In an interview in early March, 2015, “Namaissa” told us that she had bought capulanas, the traditional cloth wraps women wear in Mozambique, for her family members to wear to the commemoration of the one year anniversary of her late husband’s death. Despite having little money during this time of year, Namaissa described how she was only able to afford the luxury of new capulanas with funds from her ASCA payout in December, 2014.
In the Smallholder Financial Diaries, currently underway in Mozambique, Tanzania, and Pakistan, a detailed view of the seasonal cycles that govern smallholder farmer’s lives is becoming clearer. Accumulating Savings and Credit Associations (ASCA) seem to be an especially well-timed financial instrument for the agricultural income cycle. ASCA participants save little by little over the course of a set period, often a year. Often the deposit amounts are discretionary. Group members, and sometimes other community members can borrow from this pot of saved money, often repaying with interest. At the end of the period, each participant gets their savings back and any interest income is split between participants like a divided.
In Nampula province in Northern Mozambique, there are two clear harvest periods in August and June. Farmers report that January and February are the worst months of the year, not only because this is the reported hunger season, but because heavy rains fall during this time, resulting in increased incidence of illnesses like malaria and cholera.
Casual or day labor, such as working on other peoples’ farms, assisting with construction projects, or helping with other activities such as digging a ditch or helping to build a house, is an important source of supplementary income between harvests. However, because everyone in the village lacks money in the difficult period between January and February, there are limited opportunities for casual work during this time.
Farmers in the Mozambican Financial Diaries save in the ASCA over the course of the year, especially contributing in July and August, receiving the large payout in December. This strategically timed payout helps alleviate financial pressure and food insecurity in the difficult months, not only covering holiday-related expenses around the New Year’s celebration, but also injecting much needed liquidity right before the rains begin and stores of crops run low.
Although Namaissa was able to buy somewhat of an “extra” with her ASCA payout, like other women who participated in the ASCA, she also used the money to buy essentials like oil for cooking, salt, and sources of protein when the family is eating their reserves of xima, or maize meal, and not much else.
Although ASCAs are a useful informal tool that provide a lump sum at the time when farmers need money the most, this system is only in place in two of the three villages participating in the Smallholder Diaries research. NGOs that promote savings groups may wish to consider this structure in agricultural and rural communities. While clients appreciate the flexibility and discipline of savings groups, such arrangements are inherently risky: the box of deposits may be stolen or destroyed (we have heard stories of fires and floods), or those calculating the share out may make intentional or unintentional mistakes. Linking ASCAs to formal financial institutions, or offering more formal savings products that share this structure, will help reduce these risks.