a reasonable minimum threshold
contribution per meeting, such as $1 or $5.
This product addresses a compelling member need while helping Club members to learn to
manage financial accounts. As a result the Club can build up its capabilities at its own
speed, making it easy to deliver other products to its members later.
When the members are very poor, and live in very poor villages, they may also need
emergency funds from time to time. Loans are not recommended for this purpose, since
additional debt compounds the substantial financial risks that very poor households already
carry. Instead, the Club may introduce a Current Savings account. Members may save any
amount they wish in this account up to a maximum specified by the Club. The funds in this
account are kept in a separate pouch, and can be withdrawn by the owner at any full
meeting of the Club, without providing advance notice. To avoid an accumulation of too
much cash in the Cashbox, the Club members should set a maximum amount that each
individual can save in the Current Savings account. This maximum should not be large: for
example it might start at $50 or $100, and even a very established Club with very strong
procedures should not allow individual Current Savings accounts above $500.
Some Clubs, especially temporary ones, already have a Social Fund. A Social Fund provides
money, drawn from all the members, to make small pay-outs to members in distress: for
example if a child is sick, or if the family has lost a loved one. Most Clubs want to make such
offers to members, and may establish rules, with fixed pay-out amounts, to make the process
fair and transparent for all members. The Social Fund may be financed by regular member
contributions (e.g. $1 per meeting per member) with the money going in Compartment 1 of
the box. However, it may also operate as an ‘unfunded’ service founded on the collective
faith and good will of the members. Members can be asked to provide funds in the event of
a crisis, knowing that they too, may need funds in a crisis later. Clubs can also have
fundraisers to build up Social Funds. If the Club is offering its members a Current Savings
account, any member who faces trouble meeting a payment can take the funds from his or
her account there.
ROSCAs (Rotating Savings and Credit Associations) are also easily integrated into a Savings
Club, because like the Club, they involve transactions based on regular weekly or bi-weekly
meetings. Unlike the Club they do not require records, and a sub-group of members (e.g. 10
or 15) could run one as a supplement to the main activities. The acquisition of financial
literacy also involves certain costs: for example many members may wish to purchase a
calculator, exercise books etc. A ROSCA is a good mechanism for members to buy these
Some Clubs may go no further than this. They can distribute equity (composed of fees
charged to open Savings Plans, and penalties under the Club’s Constitution, net of any
incidental expenses) to all members equally, once a year. Other Clubs will want to offer
loans, and may also want to offer a supplementary savings product that yields a healthy
profit for members on their investment capital. These Clubs can offer a Loan Fund financed
by time-limited Investment Share offering to its members. Since members are also well
positioned to finance consumption expenses through Savings Plans and Current Savings
accounts, the Loan Fund should only lend to members capable of investing the funds in
profitable microenterprises or other business initiatives. The Club can set the interest rate it
charges on loans and should only lend to members.
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To ensure that members receive maximum benefit from the investment, and to ensure
maximum incentive to repay loans, the Loan Fund should be a time-limited one that
distributes all shares back to the members, plus profit proportional to shares owned, at the
end of a fixed 6-12 month period. To keep the records as simple as possible, no additional
share purchase transactions, and no share sale transactions, are permitted during the period
of Loan Fund’s operation.
Information System
The information system of the permanent Savings Clubs includes the documents in TABLE 3.
TABLE 3: Club Information System
SavingsPlan SavingsPlan
Loan LoansDue
SocialFund None
The Balancing Box
The steel cash box with 3 locks is an integral part of the Club information system, and is
intended to protect savings that are stored by the Club in the village, and to afford easy
balancing. The interior contains a wooden divider segmenting the box into 4 equal sized
compartments (see DIAGRAM 1). The divider, and the wooden floor on which it rests, are not
attached to the metal box and can be removed during meetings to help Club members
with balancing.
Compartments 1-2 (Uses of Cash) can be painted green after the products of agriculture,
and Compartments 3-4 (Sources of Cash) can be painted the colour of earth, from whence
these products come. The analogy to the concept of “uses of land = sources of land” can
be developed. For example, for every coconut tree or taro crop, there must be land and
generative soil.
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DIAGRAM 1: The Balancing Box
The savings plan passbook is composed of four sections, appearing in the following order.
1. Savings plan pages or ‘contracts’ (pages 1-2)
2. Investment savings page (page 3)
3. Savings transaction pages (pages 4-25)
4. Loan pages (pages 26-32)
To keep motivation to meet and keep saving high, it is essential that members receive cash
in their hands frequently. The purposed-based savings product is designed as a substitute for
a savings account in which withdrawals are restricted.
As a condition of membership, every member is expected to have at least one saving plan
underway at all times. This plan is recorded in a separate plan section at the start of the
member’s passbook. It is a contract (with a small fee such as $10 or $20 paid to the Club). It
will identify:
the purpose of the saving,
a start and maturity date, and
the target savings amount.
The Deposit Pages track actual transactions by Plan, except that the final withdrawal is
transferred back to the Savings Plan page. Each entry in the Deposit pages must begin with
a reference to a specific plan on the Savings Plan pages (Plan A, B, C etc.). The Club may
restrict members to depositing in only one Savings Plan at a time, or may permit deposits in
up to two at once. If members are depositing in more than one Plan, a different column of
the passbook should be used for each Plan, to avoid confusion.
If the Savings Club offers a current account to its members, each member who opens one
will be assigned a Current Account Passbook which will be stored in Compartment 1 of the
cash box. The first time the member makes a deposit, the Club will deduct a fee to pay for
her passbook. The remaining cash will be registered as a deposit in the member’s passbook
by the Current Account Record-Keeper.
All cash deposited in the current account is stored in a special Current Account pouch. This
money is never remitted to a bank or lent out; it is only used to meet requests by members to
withdraw funds from their current accounts during meetings.
Metal perimeter of the box
Cash in Box and Bank What We Owe
cash in box savings and share inventory list
cash in bank credit notes for amount s ow ing
(bank statements) to other people
What We Are Owed What We Own
loan inventory list accumulated profit up to
+this meeti ng
list of loans with untimely +
repayment profit from this meeting
Metal perimeter of the box
Interior wooden compartment walls
SavingsClubPracticeGuide,SolomonIslands Page9
The Club’s forms (and one ledger) appear in Appendix 1-6. Examples of their use are
included in the discussion of Club process in the next section.
Savings Procedures and Practices
Savings Plans
Meetings should take place every week or two weeks. The seating arrangement for the
meetings is in DIAGRAM 2.
Each member is assigned a number, which appears on her passbook, and which determines
the order in which the member sits in the meeting, and the order in which she is called up to
DIAGRAM 2: Club Seating
The agenda of the meetings is as follows.
1. Call the meeting to order (Chairperson)
2. Ask for value of the funds -- savings and current (Chairperson)
3. Open the box (Keyholders and Box-keeper)
4. Count the cash in Savings Plan and Current Account funds; announce totals (Money-
5. Hand out passbooks; recite rules (Committee, Members)
6. Collect penalties
7. Accept contributions to the two savings funds (Treasurer and Secretary)
8. Provide pay-outs from two savings funds (Treasurer and Secretary)
9. Agree to new Savings Plans (Treasurer, Members)
10. [Optional] Credit loan repayments to the Investment Share fund
11. [Optional] Issue new loans
12. Count the cash in the savings [and loan] funds again (Money-Counters)
13. Balance the box (Committee, Solidarity Groups)
14. Other business, if any (Chairperson)
15. Return passbooks; close the meeting (Chairperson)
4.Treasu rer
1.Chairman 3. Mon ey
5. Se creta ry
15 14 13 12 11 10
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The procedure outlined below references the example of Lulabona Savings Club, in the
fictional village of Lulabona on New Elizabeth Island. The club has 25 members, both men
and women, and it formed in January 2014. The examples for savings are drawn from the
meeting of May 26, 2014, and the examples for loans from the meeting of July 6, 2015.
The Previous Meeting
At each meeting the Treasurer of the Savings Club should up-date the ‘Cash Required by the
Club’ form for each of the next two meetings. The example in DIAGRAM 3 was prepared by
the Treasurer of Lulabona Savings Club on May 12, 2014. Seven savings plans are expected
to mature at the next two meetings, with a total value of $4,960.
DIAGRAM 3: Cash Required Form
Since the last meeting, the commitments of the Club to those with plans maturing at the next
meeting (May 26, 2014) have increased from $2,450 to $2,910. Three members have made
contributions at this meeting totaling $300, and Georgina has just opened a very short Saving
Plan that will mature at the next meeting. She deposited $160 in today. The Club also has
$2,050 in commitments for the following meeting, taking place on June 9th.
As the club is 25 kms from the nearest bank and it is only 5 months old, it has given little
thought to opening a bank account. But at the May 12th meeting cash stored in the box to
meet future Savings Plan commitments crossed $10,000, and for the first time, members
discussed it carefully. They agreed that the Chairman and Treasurer, who are traveling to
town a month from now, should open a bank account when they go.
Starting the Meeting
At the appointed time the Chairman will call the meeting to order. Take the example of the
meeting of Lulubona Savings Club occurring on May 26, 2014.
As the meeting begins, the Committee leaders must have the forms in TABLE 4 with them,
which they are responsible for up-dating or preparing during the meeting.
M# Member
Name Plan Plan $s
Now M# Member
Name Plan Plan $s
12 Florence
1,800 5 Wendy
17 Doris
350 19 Derek
20 Mary
600 21 Edith
Cash Required by the Club
Cash Required by the Club
Cash required by the Club
next meeting
Cash required by the Club
next meeting
Maturity Date
Maturity Date
Cash required by the Club
2 meetings from now
Cash required by the Club
2 meetings from now
SavingsClubPracticeGuide,SolomonIslands Page11
TABLE 4: Officer Record-Keeping Duties
Chairman To
alClubProfitForm 7
Treasurer TotalClubCash
Secretary MemberRegister
As the meeting starts Paula, the Chairman, asks all the members to take their places
according to their member number, turn off their mobile phones, and pay attention to the
proceedings without talking or making unnecessary noises.
Chairman: “Can anyone tell me – how much money is in the Current Account Fund?”
After one or two tries, a member states a figure that sparks general agreement.
Chairman: “Thank you! Can anyone tell me – how much money is in the Savings Plan Fund?”
Again, after one or two tries, a member states a figure that sparks general agreement.
Chairman: “Thank you! Could the Key-Holders please come up, and open the box!”
The Key-Holders bring their keys to the front, and open the box in front of the members.
Money-Counters take the two money pouches out of Compartment #1. First they open the
Current Account Fund, place the cash in the Money Counting Bowl, count it, and announce
the total. Then they open the Savings Plan Fund, place the cash in the Money Counting Bowl,
count it, and announce the total.
If there is agreement on these totals, the meeting continues. If there is a difference, it must be
resolved on the spot, by recounting or by identifying another source of the difference.
Chairman: “The members will now collect their passbooks.” Passbooks are always stored in
the box between meetings. During meetings they are circulated and held by the members,
and then returned to the box at the end of the meeting.
Each member comes to the front, in numerical order (or in reverse numerical order, or
starting with 6 and ending at 5, etc. ...) and collects their Savings Plan passbook from the
Treasurer, who is the Savings Plan Record-Keeper.
As each member comes up to collect her passbook, she recites one of the rules of the
Constitution in a clear voice so that the whole Club can hear. If she intends to deposit
additional cash in her Current Account, she also collects her Current Account passbook from
the Secretary, who is the Current Account Record-Keeper.
While the members are collecting their passbooks, the Chairman takes attendance, noting
members who are present in an exercise book she maintains for the purpose.
While the members are coming up to collect their passbooks, 2 members arrive late. Then,
everyone is seated again, with their passbooks in hand.
Chairman (consulting the attendance list for the previous meeting, on the previous page of
her exercise book): “Katherine and Peter, you are listed as absent from our last meeting.
SavingsClubPracticeGuide,SolomonIslands Page12
According to our Constitution and the agreement of the members of the Savings Club, you
are to pay a fine of $5 each. Mary and Greg, you were late for this meeting. According to
our Constitution and the agreement of our members, you are to pay a fine of $2 each.
Please come forward and pay your fines now.”
The members come forward and put their fines in the Fines Bowl, which is in front of the
Chairman. She makes a note in her exercise book, so she will be able to up-date the Total
Profit Form correctly at the end of the meeting.
Savings Plans
Chairman: “It is now time to build up your savings plans! You may also deposit money in your
current accounts!”
Rose, the Treasurer of the Club, announces the order. She has her exercise book open, where
she will keep a running tally of up-dates to the passbooks during the meeting.
She also has the Cash Required Forms for the next two meetings open. As members whose
plans are maturing during those meetings come up, she will up-date these forms so that the
Club knows how much money it needs to meet withdrawals.
Treasurer: “Number 6, please come up ...”
The members each come up in turn, carrying their Savings Plan passbooks and their cash
contributions. They give their cash to the Money-Counter sitting next to the Treasurer,
announcing the amount they are depositing in a clear and audible voice.
Member # 6 (Erica): “I am depositing $40 in Plan A and $60 in Plan B. The total is $100.”
DIAGRAM 4: Savings Plan Passbook, Deposits
The Money-Counter counts the cash and reports the result to Rose, the Treasurer. If there is no
dispute about the amount the Money-Counter puts the funds in the Savings Plan bowl.
Erica up-dates her passbook by writing in her new balances. If she has trouble writing, the
Treasurer may write the Plan and date, and even help her with the balance information. But
the member is expected to try to up-date her balances by herself after a few meetings. The
Treasurer may correct an entry if the arithmetic is wrong. Whether the passbook balance is
up-dated by the member or by the Treasurer, the Treasurer must sign the right-hand column
once the balance has been entered, to indicate that she verifies the accuracy of the entry.
The Treasurer is also responsible for knowing the total amount that is contributed to savings
plans by Savings Club members during the meeting, so she adds $100 to a list she is
compiling in her exercise book. Rose is neat and methodical, and has set aside a special
page in her exercise book for today’s meeting.
After signing Erica’s passbook, Rose returns it to her. Erica is very regular in her savings habits –
she deposits $40 in Plan A and $60 in Plan B every two weeks.
40 320
60 180
40 360
60 240
/ / / /
Date Deposit Balance
Date Deposit Balance
SavingsClubPracticeGuide,SolomonIslands Page13
Treasurer: “Number 7, please come up ...”
Erica returns to her seat, carrying her Savings Plan passbook. Member #7 comes up, followed
by the other members; one by one, and make their deposit transactions.
Chairman: “Would the Money-Counters please announce the total cash collected in Savings
Plans today?”
Money-Counter (Wendy): “Madam Chairman, today the Club members contributed $975 to
their Savings Plans! The total cash in the Savings Plan bowl is now $11,480.”
Chairman: “Treasurer, do your records agree with the Savings Plan count?”
Treasurer: “Yes, Madam Chairman.”
Provide Pay-Outs from Funds
Chairman: “It is now time to close mature Savings Plans.”
The Treasurer, referring to her Cash Required Form, calls up each member with a maturing
Savings Plan in turn. At this meeting, on May 26, the Treasurer first calls up Florence, who has
been saving for a solar panel.
Florence brings her passbook to the front and the Treasurer (Rose) inspects it. First Rose
checks the total balance in the Deposit pages of the passbook for the correct Plan. Florence
has been saving for this since the Club’s first meeting, so it is her ‘Plan A’. Rose notes that at
the last meeting, Florence’s balance was $1,800, and she contributed $200 at this meeting,
so her goal of saving $2,000 for a solar power unit has been achieved by her planned date.
DIAGRAM 5: Closing a Savings Plan, Deposit Section
200 200
200 400
200 600
200 800
200 1000
200 1200
200 1400
200 1600
200 1800
200 2000
/ /
Date Deposit Balance
SavingsClubPracticeGuide,SolomonIslands Page14
Rose up-dates the balance of Florence’s Plan ‘A’ in her passbook. In the next row she writes
‘A’ in the Plan column and a ‘0’ in the balance column. She then draws a line through the
whole row. This indicates that Florence’s Savings Plan ‘A’ has matured. Future savings plans of
Florence’ will use later letters in the alphabet: the letter ‘A’ should not be used again until she
has passed savings plan ‘Z’.
To avoid any risk of confusion, this column is not used again. When Florence wants to open
another Plan, Rose will start it at the top of a new column.
Rose turns to the Saving Plan pages at the start of the passbook and writes the actual pay-
out amount, corresponding to the balance accumulated in the Plan in the Deposit page,
beside the finishing date.
The Treasurer then gives the passbook to the Money-Counter (Wendy), who counts out
$2,000 in cash from the Money-Counting Bowl and gives it to Florence. Wendy returns
Florence’s passbook to her. Because Florence is receiving the cash, she counts it as well, and
satisfies herself that the count is correct. To complete the transaction, she must accept the
cash by signing her passbook in the Savings Plan section in the presence of the Treasurer and
DIAGRAM 6: Closing a Savings Plan, Plan Section
This entry effectively closes the first Savings Plan contract between the Club and Florence.
Treasurer Rose adds a note to her exercise books under withdrawals for the day: $2,000.
Today, Mary is also withdrawing from her Savings Plan account. Treasurer Rose is completing
the record-keeping to close out Mary’s Plan B, and Mary has another Plan C, that is still
DIAGRAM 7: Tracking Two Savings Plans
During the savings contributions, Mary deposits $80, using $20 to complete her Plan B, and
depositing the other $60 in Plan C. To keep the plans from getting confused, Rose tracks the
two plans in different columns of Mary’s passbook. Now that Plan ‘B’ is completed, she will
start another column when Mary opens a Plan ‘D’.
No. Target
Date Cash-Out
Solar panel
100 310
35 35
60 370
25 60
150 520
80 140
80 600
60 200
20 620
/ /
/ /
/ /
/ / / /
Date Deposit Balance
Date Deposit Balance
SavingsClubPracticeGuide,SolomonIslands Page15
Treasurer: “I’m pleased to announce that at this meeting we had we able to pay out the
highest value of Savings Plans since our Club started five months ago! Lulabona Savings Club
made payments to four members totalling $3,260!”
Chairman: “Excellent Madam Treasurer!”
Formation of New Savings Plans
Chairman: “Any member who wishes to start a new Savings Plan may now stand up and
announce their intention to the Savings Club. Remember that to maintain membership in
good standing, everyone must have at least one plan open at all times.”
Because Florence had only one plan open, and it has just been closed, she stands up.
Florence: “Beginning at the next meeting, I will be saving $600 to pay Samuel to saw timber
for our family housing project. I expect to be able to save the money over the next 5
Chairman: “Does anyone have any objection to Florence’s plan?”
DIAGRAM 8: Opening a Savings Plan
As there are no objections, Florence brings her passbook up to the Chairman. Paula consults
the calendar and enters the dates of the next meeting and the 5th meeting from the next,
and the amount committed by Florence. She then signs to acknowledge that the Savings
Club has accepted the commitment, accepts the Savings Plan contract fee and drops it in
the Fees and Fines bowl, and returns Florence’s passbook to her.
The Treasurer up-dates the Cash Required form for August 4th by adding Florence’s name to
it. Amounts will not be added until two meetings before the Plan’s maturity date. By up-
dating this form now, the Treasurer will know during the two meetings before August 4th
exactly whose plans are maturing on that date, and will be able to track the amount that
the Club must pay out to them.
DIAGRAM 9: Up-Dating a Cash Required Form
Mary also stands up to announce a new Savings Plan.
No. Target
Sawn timber
Date Cash-Out
Solar panel
M# Member
Name Plan Plan $s
14 Solomon
12 Florence
Cash Required by the Club
Maturity Date
SavingsClubPracticeGuide,SolomonIslands Page16
Mary: “Beginning at the next meeting, I will be saving $1,200 to buy a sewing machine so I
can start a tailoring business.”
Chairman: “When do you plan to be able to save up the money?”
Mary (hesitating): “I’m not sure. I haven’t looked at the calendar.”
Chairman: “How much do you think you can save every meeting, for this Plan?”
Mary (thinking): “Right now I am saving for seeds, but that finishes on July 21st. After that I can
save $100 a meeting.”
There is a pause while the chairman and the treasurer consult the calendar and enter
numbers into the treasurer’s calculator.
Treasurer: “How much will you be able to save for this up to July?”
Mary: “$40 a meeting, starting today.”
Chairman: “If you can keep to that schedule you should have $1,260 by Dec 22nd.”
Mary: “I want the sewing machine earlier than that, so I can earn money for Christmas. I
should be able to pay in about $500 in August.”
Chairman: “If you can do that, you will finish by November 10th, but to be safe, why don’t we
aim for November 24th?”
Mary: “Very good. That is what I will do.”
Chairman: “Members, you have all heard Mary’s Plan. Do you agree?”
Members: “We agree!”
Chairman: “Very well, Mary! Please bring up your passbook, your contract fee and $40, and
open your new Savings Plan!”
As Mary does this, the Treasurer opens a new Cash Required form for Nov. 24th, 2014 (so far,
no one else is scheduled to cash out on this date, so no form has yet been opened for it.) This
is Mary’s 3rd Savings Plan, so it is denoted Plan ‘C’.
As each member completes her Savings Plan transaction, the Treasurer (Rose) makes a note
in her exercise book. She also up-dates the Cash Required forms for the next two meetings
by transferring the relevant balances onto them.
When all the Savings Plan transactions for the meeting are done, the Treasurer finalizes the
daily deposits by summing them all on the Club’s calculator. The Money-Counters count the
money in the Savings Plan bowl and record the total in their exercise books.
Chairman: “Now that all the transactions are complete, can Rose, Thelma and Wendy up-
date the Club on the status of our Savings Plan accounts?”
The Money-Counters check the total cash contributed to the Savings Plan bowl during this
meeting. The Treasurer does not reveal her calculations to the Money-Counters immediately.
Instead, Rose waits patiently for them to complete their counting, and to announce their
count to the Club.
SavingsClubPracticeGuide,SolomonIslands Page17
Money-Counter (Wendy): “We have checked the cash, and we find that there are $8,220 in
the Savings Plan account””
Treasurer: “I have up-dated the Savings Plan passbooks, and agree that there are $8,220 in
the Savings Plan account.”
Chairman: “Thank you, Money-Counters and Treasurer!”
Current Savings
The procedures for Current Savings accounts are very similar to the procedures for Savings
Plan accounts, with a few differences highlighted below. If the Club has no other products, it
is possible to offer both. This is done by giving responsibility for Current Savings to the
Secretary, and conducting transactions for this account after the Savings Plan transactions
are complete, so that the Money-Counters can devote their full attention to the Current
Savings accounts.1
During the first year at Lulabona Savings Club, a Current Savings account was offered as well
as a Savings Plan account. The Club has 10 members who have signed up for these
accounts. The member balance limit set by the Club in its Constitution is $250. The Club
agreed when they debated this limit that if 20 members were to sign up, they would have to
reduce the balance limit to $200, so that no more than $4,000 is kept in the box at once. But
since they started operating the account they notice that withdrawal transactions are quite
common, and they never seem to have more than about half the maximum actually stored
in cash in the box. So they are considering eliminating this restriction.
A few transactions for May 26th, 2014 are described below.
Erica (Member #6) has her own Current Savings account and plans to make a deposit
today, so she takes her Current Account passbook and cash to the Secretary and Money-
Counter on the other side of the table, and gives her cash to the Money-Counter and her
passbook to the Secretary, announcing in a clear and audible voice “I am depositing $15 in
my Current Savings today.”
DIAGRAM 10: Up-Dating a Current Savings Passbook
The Money-Counter counts the cash, and reports the result to John, the Secretary. Since the
amount is agreed, the Money-Counter drops the cash in the Current Savings bowl.
1 To save time, an experienced Club may recruit two more Money-Counters and attempt to process both Savings Plans and
Current Accounts together. However, this should not be tried until a Club has been operating well for at least six months.
17/02/2014 30 30
20/03/2014 33 63
12/05/2014 10 73
26/05/2014 15 88
Balance Signed
Date Deposit
SavingsClubPracticeGuide,SolomonIslands Page18
Erica up-dates her passbook; entering the new balances in the correct locations. The
Secretary helps her with this, if she needs help. Secretary John checks that the entries and
the announced count agree, and signs Erica’s passbook to signify agreement. He also makes
a note of the deposit amount in his exercise book, as he must announce the day’s deposits
and withdrawals in the Current Account to all the Club members at the end of the meeting.
John returns Erica’s Current Savings passbook, and Erica returns to her seat, taking the
passbook with her. The other members come up, one by one, and make their deposit
Florence is a very active member, and she also has a Current Account. Her third-born
daughter, 12 years old, has been infected with malaria, and she needs $200 for medication.
Fortunately, she has enough money in her Current Account already, so she goes up to John
(the Secretary) to withdraw the cash. Several other members are already waiting in front of
John with the Current Account passbooks, waiting to make withdrawals. Florence waits her
turn behind them.
DIAGRAM 11: Withdrawing Funds from Current Savings
John enters the withdrawal transaction in Florence’s passbook, and hands the passbook to
the Money-Counter, Thelma, who counts out $200 from the Money-Counting Bowl and gives
it to Florence, along with her passbook. John also up-dates the running tally of transactions in
the current account for the day, in his exercise book.
Once all deposits and withdrawals in the Current Accounts are completed, the Chairman
says: “Secretary, would you please announce the total collected in Current Accounts today,
according to your records?”
Secretary: “Madam Chairman, according to my records, today the Club members
contributed $421 to their Current Savings accounts. They withdrew $551, and I calculate that
the total cash in the Current Savings account bowl should now be $1,326.”
Chairman: “Would the Money-Counters please announce the total cash collected in Current
Accounts today?”
Money-Counter (Thelma): “Madam Chairman, we have counted the money in the Current
Savings account bowl. There are $1,326 there.”
Closing the Records for the Meeting
At the end of the meeting, the Committee members must finalize several records.
03/02/2014 65 65
03/03/2014 38 103
28/04/2014 70 173
12/05/2014 27 200
26/05/2014 200 0
Balance Signed
Date Deposit
SavingsClubPracticeGuide,SolomonIslands Page19
the Treasurer completes the Total Club Cash form, and stores it in Compartment #1;
the Secretary completes the Current Savings form, and stores it in Compartment #1;
the Chairman completes the Total Club Profit form, and stores it in Compartment #4.
The Treasurer prepares the cash summary by adding the total cash in the three bowls
together, based on the information provided by the Money-Counters. The Chairman (Paula)
completes the Total Club Profit form for the meeting. The Club has only had one significant
cost: buying the cashbox and equipment. This was a cost shared by all the members equally
during a meeting; the Club did not record it.
DIAGRAM 12: Completed Total Club Cash Form, Lulabona SC, May 26, 2014
DIAGRAM 13: Completed Savings Plan Form, Lulabona SC, May 26, 2014
Cash in Box Total
Account #1 Account #2
Balance forward, previous record
17 /03 / 14
7,403 0 0
31 /03 / 14
14 /04 / 14
28 /04 / 14
12 /05 / 14
26 /05 / 14
Cash in Bank
Total Club Cash
Date New Balanc
Balance forward, previous record
17 /03 / 14
1,298 2,300
31 /03 / 14
2,014 726
14 /04 / 14
711 1,509
28 /04 / 14
2,270 562
12 /05 / 14
3,230 1,145
26 /05 / 14
1,047 3,260
/ / =
s Plan Form
Deposits Withdrawals
SavingsClubPracticeGuide,SolomonIslands Page20
DIAGRAM 14: Completed Current Savings Form, Lulabona SC, May 26, 2014
DIAGRAM 15: Completed Total Profit Form, Lulabona SC, May 26, 2014
The Club has incurred small costs from time to time but usually deals with them the same
way, by taking a small collection from the members during the meeting in which the cost
comes up. For example, last month the Club sent a delegate to a Club in another village to
learn how to start an Investment Savings account, and the members put in $1 each to cover
the transportation costs.
Balancing: Savings Only
Balancing is the ‘hygiene’ of any financial organization, including a savings club: failure to
do it will probably not lead to noticeable problems in the next few weeks – but sooner or
later it will certainly lead to major problems, followed by disputes and inevitable collapse.
Once record-keeping problems have accumulated for months or years without correction, it
New Balance
Balance forward, previous record
17 /03 / 14
31 /03 / 14
14 /04 / 14
28 /04 / 14
12 /05 / 14
26 /05 / 14
/ / =
Total Current Savings
Deposits Withdrawals
Date Total
Balance forward, previous record
17 /03 / 14
31 /03 / 14
14 /04 / 14 =
28 /04 / 14 =
12 /05 / 14 =
26 /05 / 14 =
/ / =
Total Club Profi
Interest Other
Revenue Expenses
becomes extremely difficult to find their source. They then become virtually impossible to
correct. The easiest way to avoid this is to balance regularly. This identifies and corrects small
problems before they can grow big. Even temporary groups balance; they do it by
The organization of the box is based on the model balance sheet. For a Club that doesn’t
lend, the balancing equation looks this.
Later, if the Club begins to lend money, the balancing equation changes to this.
All groups should start with the simpler Standard System 1.
Club ‘Sources and Uses of Money’
When a Savings Club balances, it brings information about the Club’s accounts together
from 3 separate sources, compares it, and resolves any outstanding contradictions. These
three sources are:
the cash count conducted by the Money Counters,
the information recorded in the member passbooks, and
the running tallies kept by the Committee members in their exercise books.
Of these, the first two are the most important, but the third can sometimes help in resolving
outstanding problems.
Tallying Passbook Entries
After its transactions are completed on May 26, 2014, Lulabona Savings Club balances. At
this point balancing at Lulabona Savings Club is very simple. It is a new Club that has been
operating for 10 meetings. It is not lending out money, and does not have a bank account
Date of Meeting Signature
1Cash A What We Owe D
Box Sav ings
Bank Borrowings
2Loans B What We Own E
To me mbe rs Pr ofi t up to l as t meet ing
[Doubtful loans] Profit this meeting
Sources and Uses of Club Money
/ /
The Savings Club Standard System 1
cash = savings + equity
The Savings Club Standard System 2
cash + loans = savings + equity
SavingsClubPracticeGuide,SolomonIslands Page22
The leaders of the Club’s solidarity groups are asked to collect together the passbooks from
their members. If any member of the Club is absent, their passbook will still be in the cash
box. At this time, it is given to the leader of the absent member’s group.
Groups leaders are asked to provide totals for the following:
total deposit balances for all Savings Plans held by their group members,
total deposit balances for all Current Accounts held by their group members, and
total fees and penalties paid by their group members during this meeting.
The last of these – total fees and penalties – does not appear in the passbooks, but the
members should be able to remember these figures.
The solidarity group leaders may have the best skills in their groups in adding and calculating,
and they will get help from other members of their groups. They may use calculators if they
have them. Since only five numbers have to be added together in each case, a group
without a calculator should be able to perform the task in reasonable time without one.
For example, on this occasion, after adding the figures in his exercise book, the leader of
Group 2 reports: “We have completed our report for Group 2. Our group has $1,450 in
Savings Plans and $281 in Current Savings. Today we paid $5 in fees and fines.”
As everyone becomes more accustomed to their roles, it is reasonable for the Chairman to
expect all solidarity groups to be ready to report as soon as the balancing session starts. But
initially, it may take 5-10 minutes for the groups to get ready.
In an exercise book, the Chairman and
the Treasurer prepare a total for the
Club as a whole. The totals are $8,220
for Savings Plans balances, $1,326 for
Current Savings balances, and $86 for
Fee and Fine payments (including $14
collected and reported by the groups
These totals tally with the totals
prepared earlier by the Treasurer in the
Savings Plan form, by the Secretary in
the Current Savings form, and by the Chairman in the Total Club profit form.
DIAGRAM 17: Completed ‘Sources and Uses of Money’ Form
Date of Meeting Signature
1Cash A
What We Owe D
Sav ing s
Bank Borrowings
2Loans B
What We Own E
To me mber s Pr ofit up to l ast me e tin g
[Doubtful loans] Profit this meeting
Sources and Uses of Club Money
$0 $0
Savings Plans
Current Savings Fees and Fines
1 1,036 86 2
2 1,450 281 5
3 2,552 - 2
4 1,420 547 -
5 1,762 412 5
8,220 1,326 14
Previous fees and fines . . . . 72
Total fees and fines 86
SavingsClubPracticeGuide,SolomonIslands Page23
Chairman: “I am pleased to announce that the box is balanced! Is there any other business
that the members wish to discuss during this meeting?”
Based on the information collected, the Secretary is able to prepare a balance sheet for the
meeting date (see Diagram 17). Once completed this is stored in Compartment 4.
The Club closes the meeting with discussion of other business, including the up-coming
marriage of a member’s son.
If It Doesn’t Balance
If for any reason the figures don’t balance a further check is required. While the solidarity
group leaders check their numbers again with the member passbooks, the Chairman
removes the divider from the cashbox, and places it on the table in front of the Committee.
He invites all the members to come up and observe the proceedings.
The Committee members take their records and place them, along with the cash, around
the divider, according to the lay-out in TABLE 5. The cash and documents for each
Compartment are placed in or beside the Compartment, so that all the members can see
them and can tell which compartment they belong in.
TABLE 5: Organization of the Cash Box, System 1
Organization oftheCashBox (SavingsOnly)
Once the solidarity groups have checked their counts, if there is still a difference in the
counts, the passbooks are added to the balancing box. The Committee members, with the
help of the solidarity group leaders, go through the passbooks one by one and confirm the
totals in each account. If there are doubts about the cash count, it is recounted.
If the error is still not found, the teams working in each Compartment switch places, and go
through the process again.
When a record-keeper has made an error in the records, it can be hard for that person to
notice. International experience clearly shows that a second or third person is more likely to
find errors, and find them more quickly. No one should ever be made to feel badly because
they made an accidental error in the records, or because they were unable to find it later.
Common entry errors in records include
switching numbers (for example, entering “3,800” instead of “8,300”)
omitting or moving a placeholder (“120.00” instead of “1200.00”)
SavingsClubPracticeGuide,SolomonIslands Page24
In the highly unlikely event that balancing cannot be completed during the meeting, the
Club should suspend all savings in-flows and new loan disbursements until a satisfactory
balance has been achieved. If necessary external support, such as from an experienced
leader of another Club, from a local school teacher or similar professional, may be sought.
Closing the Meeting
Once the Club has completed its transactions and balanced, the Chairman closes the
Chairman: “We plan to have our next meeting on Monday June 9th at our usual time. Please
bring up your passbooks if you have not already done so.”
It is very important that all the passbooks are stored in the box between each meeting.
Before the meeting closes the Money-Counters should confirm that all the passbooks are in
the box. If any are missing, they announce it to the whole Club, and the location of any
missing passbooks is identified and they are returned to the box.
If the final balances for the two Club accounts (Savings Plan and Current Savings) have not
been announced to all their members for their recall at the next meeting, the Chairman does
this now.
Cash Management
A Savings Club should always have sufficient cash in its
box to pay out at all Savings Plan contracts at each of
the following two meetings, even if no other money were
to come in at all. Because many Clubs meet every two
weeks, this is called the ‘one month test’. It answers the
question: “will the Club have enough cash on hand to
keep its savings plan promises for at least the next
month?” For Savings Clubs with reasonable access to a
bank branch or agent, cash amounts that exceed this may be stored there.
If the bank or agent is far away, and visits are likely to be less often than once in three
months, the Club might keep more (for example, enough cash for three meetings).
Furthermore, if the Club meets every week, it may wish to keep enough cash on hand to
meet all withdrawals for three meetings, since trips to the bank might otherwise become too
frequent and costly.
If the Club has no bank account, is balancing regularly and has not yet started lending
money, there is no reason why it should ever fail this test. However, once it opens a bank
account it must check its cash position at each meeting. If the Club’s cash cannot meet the
‘one month’ test, then representatives should visit the bank and build up the Club’s cash on
hand so that they will pass this test at their next meeting.
Lending Procedures and Practices
The Lending Decision
The decision to lend is an important one. Lending can increase the profits of the Club, but it
involves considerably greater work (in managing loans), and considerably greater risk,
especially if members’ savings are involved. The Club members may prefer to simply manage
savings plans, and deliver to every member the ability to achieve their savings plans, and the
confidence that they will receive their money back when their plans mature.
Whether a Club decides to lend or not, it should operate without loans for its first six to twelve
months. This is enough time for the Club leadership to learn how to manage savings plans
Note: Savingsplancontractsare
SavingsClubPracticeGuide,SolomonIslands Page25
and current accounts, and begin to earn trust among Club members that it is capable of
protecting of their savings.
If the Club decides to go ahead with lending, there are several related decisions it must
1. Where will the money come from?
It is recommended that the Club create a separate loan pool, independent of Savings
Plans or Current Accounts. Some Clubs may do this by having fundraising events in their
villages, and using the funds they raise to lend to members. Other Clubs may issue an
“Investment Share Offering” to their members. In this system, each member will agree to
contribute a fixed amount (for example $100 or $500) to open an individual term share
account for themselves that will run for 6-12 months. The members must be given time to
raise this money, and may choose to open a Savings Plan to do it.
For example, Lulabona Savings Club might agree to form a 6-month loan pool by asking
all members to purchase 1-5 shares at $100 a share. Three months later, the 25 members
make their purchases and together buy 50 shares ($5,000). This money is then lent out.
The borrowers must be members of the Club, and the members agree on certain
conditions: no one can borrow more than 1.5X their personal shares; all loans must be
paid back within 3 months; the interest rate is 10% flat for the 3 month period.
At the end of the 6 months the loan pool is closed and the funds returned to the
members. The profit from the loan pool (net of any losses from non-repayment) is shared
between the members in proportion to the shares they own. Members are then free to
start another loan pool, if they wish. The length of the term, the length of loans, the
maximum loan size and the interest may be the same or different.
2. Should loans be restricted to business purposes, or also be for consumption, emergencies
It is recommended that loans be restricted to business purposes only (that is, loans should
only be granted to members who have a reasonable plan for using the money to earn
more money). If the Club is providing quality savings services (savings plans and perhaps
also current accounts) members are well positioned to save for consumption purposes.
For members and their households, saving for consumption is always better than
borrowing for consumption.
Emergency situations can be covered either by a social fund or by the members
individually through their current accounts. Social funds may be raised through
fundraisers, and set aside for emergencies. In unusual emergencies the Club may also
take up a special collection from the members to supplement other sources of funds.
3. How long should loans be, and how should they be priced?
It is recommended to start by restricting the term of the loan pool to 6 months. This allows
the Club to gain experience with lending, with determining who is reliable and who is not,
etc. It is further recommended that the Club restrict the term of all loans to a maximum of
3 months, and to charge a single fixed rate for the whole period (e.g. 5%, 10%) that is
approved at a general meeting of the Club and that applies to all loans issued from the
4. How should loans be approved?
SavingsClubPracticeGuide,SolomonIslands Page26
It is recommended that all members who wish to borrow must stand before the
membership during a regular meeting and clearly state the amount that they wish to
borrow, their purpose, and when they expect to be able to repay the money. The
Chairman should open up the request to a discussion, in which any member is entitled to
ask questions and/or express an opinion.
The fact that an individual is a member does not entitle them to a loan from the Club. It
entitles them to a fair hearing, fair consideration, and fair treatment from the Club. The
Club may turn down any applicant for a loan, or lend the applicant a smaller amount
than they request, or postpone their loan application to a later date. Members who have
borrowed in the past and been late in repaying for no evident reason should under no
circumstances be permitted to borrow.
The Club should always specify a reason for their decision, and if possible, a way that the
applicant can apply successfully in future. “We would like to lend to you, but we doubt
you could repay us because we see that you spend a lot of money on alcohol and betel
nut. If you stopped doing that, we would lend you the money that you ask for.”
5. How large should loans be, and how much collateral should a borrower put up?
The experience of Savings Club practitioners in the Solomon Islands is that Savings Club
loans must be 100% collateralized by the savings of the borrower. Historically, Clubs that
have failed have to come to grief after ignoring this rule, and it is observed that
borrowers do not repay portions of loans that are unsecured.
Unsecured loans require experience and skills that are not readily found in villages, but
this does not mean it is impossible. Lending over savings requires the right conditions.
Practitioners can serve villagers well by showing them when the right conditions exist, and
by helping them to achieve the right conditions when they don’t.
If a Savings Club won’t lend over savings, it should simply deliver Savings Plans. Savings
Club lending, as it exists in the Solomon Islands today, is essentially saving, not lending. A
member saves up enough money to borrow it back, pays interest on the loan, and then
gets a rebate of the interest from the Club at the end of the year. The effective result is a
zero-interest savings account, except that the member lends the Club some interest
during the year, and has to scramble to come up with it.
The Savings Plan system designed here addresses the need for a simpler and more
flexible approach to savings.
For Savings Clubs that will risk lending above savings, it is best to take small steps first. The
international standard for Savings Groups is to lend members 3 X their personal savings.
No other collateral is generally taken, though some Savings Groups do take other
collateral as well, like motorbikes or farming equipment. But in the Solomon Islands, with
no experience to base such a target on, it is better to start by lending at 1.5 X personal
savings. If that works, move to 2 X personal savings, and then to 3 X. Do not hesitate to
repossess savings – and quickly – if the member is willfully refusing to repay. A member
who is genuinely struggling to repay, but is unable to due to circumstances that were not
foreseen when the money was borrowed was should be treated firmly, but with
sympathy. The Club should help the member with time, but may also charge additional
interest if the period is several months.
The process of escalating from 1X savings to 3X savings may take several years. It need
not be rushed. The Club should feel that they are in charge of the process, and are not
losing control of it.
SavingsClubPracticeGuide,SolomonIslands Page27
The biggest challenge in lending, is knowing who to lend to. The fact that someone is a
member should not cause the Club to say ‘yes’ without further reflection. The fact that a
person is a neighbour or a wantok should not cause the Club to say ‘yes’ either. Trust in a
person’s character is not the same as trust in their ability or willingness to manage or
repay money. The best way to determine if someone can be trusted to borrow is to look
at their savings record, and the Savings Plan system gives Clubs the capacity to do this.
Reliable savers are far more likely to be reliable borrowers.
Everyone thinks that they need and deserve money, but some people are far better to
receive it as a gift, as the burden of a loan will be beyond their capacity to manage.
Some people are especially dangerous because they are powerful, and their demand
for money can become a great burden on the Club. This is why all transactions should be
processed at a full meeting of members, and why it is essential that the Club is important
to the members and they are ready to protect it. The first of the great banks of
Renaissance Europe – the Medici Bank of Milan, Italy – failed because it began to lend to
princes. These loans seemed tempting because they were big and seemed like an easy
profit. But if princes don’t repay, what recourse is there?
Of course, it is also essential to follow up on loans that are not being repaid. Villages are
very small, and if one borrower is clearly getting away with non-repayment, other
borrowers will inevitably ask why they should repay if their neighbour doesn’t have to?
Repayment is a burden, and it is up the Club to ensure that it is shared equally, without
fear or favour. Savings Clubs should know every source of leverage and pressure that
they can bring to bear on delinquent members before lending to them. While making the
lending decision, they should be asking themselves what they will do in the event of non-
repayment. And ultimately they should never forget that it is their money, and they don’t
have to lend it at all.
Operating a Loan Fund
By integrating a temporary lending cycle into a permanent Savings Club, the Club members
are able to increase their savings options and flexibility. At the end of the lending cycle the
profit from the cycle is shared among the members proportionate to the number of shares
they held as investments. No one is permitted to purchase shares in a loan fund after its
operations have started.
Setting up the Loan Fund
Lulabona Savings Club does not begin lending immediately. However, after operating for a
year, it decides to offer an Investment Share product and a six-month Loan Fund beginning
in March, 2015. The Club members discuss this at their annual meeting in January, 2015. At
that meeting they consider ending their Current Savings account. But the 12 members who
use the Account use it actively and argue that they would rather not have a Loan Fund if
they have to choose between the two. Meeting processes are much faster than last year,
and the members finally agree that the whole meeting can still be conducted in under one
hour, even if the Current Account continues to operate.
Each of the 25 members agree to save between 1 and 5 Investment Shares, worth $100
each, between Jan 19 and March 16. On March 16 the Loan Fund will make its first loans.
DIAGRAM 18: A Savings Plan for Investment Shares
No. Target
Investment Shares
Date Cash-Out
SavingsClubPracticeGuide,SolomonIslands Page28
The Loan Fund runs until September 28th, when it will wind up and distribute its shares, plus
earned interest, back to its members. In total, 55 shares are fully paid up by March 16, raising
$5,500. Partially paid shares are returned to the members in cash. When Florence has
completed saving $500 in her Savings Plan on March 16, she signs for receipt of the cash,
and gives it to the Club Secretary (John), who issues her 5 shares of the offering for a total
value of $500.
The shares are issued on the Investment Shares page of the passbook (see below). The
Secretary labels this Loan Fund ‘A’. Each loan fund in future must have its own unique
alphabetic reference. This will be the only Loan Fund labelled ‘A’ until ‘Z’ has been used
DIAGRAM 19: Opening an Investment Share Plan
The Club members agree that only members can borrow from the Loan Fund, and that all
cash borrowed must be returned no later than the final Loan Fund distribution date, on
September 28th. The members also agree to charge a flat 10% for a loan with a maximum
duration of 3 months. This charge will be the same for all members; there will be no
A member can borrow up to 1.5 X her shares if she has a proven track record of setting
Savings Plans and successfully achieving her Plan targets.
If the 3 month deadline for repayment is missed, the Club will charge a $25 penalty for late
repayment to the Loan Fund. If the loan is not repaid by the second week of the fourth
month, the Club charges an additional 10% on the initial loan amount. (For example, if the
member contributed $500 in shares and borrowed $750, the additional charge would be
$75.) Because the interest rate is flat, the charge is $75 in this case even if the amount
outstanding is now only $100 or $50. Any member who has not repaid within 6 months of the
final due date is automatically expelled from the Club.
Loan Repayments
At Lulabona Savings Club’s regular meeting on July 6, 2015 there are loans outstanding, so
loan transactions are included in the agenda for the meeting.
Before the box is opened, the Chairperson calls on members to recall the balance in each of
Lulabona’s three funds (Savings Plan, Current Saving and Loan Fund). After the box is
opened, the balance in each of the funds is checked by the Money-Counters and
announced to the Club members. The Current Saving and Loan Fund pouches, with their
cash, are then returned to the box and the box is closed (but not locked) until the Savings
Plan transactions are completed. When the time comes for repayments, the Money-
Counters take the loan pouch from Compartment #2 and empty the cash into the money-
counting bowl.
Chairman: “Can anyone remind us how much money is in the Loan Fund today?”
Member: “There are $1,350!”
No. Shares
Purchase 16/03/15
Sale 28/09/15
Purchase / /
Sale / /
Date Investment
SavingsClubPracticeGuide,SolomonIslands Page29
Chairman: “Thank you! It is now time for members who have borrowed from the Club to
make repayments.”
Elizabeth comes to the front and announces “I am paying off my full loan amount today.”
She gives her cash to the Money-Counters, who count it. Elizabeth up-dates her passbook by
herself, and hands it to John to check and for his signature. The Club Secretary reviews
Elizabeth’s passbook and checks the cash count with the Money-Counters. Once he is
satisfied that the count is correct, he signs Elizabeth’s passbook and returns it to her.
DIAGRAM 20: Closing a Loan
Solomon comes up, without being asked, to pay off a loan that he owes to the Club. While
the members are repaying and the Money-Counters are counting the cash, the Club’s
Secretary reviews the Loan Payment Due form, kept in Compartment 2, to determine if any
borrower who is due to pay at this meeting, is not doing so. Each time a member borrows
from the Loan Fund, the Secretary adds their name and the amount to the list of borrowers
repaying at this meeting. If there are none, he opens as new form. These forms are kept, in
order by meeting date, in Compartment #2 with the Loan Fund cash.
DIAGRAM 21: Tracking Late Borrowers
Secretary: “Paul, are you able to pay this meeting? You owe $100 to avoid a penalty for late
Paul (standing up): “My apologies to all. I will pay at the next meeting.”
13/0 4/ 2015
750 75 825
11/05/ 2015
150 675
08/ 06/20 15
200 475
475 0
Date Loan Interest Repayment Balance
M# $s Due $s Paid
Solomon +
Paul +
Loan Due Date
Loan Payments Due
Member Name
Cash due at this
SavingsClubPracticeGuide,SolomonIslands Page30
Chairman: “Paul, you have promised this to every member of the Club. Since you are usually
a reliable repayer, the Club will give you another meeting. But you will incur another interest
charge if you fail to pay next time.”
The Secretary up-dates the Loan Payments Due form, and adds Paul’s name, and his $100
outstanding, to the Loan Payments Due form for the following meeting.
Issuing New Loans
Chairman: “Secretary, please tell the Club how much money is available to lend from the
Loan Fund?”
DIAGRAM 22: Up-Dating the Loan Payment Due Form
Secretary: “We began this meeting with $1,350 in the Loan Fund, and $725 have been repaid
today. We now have $2,075 available to lend.”
Chairman: “If anyone is interested in borrowing, please stand now and make your case to
the Club.”
Doris: “I would like to borrow $450 to buy a return ticket to Honiara, where I will sell taro and
eggplants and green peppers from my garden. I can repay the Club in August.”
Chairman: “Thank you, Doris. Are there any other requests for loans?”
There is a pause to allow people to speak.
Chairman: “As no one else has a request, let us deal with Doris’ application. What is the value
of your shares in the Loan Fund, Doris?”
Doris: “I have three shares worth $300.”
Chairman: “And how many Savings Plans have you completed so far?”
Doris: “So far, I have saved $1,850 in four plans, and have completed three of them already.
In each case I have reached my Savings Plan targets”
Chairman: “Does everyone agree to lend Doris $450 until July?”
“Very well. Doris, please bring your passbook up and make arrangements with John.”
M# $s Due $s Paid
$475 $475
14 Solomon +
16 Paul +
Loan Due Date
Loan Payments Due
Member Name
Cash due at this
$825 $725
Doris brings her passbook to John, who enters $450 on the loan page as well as a $45 interest
charge and a balance of $495 owing. The Money-Counters count out $450 and hand it to
Doris. As Doris is receiving the money, she must sign her passbook for the accuracy of the
amount. She checks the count carefully and when she is satisfied signs her passbook in front
of the Secretary, and then returns to her place.
Once all loan transactions for the meeting are completed, the Money-Counters count the
total cash in the Loan Fund and announce the result to the Club.
Issuing a New Loan
Money-Counter: “The Loan Fund now has $1,625 in cash available.”
The Secretary checks the number, making notes in his exercise book:
Chairman: “Secretary, do your records agree?”
Secretary: “Yes!”
Chairman: “Everyone, the Loan Fund now has $1,625 in cash. Please remember it!”
Closing a Loan Fund
On September 28, 2015, Lulabona Savings Club closes its loan fund on schedule. Just as
Savings Plans should never be extended, neither should Investment Savings accounts or Loan
Funds. (The one exception to this is the occurrence of a disaster that affects all the members,
such as a flood or a very serious crop failure.) The Treasurer and Secretary visited the bank in
early September and returned with the $1,000 that had been stored there.
At the closing meeting, two members have overdue amounts, totaling $400. Peter borrows
his outstanding of $150 from a relative and barely manages to settle his account before the
meeting ends.
Sarah negotiates with the Club that she will change the goal of her current Savings Plan,
which has $180 in it, into repayment of her outstanding amount of $250. She will make the
repayment at the next Club meeting.
Chairman: “Money-Counters, please count the cash in the Loan Fund pouch!”
Money-Counters: “We have counted the money in the Loan Fund, and it contains $5,950!”
Chairman: “Secretary, do you agree with this count?”
450 45 495
Date Loan Interest Repayment Balance
$1,350 + $725 - $450 = $1,62
[opening balance] [loan repayments] [new loans] [closing balance]
SavingsClubPracticeGuide,SolomonIslands Page32
Secretary: “Based on my tallies during the meetings since the Fund opened, this count is
correct. The total will be $6,200 when Sarah is completed her repayment.”
Chairman: “Treasurer, how much money will each member receive from their Investment
Treasurer: “Every member will receive $108 per share today, and another $4 per share at the
next meeting.” The Treasurer rounds the figures down, so that finding the right change will not
be a problem. The surplus funds, which will usually be a small rounding error, are placed in
the profit pouch in compartment #4 until the next annual distribution.
Chairman: “Members, please bring your passbooks, put them on the mat in numerical order
starting on the left, and then return to your places. Please do not pick them up or handle
them again until the Committee members have completed their work.”
The members bring their passbooks together and lay them out, in numerical order, on the
mat. The Committee members pick up each passbook and check the number of shares
owned by the member in the Investment Savings page of the passbook. They then insert the
correct sum of cash at that page, close the book and return it to its place in the line.
Chairman: “Thank you! Treasurer, could you please up-date the Club on the results.”
Treasurer: “Yes. Our 25 members had a total of 55 shares, and we distributed $5,940 to the 25
passbooks. We still have $10 in cash.” The Treasurer puts the $10 in the Fees and Fines bowl in
front of the Chairman.
Balancing: Savings and Loans
The balance example in TABLE 6 is for Lulabona Savings Club on July 6, 2015. The Club now
has a bank account, opened at a bank branch about 25 kms away by boat.
TABLE 6: Exemplary Contents of a Cash Box, Savings and Loan Clubs
At this stage the solidarity groups all know how to add the figures, and substantially complete
this task at the same time that the transactions are completed. A couple of groups still need
SavingsClubPracticeGuide,SolomonIslands Page33
to borrow a calculator from the Committee to finish their work, and this adds a few minutes
to the process.
The totals given by the groups -- $9,429 for Savings Plans balances, $1,851 for Current Savings
balances, and $15 for profit this meeting – tally with the totals prepared earlier by the
Treasurer in the Savings Plan ledger, the Secretary in the Current Savings form, and the
Chairman in the Total Club Profit form.
Compartment #1 (Cash)
In preparing the Cash Required form for July 6, 2015, the Treasurer reports that cash in the
box is close to failing the two-meeting test, as $4,220 will be required in the next two
meetings, and only $4,650 are available (see the Total Club Cash form Rose prepared,
below). The ups and downs in the total Savings Plans are quite irregular, due to the many
different plans that members have.
DIAGRAM 24: Completed Total Cash Form
For this reasons, the Treasurer requests that the Club redeem $2,000 in total to address
Savings Plan requirements for the coming meetings. The Chairman and Secretary, who are
traveling to town next week, make a note of the requirement.
Compartment #2 (Loans)
At the last meeting, which was the mid-point of the Loan Fund’s operation, the Club
conducted a special balance of Compartment 2. After the final cash count for the Loan
Fund for the meeting had been counted and confirmed, the Chairman asked all the
members who have loans, or have paid loans off during the cycle, to present their passbooks
to the Committee.
Since the Secretary normally makes the entries, the Treasurer conducted the balance. This
involved comparing the current balances in all the passbooks of affected members (7 in this
case) with the records in the Payment Due forms, to determine if the total balance
outstanding with members (including interest owing) was the same in both cases.
While there was one small problem with a passbook that had not been properly up-dated,
when this was resolved the compartment balanced, and the Club closed its meeting.
Compartment #3 (Savings)
The Club now has 3 pouches holding cash: one for Savings Plans, one for Current Savings
and a third for Investment Shares.
Compartment #4 (Profit)
The Club conducted a distribution in December, in which $275 were shared with the 25
members ($11 each). The purpose of the distribution was to clear the funds off the books. The
Cash in Box Total
Account #1 Account #2
Balance forward, previous record
25 /05 / 15
5,857 7,000 0
08 /06 / 15
22 /06 / 15
06 /07 / 15
/ / =
Total Club Cash
Cash in Bank
SavingsClubPracticeGuide,SolomonIslands Page34
Club has agreed that the amounts involved – mostly fines for late attendance and missed
meetings – are too small to keep detailed records. However they agree to keep a running
balance so that the Secretary can balance the total cash. Today the Chairman counts the
money and finds $245 in the Pouch #4. Fees and fines totalled $15 during the meeting, and
at the last meeting the contents were $230.
Balance Sheet
Rose prepares the balance sheet for the meeting, which shows that the Club is in balance
except for the immediate delinquency of $100 from Paul. Since this is not yet serious and this
statement is not for reporting purposes, she leaves the imbalance as it is, and signs and dates
the balance sheet.
DIAGRAM 25: Completed Balance Sheet (Interim)
Chairman: “I am pleased to announce that the box is balanced! Is there any other business
that the members wish to discuss during this meeting?”
Annual Election Meeting (AEM)
The Annual Election Meeting will take place at a fixed time each year – for example the first
week of November, or the last week of March, etc. At least two-thirds of the members must
attend the Annual Election Meeting, or it must be rescheduled to another date.
The AEM includes three agenda items that do not take place in other Club meetings.
1. The annual election of Club office-holders.
2. The distribution of the dividend.
3. The annual feast.
Annual Election of Officers
Regular elections are very important for the success of a Savings Club, for the sound
management of Club loans, for the maintenance of good records and especially for the
safety of the savings, all of which are primarily the responsibility of the Club’s office-holders.
A regular rotation of officers helps ensure that many people have the capabilities requires to
run the Club. This is good for each of those who get the opportunity to serve, and it is also
good for the Club as a whole because if one capable leader migrates to Honiara, there will
be others capable of taking her place. Regular rotation also helps to keep trust in the Club
high among members. It does not prevent energetic and capable people from continuing
to serve, as there are several different roles available. But it does ensure that individual office-
Date of Meeting Signature
1Cash A
What We Owe D
Sav ing s
2Loans B
What We Own E
To me mb e r s
Profit up to last meeting
[Doubtful loans]
Profit this meeting
Sources and Uses of Club Money
SavingsClubPracticeGuide,SolomonIslands Page35
holders do not become bored or complacent in their work, or begin to feel too burdened by
it, or unable to step away.
A member may be elected to the same position no more than three (3) times, and each
term can last no longer than one (1) year. After three years a member may continue to serve
on the management committee, but must be elected to a different role.
TABLE 7: Election Methods
ShowofHands SecretBallot
CLUBROLE Money‐Counter
To conduct election by secret ballot, the Club uses the money counting bowls, which are
emptied and serve as the ballot box. Each candidate for the offices of chairperson, treasurer
and secretary shall be assigned a number. Each member will write the number of the
candidate they support on a slip of paper, fold the slip of paper so that the number cannot
be seen by other members, and drop it in balloting bowl. A team of 3 members who are not
on the management committee and are not running for office will then bring the ballots into
the centre of the assembled group of members, lay them out on the ground or on a table
where everyone can see them; count them, and announce the number of the successful
Distribution of Dividends
Profits are distributed according to the timing and methods of distribution noted in TABLE 8.
The permanent equity in a successful savings club is not composed of cash but of member
confidence. For this reason, every member is entitled to an equal distribution of all
accumulated funds from Savings Plan fees and fines, after adjusting for any club expenses,
at least once a year.
TABLE 8: Club Distribution of Profits
ProfitAccountTiming ModeofDistribution
The lending operation is a separate project of the club, in that capital is raised separately,
and interest accounted for separately. All interest from the lending operation should be
distributed proportionate to the number of shares owned by each member in the loan pool.
Like member savings and loans, all equity has a pre-agreed and pre-scheduled completion
and exit date. No money stays in the Club permanently, as permanent capital is always at
greater risk than capital with a clear exit date.
SavingsClubPracticeGuide,SolomonIslands Page36
Action Audits
An action audit is traditionally viewed as a routine end-of-cycle procedure for temporary
savings groups, such as informal ASCAs or their engineered cousins (VSLA, SILC, etc.). But in
fact it should be viewed as an administrative option that is open to any group, at any time.
Action audits can offer a path out of many difficult problems, and should especially be
considered if the group is locked in an unsolvable dispute, or when group operations are
effectively dormant. NGOs that are incubating groups can also order them to conduct
action audits, for example when they find that money is missing, or feel that the group’s
management are corrupt.
An action audit is the informal sector’s equivalent of an ordinary audit. An ordinary audit of
any financial institution requires components that are rarely found in villages: such as records
prepared and stored according to standard protocols, financial statements with adjusting
entries, and certified auditors. The purpose of an audit is to assure the users of the records,
such as members of savings clubs who hold accounts there, that the records are accurate
and complete. In other words, an audit assures people who trust the organization with their
money that their trust is not being abused.
An action audit allows the members of a savings club to accomplish the same result (and
does so, if anything, with greater certainty). It answers every member’s unspoken question –
“where is my money?” -- by giving it to them. Informal financial groups, including ASCAs and
ROSCAs, which can be found in most of the world’s countries in one form or another, have
worked on this principle for centuries.2 They distribute their assets frequently; usually at the
end of an operating cycle of less than 2 years.
The Action Audit Process
At any ordinary meeting, the membership may set a date for an action audit: preferably
about 1 month away, and no more than 2 months away. This is far enough in the future to
permit everyone who is borrowing to make reasonable arrangements to repay. It is also close
enough to offer everyone hope for an expedient resolution, and perhaps even for a fresh
If the members decide to perform an action audit, they must elect a chairman for the action
audit meeting. This may, or may not, be their ordinary chairman. This individual need not
even be a member of the Club. For example, s/he may be a member of another Club in the
The important consideration is that the person be accepted and trusted by the whole
membership as the best person to oversee the process. The process includes
ensuring that the assessment of who still has loans outstanding, and how large those
loans are, is accurate and fair;
ensuring that the assessment of who has claims on the savings of the Club, and how
large those claims are, is accurate and fair;
presiding over a public process to resolve those claims;
acting as trustee for payments that reach the Club after the action audit date, and
distributing those sums to members with outstanding claims, using an accurate and
fair process.
If the members of the Club believe that the rules of the Club were not respected by the
chairman and the committee, they may wish to replace these individuals. This is especially
true if loans were issued by the chairman and the committee that were larger than those
permitted by the Club rules.
2 An excellent summary of the operations of ASCAs and ROSCAs can be found in Rutherford, Stuart. The Poor and their
Money, Oxford University Press, Delhi, 2000.
SavingsClubPracticeGuide,SolomonIslands Page37
Between the meeting at which the decision is made to perform an action audit, and the
date of the action audit itself, there is no requirement to have meetings, but if any meeting is
to take place, it must be a full meeting, with all members present. At such a meeting loan
repayments may be made, but no other transactions are permitted. If there is a serious
problem of long overdue loans, a general amnesty may be called, in which all members with
overdue loans can repay without overdue interest charges. If deposit contracts are in force,
their end dates are automatically changed to the date of the action audit.
During the waiting period before the action audit all documents and cash should be kept in
a secure place. If the group has a triple-lock box, 3 key-holders and a box-holder; then the
documents and cash can be store in box, in the box-holder’s house. If the group does not
have provision for secure storage of documents and cash, other provisions must be made.
Documents and cash may be stored with individuals who have the trust of all members of
the group, such as chiefs, elders, public officials, etc; in the village or in a nearby community.
The Action Audit Meeting
At the action audit meeting the Committee should be sitting in their normal positions, where
they will be expected to manage transactions and up-date records. All cash and other
documents (passbooks, member ledgers and the Club registration form) must be available.
It can be helpful to include a local authority figure in this meeting, such as the village chief,
one or more religious leaders, teachers or public officials, etc.
Chairman [from the member register]: “I am now going to read the list of registered members
of the Club, from the member register. The Club includes the following members ... [the
Chairman names them] ...”
“Is there any name missing from this list, that should be there?”
If the member register has not been kept up to date, there may be missing names.
Individuals should stand and present their claim to be members. For example, they may
testify that they have a passbook, or that there is a member register in their name. In
complex or unusual cases the Chairman will facilitate a discussion among the members
about the merits of the claim, and can bring the matter to a vote.
Once the discussion and voting is over, the Chairman up-dates the member register.
Chairman: “Is there any name that should not be on this list, but is?”
Again, if there is a need for discussion among the membership the Chairman facilitates it and
as required, calls votes. When the discussion and voting is completed the Chairman
concludes by reading the full member register, as amended.
Once the discussion and voting is over, the Chairman again up-dates the Member Register.
Chairman [from the member register]: “As of [today’s date] the Club includes the following
members ... [the Chairman names them] ...”
Chairman: “Could the members please come up and collect their passbooks.”
After the members have collected their passbooks, the Chairman says: “Could the Treasurer
please up-date the Club on the amount of savings owed by the Club to each member?”
Treasurer [from the member ledgers]: “The names of the members, and the amount of
savings they have in Club accounts, are as follows ...”
SavingsClubPracticeGuide,SolomonIslands Page38
Chairman: “Does any member dispute the amount read by the Treasurer?”
If there is a dispute, it must be resolved by comparison of passbooks and ledgers, and if
necessary by member recall and voting. Once the disputes have been resolved, the
Chairman will say, “Treasurer, please announce the total savings in the savings accounts of
the members.”
Treasurer [reading from the ledgers]: “The total savings in the savings accounts of our Club
are SI$ .... “
Chairman: “Thank you, Treasurer! Now, if there is any individual who owes money to the Club
and is waiting to repay it, please come up with your repayment now.”
Some borrowers come up and make their payments to the secretary, who up-dates the
member ledgers and loan register.
Chairman: “Secretary, please inform the members of the Club – have all the loans owing to
them been repaid?”
If the answer is ‘yes’, then the cash count, followed by the distribution of assets, can begin. If
the answer is ‘no’ then the Chairman continues.
Chairman [from the member ledgers, or (if available) the loan register]: “I am now going to
read the list of borrowers who have outstanding loans, still unpaid and owing to the Club’s
members. The delinquent borrowers include the following ... [the Chairman names them and
states the amounts that they owe, and the length of time that has passed since the money
was to have been repaid] ...”
Chairman: “Can the borrowers please describe to the Club their plans for repayment?”
As the borrowers state their plans, the Secretary prepares a promissory note for each one
and the Chairman asks the borrower to come to the front and sign it, with the other Club
members as witnesses.
In situations in which the borrower does not speak up, the Chairman will probe the assembly
Chairman: “Can anyone who is related to [Chairman names the borrower] speak on their
The Secretary and the Chairman prepare a list of the individual borrowers and amounts that
are still outstanding and not accounted for through promissory notes during this meeting.
Chairman: “Treasurer, could you please deduct unpaid loans, including accumulated
interest, from the savings account claims of the members who have borrowed and not
The Treasurer and Secretary work together on this task. When they are completed, they pass
their work to the Chairman, who reads it out to the meeting.
Chairman: “I will now read the names of the borrowers who have not repaid, the amount of
savings that they hold at the Club after their delinquent loans are deducted, and the
amount of money they still owe the Club, if any.”
SavingsClubPracticeGuide,SolomonIslands Page39
Once all the money from outstanding loans has been paid in, and all savings claims of
delinquent borrowers have deducted, and a list of remaining outstanding loans has been
finalized, the Club’s cash is counted and the distribution begins.
Chairman: “Could the money-counters please count the cash?”
When that task is completed, and the results announced to the Club, the Chairman says:
“Treasurer, please itemize the total funds, in cash and outstanding loans, available to the
Treasurer: “The Club has total cash of ______ , promissory notes for ______ due during the next
2 months, and _______ in delinquent loans which are not backed by promissory notes.”
Chairman: “The Club currently has SI$ ... in cash available, and SI$ ... in claims from members
with savings accounts. Is this correct?”
Treasurer: “Yes.”
Chairman: “Please distribute all the cash to the members in proportion to their claims.”
The Treasurer and Secretary work together on preparing the distribution. First, they establish
the amount of cash to be paid to each member for every $1 in savings the member owns.
This is done according to the following formula.
For example, if the Club has cash of $8,734 before delinquent loans, and the members have
claims for $10,424, the member claim value per dollar is
Total cash owned by the Club
Total claims on the Club’s cash
by members
Claim Value per $
SavingsClubPracticeGuide,SolomonIslands Page40
The Treasurer and the Secretary then multiple this number by the claims of each member. For
example, Rachel has a balance in her savings accounts of 1,615.
Once the members have been paid, the Chairman concludes the meeting.
Chairman: “The Club still has outstanding debts from borrowers totalling .... including
promissory notes, payable within the next 2 months, of ... . I have been appointed by the
Club to act as trustee for all repayments, and it is my duty and intention to ensure that all
future repayments will be distributed to registered members proportion to their claims, as
established at this meeting.”
As this example illustrates, action audits will not always result in the members getting all their
savings back. But keeping a group operating when there are delinquent borrowers in the
village does not increase the likelihood of repayment. The longer the club continues --
without the delinquent borrowers repaying, and with very little evidence of any activity at all
-- the less likely it becomes that they will repay. An action audit creates one final burst of very
public pressure to repay. The real impact of continuing the club is that the savers can’t get
any of their savings back. Instead, they wait and they wonder: “will more borrowers take
more money and not repay it? Will even more of my savings be lost before this is over?”
Savers didn’t cause the problem, and shouldn’t be made to suffer due to the irresponsible
actions of a few individuals.
The reason an action audit is difficult is because it requires people to admit a fact that they
don’t want to admit – that they have lost money in their savings club. None of us like to admit
to losses of any sort, but we all know that sometimes, losses happen.
Accepting them lets us put them behind us. Accepting them gives us a chance for a fresh
$1,615 X $0.83787
SavingsClubPracticeGuide,SolomonIslands Page41
1. TheBalancingProcess:StepbyStep
June 19th, 2015
Toghe Savings Club begins its operations on June 19th, 2015. When it starts, it has a standard
steel box with 3 locks divided in four parts, savings and loan passbooks for its 25 members, a
set of Club record forms and zip-up cash bags. Salome, an older mother of six who is not on
the committee, brings three bowls from her kitchen to the meetings for counting cash.
The previous week the group paid for the box and equipment with a cash collection taken
equally from each member. This cash collection included a Savings and Loan passbook for
every member. These transactions were witnessed by the whole group in its meeting, and no
further record was required.
At the start of the Club’s first operational meeting on June 19th, the box is in its starting
balance position. It has no cash in it, and all the operational forms are still blank. Value on the
left side is “0”, and value on the right side is “0”, so that the left side = right side.
During the meeting all 25 members begin their first savings plans. A total of 31 savings plans
are opened, and $163 collected in savings. The Club charges $2 for opening a savings plan,
so an additional $62 (31 X $2) is collected in savings plan fees. At the close of the meeting
the passbooks are stored in Compartment 3 of the box (Savings) while the cash is stored in
Compartment 1 (Cash).
At the end of the meeting, the box looks like this.
Cash in Box and Bank What We Owe
(cash in box)
What We Are Owed What We Own
(no loans yet) (no profit yet)
The box
in the
'Starting Balance'
(member savings
$0 $0
$0 $0
SavingsClubPracticeGuide,SolomonIslands Page42
Based on the position of the box, at the close of the meeting the Treasurer (Thelma)
completes the ‘Sources and Uses of Club Cash’ form.
In section 3 of the form, she writes $163, because there are records in
Compartment 3 of the box (savings) showing that members have deposited
In section 4 of the form, she writes $62, because there is a record in
Compartment 4 (profit) showing that members have paid $62 in savings plan
In section 1 of the form, she writes $225, because there is $225 of cash in
Compartment 1 of the box.
Compartment 2 of the box is empty, because the Club has no loans. So
Thelma leaves section 2 of the form blank.
She then sums the totals at the bottom, and arrives at $225 for ‘Total Sources
of Cash’ and $225 for ‘Total Uses of Cash’.
Everything is balanced!
Cash in Box and Bank What We Owe
(cash in box)
What We Are Owed What We Own
(no loans yet) (profit this meeting)
$0 $62
(member savings
The position
of the box
after the
first meeting
$225 $163
Date of Meeting Signature
1Cash A
3What We Owe D
Box Savings
Bank Borrow ings
2 Loans B What We Own E
To me mber s 4Profit up to last meeting
[Doubtful loans] Profit this meeting
Sources and Uses of Club Cash
SavingsClubPracticeGuide,SolomonIslands Page43
July 3rd, 2015
At the July 3rd meeting 24 members attend, including 2 who are late. Late members are
charged a penalty of $1 each, which is added to the Club profit, along with fees for opening
two new savings plans. The members contribute $136 to their savings plans. The first savings
plan, belonging to Edith, matures and she receives $35 in cash from the box. As a result the
Club now owes another $101 ($136-$35) to its members under the various savings plans.
Thelma, the treasurer, completes the ‘Sources and Uses of Club Cash’ form.
In section 3 of the form, she writes $264, because $101 additional dollars have been
added to savings since the last meeting ($136 deposits less $35 withdrawals).
In section 4 of the form, she writes $68, because $6 additional dollars have been
added to the profit, and nothing has been taken out.
In section 1 of the form, she writes $332, because the money counters have counted
the cash, checked it and announced the total (“$332”) to the Club.
She leaves section 2 of the form blank, because the Club has not yet lent out any
This meeting
This m eet i ng
This m eet i ng
Cash in Box and Bank
What We Are Owed
Last meeting
Tot a l
Tot a l
The position
of the box
after the
second meeting
Tot a l
What We Owe
Last meeting
Last meeting
What We Own
(no loans yet)
Date of Meeting Signature
1Cash A
3What We Owe D
Box Sav ings
Bank Borrow ings
2 Loans B What We Own E
To me mb er s 4Profit up to last meeting
[Doubtful loans] Profit this meeting
Sources and Uses of Club Cash
SavingsClubPracticeGuide,SolomonIslands Page44
July 17th, 2015
At the July 17th meeting 24 members attend, including 1 who is late. The member who missed
the July 3rd did not send in a contribution, so she is fined $2 for missing the meeting. Three
new savings plans are sold, and two more are cashed out. Andrew and Josephine receive
cash from the box totalling $65. The treasurer records contributions of $169 to member
savings plans. As a result the Club now owes another $104 ($169-$65) to its members under
the various savings plans. The Club now has $463 in its cashbox, including $131 from this
Thelma sets to work at the end of the meeting and prepares a balance sheet. But it doesn’t
balance! It is off by $18, as the sources of cash are less than the uses of cash.
Thelma and the rest of the members know that the balance sheet was balanced at the last
meeting, and in the previous meetings. So, she reasons, if it doesn’t balance this meeting, the
problem must have happened at this meeting. She hopes it will still be easy to find the
This m eet i ng
This m eet i ng
This m eet i ng
(no loans yet) Total
What We Are Owed What We Own
Last meeting
Tot al
Tot al
The position
of the box
after the
third meeting
Cash in Box and Bank What We Owe
Last meeting
Last meeting
Date of Meeting Signature
1Cash A
3What We Owe D
Box Sav ings
Bank Borrowings
2 Loans B What We Own E
To me mbers 4Profit up to last meeting
[Doubtful loans] Profit this meeting
Sources and Uses of Club Cash
SavingsClubPracticeGuide,SolomonIslands Page45
Doris (the chair of the Club): “Money-counters, could you please re-count the cash in the
The money-counters re-count the cash in front of the members. “Madame Chair, the box
contains $463 in cash!”
Doris: “Could the solidarity group leaders please report the total savings in their groups’
Group Leader #1: “Our group has $63 in savings!”
As each group leader announces the group total, Thelma checks the figures in her savings
Group Leader #4: “Our group has $91 in savings!”
Thelma goes and sits with the group, and looks at their passbooks. One member saved $42
today, but Thelma wrote “$24” in her exercise book. The number “42” is recorded in the
member’s passbook, and the member insists that it is correct. Thelma remembers entering
the number, and thought she had written “$42”, so she recognizes her error immediately.
Numerals often and easily get reversed; it is a very common mistake. Thelma corrects her
work in the savings ledger.
Group Leader #5 provides his report, and the figures tally.
With the reports from the solidarity groups in, the savings ledger is fully verified, and Thelma
corrects the balance sheet, leading to the result above.
Doris: “I want to congratulate Thelma, the money-counters and the solidarity groups for their
very good work! By working well together, we can operate our own bank right here in
Feb 12, 2016
Toghe Savings Club issues an investment share offering to its 26 members on Nov. 28, 2014.
Date of Meeting Signature
1Cash A
3What We Owe D
Box Sav ings
Bank Borrowings
2Loans B What We Own E
To me mbers 4Profit up to last meeting
[Doubtful loans] Profit this meeting
Sources and Uses of Club Cash
SavingsClubPracticeGuide,SolomonIslands Page46
Now that the Club is lending out money, it maintains two cash pouches: one for savings plans
and the other for investment shares + loans. Members are asked to recall the amount of
money in each cash pouch at the close of each meeting and the opening of the next one.
Each cash pouch is emptied at the start of the meeting into a money-counting bowl and the
count is checked at the start and end of each meeting.
The investment share offering raises $4,000. By the end of the Club’s meeting on January 30th,
2016, it has already lent out $3,000, all of it for a 3-month period at 5% flat. To date, members
have paid back $600 and interest totalling $150 has been collected.
As a result, there is $1,750 in the loan pouch, including the interest which is stored in this
pouch until the final distribution to the shareholders. This pouch is stored in Compartment #2.
The amount owed to the loan fund is tracked on a running basis by the Secretary, and can
be checked at any time by asking for reports from the solidarity groups, based on the
records in the passbooks.
At the opening of their next meeting (Feb 12, 2016) their cash box shows the balanced
position above, identical to its position at the close of their last meeting, on January 30.
At this meeting, the members contribute $316 to savings plans, and four members redeem
matured plans worth $212, which means that the total debt of the Club to its members rises
by $104. Three members borrow a total of $460, and five members make loan repayments
worth $380, increasing the loans outstanding by $80. Cash in the loan pouch drops to $1,670.
The Club collects $6 in penalties and $8 for opening new savings plans.
This meeting This meeting
This meeting This meeting
The position
of the box
at the start of
the meeting
Feb 12, 2016
Cash in Box and Bank What We Owe
Last meeting
Last meeting
Tot a l Total
What We Are Owed What We Own
Last meeting
Tot a l
Last meeting
Tot a l